Mortgage free or bigger house? I'm unsure what to do....

JadeHighland

I'm coming to a bit of a crossroad in life and it would be great to get other thoughts on this. I'll try to be concise. 

• Myself and husband (35 and 37) have a joint salary of £128k 
• Two children, boy and girl, 5 and 7.
• Live in a 2 bedroom mid-terraced house in East London. 
• House valued around £360k, £168k left on the mortgage with just over 10 years to go. 
• Fixed term ends in March next year. 

This year, I finished paying off my student loans, cleared debts and youngest went to school so no more nursery fees. We are now in a position where we can save at least £1,800 a month. Currently £200 going into stocks and shares ISA and £1,600 Cash ISA. 

So, the main issue is that, thought the kids very much enjoy each others company, quite soon they will need their own bedrooms. We are stuck between buying a new house or doing a loft extension. Houses in our area, a 3 bedroom is going to cost around £80k more than the top end of our current valuation, but pretty much all of these houses have quite a small 3rd room, no separate dining room (which we don't currently have either) or the bathroom and/or kitchen needs complete redoing. 

We like our house. Only time it feels small is usually during the colder months where we have no choice but to hang clothes in the kitchen which take up a lot of room. Another key thing is that we both don't really like working and my jobs haven't been the most stable. Our ideal from the start was to also pay off our mortgage early. So, what would you do or suggest?

Doing the loft extension is something we can pay cash for early 2026 if we save at the current rate. That will eliminate most a big problem and also keep us on track finishing our mortgage in 10 years (if not sooner). A bigger house will mean a bigger mortgage, but the fact we could comfortably pay an extra £1,000 a month on a mortgage means that we wouldn't even need to extend the term. But that will then put us in a risky position if one of us lost our relatively high paying jobs. 

Thoughts?

MFWannabe

How much would the loft conversion cost? 

You love your current house and assume you love the area? 

Sounds like you’d feel more comfortable/ stable staying where you are? 

Would you worry all the time if you went for a new more expensive house? 

El_Torro

The loft conversion will probably cost more than you initially think (these sorts of things usually do). If moving were to be a similar cost then I would be inclined to move to a 3 bedroom property. That's just me though.

If you're worried about making big mortgage payments you can extend the term to reduce the monthly payments. If you do this you should still be able to make monthly overpayments when you can (assuming your mortgage provider doesn't charge you a penalty for doing this). 

Between you you're putting £1,800 a month into ISAs, which is good. However at least one of you is a higher rate tax payer. Making additional contributions to one (or both) pensions will be more tax efficient than ISAs. The downside being that you won't be able to access the money in your pensions for another 20 years plus. 

littlegreen

Just remember to account for all the extra costs of moving (solicitor, stamp duty, decorating of new place etc) when comparing
Personally we did the loft, though a few years ago do financially it made more sense but if they were equal finances I'd still do the loft. It was 4 months of pain but nothing compared to the hassle of being in a house chain, just my opinion. Plus if you get the loft done and signed off, you can always save up a bit more for the fixtures and fitting you want. We used ours for about 3 months before we finally got round to getting carpet done.
I would say if thinking of loft however in 2026 o would start talking to builders now and getting plans drawn up. Know a few friends who have about a 2 year wait for the builders of choice where we live, we were on the wait list for about a year and that's with hastily approving surveyor plans etc.

P.s. I also hated my job and once we paid off the loft both me and partner dropped hours at work. Time will always be more viable then money/house/things (though of course money is super important to be able to live!)

JadeHighland

MFWannabe said:

How much would the loft conversion cost? 

You love your current house and assume you love the area? 

Sounds like you’d feel more comfortable/ stable staying where you are? 

Would you worry all the time if you went for a new more expensive house? 

Just under £60k all in. I do like the house, don't really want to move from the area as it's close to the station which takes 35 minutes to get into central London. Also near the M25 so easy to move around. Main issues with the house is the mentioned space, wish we had a separate dining room but think that can be largely solved by refurnishing the kitchen. Also, don't have our own drive. 

MikeJXE

There is no guarantee you will be happy if you move 

Being happy where you live and extending is better than moving to a bigger house and regretting it 

gwynlas

Loft extension would give  you three double bedrooms and presumably two bathrooms  so perhaps more space than a conventional three bedroom house. Would you also consider rear extension to create kitchen dining room? Are you already in a good school catchment area?
If you are happy in the area and it suits then trying to pay the mortgage off sooner would appear to be your best option.

CreditCardJunkie

We were in a similar situation but chose the move...we bought a house in the nicest part of town and are loving the extra space, as a bonus the attic is totally floored and we finally have our own driveway so no more parking wars!

Our mortgage doubled (and we're overpaying as our term also significantly increased), we also can't save anywhere near what we could before but we absolutely love the house and it's been totally worth it!

For us the area has been amazing for the kids, it's a very small development just on the edge of the countryside with beautiful walks. There are really nice children to play with and the neighbours are fabulous!

JadeHighland

gwynlas said:

Loft extension would give  you three double bedrooms and presumably two bathrooms  so perhaps more space than a conventional three bedroom house. Would you also consider rear extension to create kitchen dining room? Are you already in a good school catchment area?
If you are happy in the area and it suits then trying to pay the mortgage off sooner would appear to be your best option.

Kitchen extension is viable, but we have a somewhat awkward shaped garden. The kitchen is big enough to fit in a fall sized dining table that seats 6. Even without the extension, I reckon there are a few things I can do to it to make it feel like another living space and not just a kitchen. Right now the windows and double doors are so I'll fitted it's cold and uncomfortable to be in. Changing those and the flooring should make a big difference. 

Kids are happy with their school (rated outstanding) and overall it's a nice place to be.

CreditCardJunkie said:

We were in a similar situation but chose the move...we bought a house in the nicest part of town and are loving the extra space, as a bonus the attic is totally floored and we finally have our own driveway so no more parking wars!

Our mortgage doubled (and we're overpaying as our term also significantly increased), we also can't save anywhere near what we could before but we absolutely love the house and it's been totally worth it!

For us the area has been amazing for the kids, it's a very small development just on the edge of the countryside with beautiful walks. There are really nice children to play with and the neighbours are fabulous!

Similar dilemma. Not to get too political but the way this country is going is one of the reasons I'm leaning towards the safe bet of having a mortgage that can be covered by one salary and is going to be finished early. However, having a house with a dining room or additional living room (sitting room or Den) would be amazing. How did you come to that decision to move? 

AgathaSquirrel

From your comments it looks like you are swaying to the loft extension. If that’s what feels right, do it.