Mortgage free or Big house

anansesem

My wife and I are mid 30s- and have just paid off our mortage- for a fairly small 3 bed house in an average neighbourhood. We threw every penny we had on the house as the interest rates was going to be high at the end of the fixed term. Our plan was to build some emergency funds, and then start investing in the stock market or business (still reading around). We work in health so our jobs are fairly stable. However we just got pleasantly surprised as my wife is pregnant with our second child.

Our house should still work for a few years- even with my brother staying with us, but I am wondering whether it would make more financial sense to sell our house and use that as deposit for a bigger place (4 bed in a nicer neighbourghood)- knowing that the big house will eventually increase in value. But this will mean another 200K mortgage (and about 800 pounds in interest payment per month. In 5 years that is nearly 50,000 in interest payment ALONE). I am thinking we should stay here for a bit and enjoy the benefit of being mortgage free. And then invest in a business or even stocks for the next 5 years before moving.

Is this a smart move or am I being too concerned about interest payment (we can afford), unecessarily frugal or you think I should move to the big house? I know this is personal but I wish to read some of your views. Thank you

BonaDea

I'd stay put and save the money.  If the house became too small in the future at a point where you weren't yet able to move somewhere bigger, presumably you could ask your brother to make other arrangements and gain space that way until able to move on?

tacpot12

I think it would be best to really think hard about whether you need a bigger house or not. Is your brother's living with you definitely a temporary situation, or could it become more permanent?

If don't need a bigger house, then staying put and investing would be the safest option. It might even be the most financially lucrative if house price rises stall as more houses are built.  

ThisIsWeird

anansesem said:

My wife and I are mid 30s- and have just paid off our mortage- for a fairly small 3 bed house in an average neighbourhood. We threw every penny we had on the house as the interest rates was going to be high at the end of the fixed term. Our plan was to build some emergency funds, and then start investing in the stock market or business (still reading around). We work in health so our jobs are fairly stable. However we just got pleasantly surprised as my wife is pregnant with our second child.

Our house should still work for a few years- even with my brother staying with us, but I am wondering whether it would make more financial sense to sell our house and use that as deposit for a bigger place (4 bed in a nicer neighbourghood)- knowing that the big house will eventually increase in value. But this will mean another 200K mortgage (and about 800 pounds in interest payment per month. In 5 years that is nearly 50,000 in interest payment ALONE). I am thinking we should stay here for a bit and enjoy the benefit of being mortgage free. And then invest in a business or even stocks for the next 5 years before moving.

Is this a smart move or am I being too concerned about interest payment (we can afford), unecessarily frugal or you think I should move to the big house? I know this is personal but I wish to read some of your views. Thank you

I thought this would be easy, and then you threw in the bit in bold :-)

My thoughts are - if you have something tangible to put the spare money in to, then perhaps you should you stick where you are. If you are reasonably confident that this will give you a decent return - more than property rises - then stay put, and think 'money'....'money'...'mon... :-(

Otherwise, go for the better home, and LIVE YOUR LIFE!

A BIGGER home! In a BETTER location! ENJOY living there! WHERE you live means a LOT!

And, it'll almost certainly increase in value as much as shares and s***.

Don't fritter away these fabulous years in your 30's - you lucky thing! You will almost certainly not lose out by going 'bigger', and could gain lots.

Quality of life.

We need good, happy, NHS staff :-)

Oh, and Happy New Baby! 

Sit down, have a cuppa, and run through your mind going out from, and coming back to, YOUR house with this baby. Which will give you that buzz? The compact 3-bedder, or the scintillating 4-bedder in that nicer location? 

Run that through your head - baby in 'sling', time for 'walkies' - you step out your front door - which one will give you an immediate 'lift'?

We were stupidly lucky to find a house on the outskirts of a (I now realise, but didn't fully at the time) Surrey village at the time our first came along. That twit is now off to his second Uni, but the memories I have are of setting out the front door, floppy lump in front sling, repeatedly kissing the back of his head, whilst walking across poppy-lined fields towards the church spire...

I have no recollection whatsoever of any 'stocks investment'. Ok, largely because we didn't have any, but hey.

You are extremely unlikely to lose out on the better home - it is equally an investment - but the feeling and memories it'll give you are priceless.

(Need a lie-down...)

ReadingTim

A family of 4 in a small 3 bed will become a bit of a squeeze: maybe not in the next 5 years, but definitely in the 5 after that, and beyond.  And following the arrival of your 2nd, you'll then have no spare room for guests, unless you make the kids share - again, maybe fine now, not so much in future... 

Therefore, given this sort of timeframe is similar to the sort of timeframe you need, as a minimum, for investments to properly pay off (unless you were really lucky), you may as well just bite the bullet and think about moving.  Being mortgage free is great if you're going to spend all that spare money on living the life of Reilly, or starting a business, or going back to full time education, but if you're just going to put it in the bank and save it for a bigger house in time, I don't see the reason not to go ahead and just do it now.  

jonnydeppiwish!

We were mortgage free in a small 3 bed semi. Just the 2 of us as the kids had left home. Then along came a grand child and we realised we really did need a bigger house so moved with a 200k mortgage.

At your age, you have plenty of time to pay it off and enjoy living in a bit more space. It’s surprising how small a house can feel!

housebuyer143

Big house. We did this recently. Were living mortgage free for a few years and decided that we would upsize to a 4 bed and get a mortgage.
I do not regret it at all. You are young and you don't need to be mortgage free - if you want a bigger house it's better to do it now than in 10 years. 

Bigphil1474

We've just sold our old house which was mortgage free and bought a bigger house with a relatively small mortgage (£50k). Loving the extra space, although it is primarily for visiting family. We're in our 50s though. If we were in our 30's we'd have gone much bigger so we could enjoy the house when there's just 2 of us, and have lots of family to stay some of the time. I wouldn't gamble invest in stocks and shares anyway tbh, but we've always made a profit on houses we've sold even taking into account interest payments - if you pay £50k in interest over 5 years, but your house goes up in value £60k, then you are still ahead.

FlorayG

Do you like your current house and location? Could you extend it? My cousin had the loft converted to another en-suite, now has 4 bedrooms, cost them £50k

Zerforax

Probably also depends how much your current 3 bedroom house is worth/what you bought it for?

If you bought for 100k and paid off in mid-30s then how much impact is paying off another 200k? Whereas if you've paid off say £400k house, then taking on an extra £200k looks way more managable.

Albermarle

And then invest in a business or even stocks for the next 5 years before moving.

Investing in a business is very risky and even if they do well, getting your money out can be tricky.

Investing in stocks and shares is less risky, especially if you invest in funds that contain many different shares and other investments to spread the risk. However the recommended time scale for holding investments is an absolute minimum of 5 years, ideally more than 10 years. This is to iron out the ups and downs, especially if we go through a prolonged bad patch.
This could be a useful resource for you.
Savings & investments — MoneySavingExpert Forum
You say you work in Health. If that means you are building up a NHS pension, then all good.
If not then you will need to consider adding more to your pensions as part of the strategy as well.
Pensions, annuities & retirement planning — MoneySavingExpert Forum