Conflicting feelings about working to mortgage freedom - or increasing borrowing

startingout2016

Ive struggled to decide whether to post this, but its been on my mind for about a year now. 

Some backstory - We are a late 30's couple with 2 young school age children outside of the expensive nursery years. 
We both work with a combined income of £90k. (this may only increase slightly from now on as we've both had promotions and cant see much growth in the current businesses) 

The past few years of ups and downs have made us both extra cautious with our finances. 

We live in an expensive part of the country. We bought our house at the top of our budget (£320k) 7 years ago when we were earning a lot less and only had 1 child.
We have been renovating it and put our hearts into it. (And around £50k to get it liveable)

We overpay and have been doing so ever since our last child was out of nursery and could afford to do so, and when we remortgage we tend to put a third of our savings into paying a lump off and reduce our term slightly each time (although this was much harder to do when we remortgaged in Dec 23)

This has meant that we now owe £248k. 

Our pensions are looked after, we have no debt. We both own our cars outright and save a bit too. 

Because of the ups and downs with the economy it has meant that overpaying and saving more, and the aim of paying off the mortgage seems to be the best thing to do. 

However; our house is a small cottage. The children currently share a bedroom. They wont be able to forever. 

At what point is it sensible to give up on the ideals of having mortgage freedom and instead increase our borrowing to extend or finance a house move to a larger place? 

It worries me that in this age of house prices and interest rates, along with building costs that no option is cheap. 
Our house was valued at £420k beginning of this year, and the houses nearby that are within the 2ndary school catchments are easily another £150k on top before factoring in huge stamp duty. 
Extension costs have obviously increased massively too. 

I have seen friends upsize their houses in the last few years but now worry about rising interest rates and being able to be comfortable when they come to remortgage. 

On the other hand, their new more expensive houses have (on paper) increased in value more than the previous smaller houses so as an investment, to me it seems they have gained in that way. 

Our lack of risk means that we sit tight where we are, watching houses around us go for silly prices, knowing that the more they increase, the bigger the gap between the 3 bed next house and our little house. 

I feel very conflicted and want to seek the wisdom of the MSE's to see if anyone can help me know what we should really be working towards? 

redofromstart

From what you have said then I personally would at least be getting some quotes and timescales for an extension to see if it realistic and if the return makes it worthwhile to remortgage if you can afford the extra. 

 

Remember to allow for the cost and stress of moving when you do your calcs.

newgirly

I agree with the previous poster, how much would an extension be and is the cottage suitable to extend in the way you may need in the future? For example is it suitable for a loft conversion? We had the same dilemma years ago and thought about moving many times, in the end we took a loan out (couldn’t add more to the mortgage!) as our twin sons were sharing a room and bickering once they got older and it made such a massive difference. We went from a 3 bed/2 bath  mid terrace to a 4 bed/2 bath by having that done and now two of our three have moved out and we are nearly mortgage free. 

Is the cottage suitable if you extend or is it still too small for longer term? 

startingout2016

@newgirly thank you for your own example . That gives me hope 

it’s currently a 2 up 2 down with 1 bath cottage and the loft is suitable for conversion to get another room and shower room. 

Costs appear to be anywhere between £55-65k at current levels. 

There is potential to extend downstairs but I think the cost on top of doing the loft would be prohibitive in today’s climate. 

I hadn’t considered the option of finding the loft by loan rather than extending the mortgage. 

Although £60k ish would be a large loan to find 

beanielou

Although 60k is a lot to find, think how much it would actually cost to move ie moving costs, stamp duty ect.