Mortgage Free or Better House

Intel1982

Hi,

I'm sure this question has been asked a million times over but I'm wondering what other people's opinions are if I give you a bit of background of my situation.

I'm 35, husband is 42. We have two primary school aged kids, my husband has a decent job and I am a stay at home mum/carer to my son. 

We bought a 3 bed terrace a year ago for £138k, through overpayments and our deposit it is sitting at £90k. We have been overpaying around £750 a month, with our actual mortgage payment being £526 a month. We are torn between overpaying and aiming to be mortgagee free in 7-10years or buying a better house? The house we are in is okay, not our ideal home but certainly nice enough - it is a mix of privately owned, council tenants and private tenants.

In the long term I don't think this house will increase much in value but we would ultimately have more disposable income. Whereas on the other hand we could buy a better house, have less disposable income but that house would hopefully increase in value over the years, meaning we could make a profit if we decided to downsize. 

Would just like people's thoughts/advice.

Many thanks.

dark^knight

Interesting question.

The saying 'a rising tide will lift all boats', is somewhat true, as over time all property will rise, although your current house may not rise as much another equivalent one in a better location.

The other saying about houses is also worth considering: 'it's better to have the worst house in the best street, than to have the best house in the worst street'.

Also, you need to consider parking, garden space, local schools etc as well.

Intel1982

Parking is fine we have two allocated spaces, school situation is fine and my children get a school bus from outside the house. I'm just thinking that with the way things are going we might be able to get a better house for under market value but it's hard one to decide on as everything is so unpredictable.

Kat78MFW

We are in the pay off the mortgage camp. Hoping to have it paid off when my husband turns 50. I see our house as our home rather than an investment. It maybe small and our eldest has to make do with a box room, but soon it will be all ours. Also, a smaller house costs less to run, is quicker to clean and the rising interest rates haven't affected us. Hopefully this will give DH the chance to retire early from a job that is giving him increasing stress. We never know what health problems may come our way in the future. So for us to have the chance to have a healthy retirement, we don't want to be waiting until our late 60s.

 Also, if one or both kids might want to go to uni/learn to drive etc., you might want to have extra funds available for them at a point in your lives way sooner than you are ready to downsize. Finally, kids cost more as they get older. We have just hit the point where a family holiday costs way more as the eldest hits 16 and now we're at the point where she really wants her boyfriend to come on holiday with us too. This means that we might need to bring a friend or cousin along for our younger daughter so a big hike in our holiday budget. 

Kat78MFW

Just thought of another factor - the cost of moving runs into many thousands (stamp duty, solicitors, removals, renovating or decorating) and you will spend additional ££££££s on interest payments on a bigger mortgage. So the anticipated profit made on the "better" house when you downsize would need to take that into account. Plus another chunk of moving costs on downsizing. 

family355

I would also vote mortgage free, your home suits your needs and there seems to only be a *want* for a 'better house' 
My youngest is her last year of primary, middle-last year of high school, oldest 20 and working. They get more expensive, food, clothes, shoes (size 6 is adult prices even for an 11 year old!) activities, school trips/dinner/bus fares/uniforms, holidays, driving lessons, phones! - come September we will be paying 4 phone contracts. A free outing to a park etc is no longer something they enjoy.
We both work full time because we have to. Generally, Mortgage/insurance/Council tax/gas & electricity cost more when you take on a bigger mortgage/house.
Good luck in what you decide 🙂

diystarter7

Hi

Go mortgage free or as good as, IE have money in the bank to pay it off and a bit extra. Then sleep on it and decide if, why you want to move, what you will get for your money and what will happen if you lose job/healt etc temp/mid term etc.

Consider dail travel distance to work as well as well as kids shcool

Consider who you may move next door to

Thnaks

Intel1982

Thank you for your replies, all very helpful points. If we are to stay here there is some work we would be looking to do to the house - we definitely need a new kitchen and bathroom but my husband is hesitant to do this, as we paid ceiling value for the house and any work we do would not add to the value. Is this a silly way to think if we are intending to stay here for the foreseeable or is it not a good idea to do work when it won't add to the value? Thanks.

South_coast

If you are staying then it is your home and the value of it is irrelevant. The value is only a factor if you are looking to sell. If it's going to be your home, then do whatever you want to to make it better for you, forget what it may or may not do to the value

comeandgo

It does not sound as though you absolutely love your house and position or this question would not have entered your head.  

In 2006 we bought the house we are in, knew it was our forever home and went to the absolute highest amount we could borrow for it.  As we were both on decent wages after a few years we were able to start overpay the mortgage.  Been mortgage free for a few years now and I still love the home and it’s great for when the family come.  And on the financial side, as we stay in a tourist area the selling price of these houses have increased greatly but as not selling its only interesting knowledge.

Kat78MFW

 If we are to stay here there is some work we would be looking to do to the house - we definitely need a new kitchen and bathroom 

This is exactly where we were when the kids were small. We went to look at a couple of detached houses in our area, just presuming that we would make that next move up the housing ladder. But we realised that the houses were only a little larger than our current house and in both cases the gardens were smaller and overlooked. For a much larger mortgage, we weren't going to have a better quality of life. The only things significantly better than our house were the kitchens and bathrooms so we got those done in our house, to my own exact designs. Although expensive to get done, it was less than the cost of stamp duty to move house.