Mortgage free or forever home?

JReacher1

go for for the better house. You can always sell it and buy something cheaper in the future. 

Noneforit999

I am not sure a large mortgage is the way to go at the moment with interest rates and the cost of living on the rise.

We are in Kent and 400k on its own would get a nice 3 bed detached or 4 bed semi in our area so personally I would probably get a mortgage for £100k over 20 years, buy a £500k house and simply overpay the mortgage by as much as I could each month.

It really depends on your circumstances.

At some point the kids will move out and you as a couple will be rattling around in a 4/5 bed detached house paying band E or F council tax and a fair whack in utilities each month.

How old are the kids? 

If they are mid teens, it would make more sense to have a smaller house with no mortgage. 

We have a 2 year old and once he is ready in however many years, I should have enough put away for a deposit for a house for him. It sounds harsh but I don't want him living with us until he's 50, I want to retire before I am too old.

Different strokes for different folks

Woolsery

Noneforit999 said:

I am not sure a large mortgage is the way to go at the moment with interest rates and the cost of living on the rise.

I'm sure it's not, for the majority.

US and UK due to enter recession at the same time, major dislocation of supply chains, shortages worsening by the day, prices rising fast and people still say they're optimistic.  It's nice people are still so positive, I suppose, but what's that based on exactly? All the charts I see are going one way.

Zerforax

I do wonder if being on this forum means more people are more inclined to be more risk averse (go smaller mortgage etc) than the average person or maybe my friends are just a bit more reckless!

Looking in Yorkshire which I didn't think would be that expensive but as soon as you go near a good school catchment area, the prices jump massively!

Kids are young and still in early primary and don't plan to have anymore.

The last house we bought (and now sold) was much easier to decide on 5 years ago as we went with the biggest mortgage on salary but this time as we have more equity it gives more (perhaps too much) option which is much more confusing!

Zerforax

onylon said:

I think another factor is any other savings/investments you have. If practically all your savings are tied up in the house then it may be better to put your extra cash into an ISA and/or pension rather than a mortgage.

Pension is doing okay I think but it's another one of those things where it massively varies for every person at how much they think is reasonable at a certain age! Not really bothered with ISA for a while and I saw even Martin Lewis was recently saying he would ditch an ISA for most people! No doubt we keep a good rainy day fund but probably would leave in a Chase saving account rather than ISA.

Tiglet2 said:

A forever home is only a forever home while it meets your needs.  One day you might have different needs and your wonderful forever home is no longer suitable.

I do think that somewhere in the middle is best.  Interest rates are rising, the cost of living is rising and kids are expensive, so do think about how you would manage in this situation.  If your house is too small then you are young enough to take on a bigger mortgage over 25/30 years to get a bigger property, but don't leave yourself too short to enjoy some family holidays and days out.

Haha you have a very similar view to me on "forever home". I'm perfectly fine with moving every so often as personal circumstances change. Whereas my partner, their parents have lived in the same house for over 50 years! I guess you always will fill the space you have, whether big or small.

TBagpuss

If you feel your current home is too small or has other disadvantages you can't fix, I'd look for the middle ground - buy but perhaps with an extra 100-200 mortgage rather than stretching yourselves too far - then you have the option f overpaying to get to mortgage free sooner, or to have a bit more disposable income than you would on a £300K mortgage, so you can enjoy the now ad well as the future, and it gives you some breathing space if costs of living and interest rates continue to go up, or if you have any changes in circumstances that affect your incomes.  
£300K on £70K joint income is pretty high, and while I'm sure that a £700,000 would be lovely, overall you might be much more comfortable in a £550 -£600K house with a bit more financial wiggle room!

[Deleted User]

I think it's dependent on area as well as to how the housing market is in terms of 'jumps' in house budgets that seem to be everywhere.

We took on our largest mortgage last year on a 5 yr fix (but not pushing ourselves near the max) - we are late 30s with two teens. I would then like to move at the 6-7 year mark and hopefully become mortgage free so that has become part of the plan and consideration and tied in to a v good rate until then. At that point we would look to move into either a slightly smaller house in as nice an area, or move to a slightly not as nice (but still good) 'housing estate' style village that we could afford similar house far cheaper.

In our area, we got our 4 bed detached in nice village, excellent school catchment etc for £550k last year. If we'd have gone for similar house in a nearby village but not quite as good a location it would have been £425k ish. If we had pushed ourselves and gone to £650-700k budget, we really wouldn't have got anything better because there seems to be big jumps. In the good school catchment areas a 3 bed semi might be £250-350, 3 bed detached £350-450k, 4 bed detacheds £500-600k and then you have to pay around £900k for the next jump to a 4/5 bed that's got something very special / much larger gardens etc.

I am with you that I don't believe in 'forever' homes. It's completely down to your circumstances at the time. 

badger09

I'm another who would say don't go to either extreme. At your ages & life stage, with young children, I would look for a house which suits your needs for the next 10 - 15 years. If that means more expensive because its bigger, in a better school catchment area, or whatever, then take on a bigger mortgage. But no need to go to the top of your budget, for all the reasons mentioned by others. Leave enough disposable income to enjoy life & possibly invest.  

The lure of being mortgage free is strong, but IMO, not necessary in your 30s & 40s, when your earning power is probably at its peak. We managed it in our early 50s, having moved 'up the property ladder' a couple of times. Never overstretched ourselves, didn't waste money on new cars or 'stuff' all the time, but also supported 2 sons through Uni & their first steps towards independence and enjoyed family holidays. Being mortgage free meant we could also retire early (mid & late 50s) but we wouldn't have wanted/needed to do that in our 40s.

Good luck whatever you decide.

PS I'm sure ML's advice to ditch ISAs refers to Cash ISA, not S&S ISA

TripleH

To me a forever home is where you plan to see out the rest of your life.

If you have children surely you'd want a bigger house? (I don't believe you buy forever homes, it becomes that through you not wanting to leave where you live).

I'd buy what suits your family's needs now, maybe something better than you have now, but don't over-extend what you can afford.

If the maximum you can afford now is £500K but you see a house for £399K that suits you perfectly, go for that and pay off the mortgage sooner.

lookstraightahead

markin said:

Every one seems to be jumping to the conclusion that 'dream home' means Bigger!  An extra 50k - 200K could find a better location, a better view,  a nicer area, Or as simple as a bigger private garden

Area first, always 👍 for me and I would pay for that.  I have the most incredible views but I have very little parking space. I have birdsong continually but only one loo. My walls are very thick but they're not straight. My dream home is someone else's nightmare 😬.