Please help me decide option 1 or 2

shell18

Hello, I think I have 2 options and right now I just don't know what to do and so I am hoping someone can help me see a bit clearer.

Background - I inherited a house worth £475k. Mortgage owing is £167000. I have high priority debt (tax). My broker has found a mortgage of £215k which will pay off the mortgage and my debt. I will be debt free. I have lived in the house 3.5 years. been on market 3 months only 4 enquiries. Deadline of early october as that is 12 months from inheritance and current lender need to know how mortgage will be repaid. No other money in estate.

Option 1 - take the mortgage - £1290 a month for 17 years (I dont plan on being here for 17 years and looking to down size in about 5 years when my adult kids have moved out). I have paid more in rent and so not too scary but I am worried I might not be able to afford it. I am a worrier. We have 4 income streams. Mortgage fixed for 5 years. Eldest child is moving out early next year and other children are early 20s and so will also probably fly the nest soon. Within the next 5 years look to downsize. With this option we don't have a huge amount of surplus income but we will be debt free. We are late 50s. Do I really want to have the worry of a mortgage…

Option 2 - sell the house and pay off the debt leaving me around £260k in the bank. Immediately open 2 cash isas (me and OH) and split the rest of the money into savings accounts. I think this level of savings may give me around £1000 a month income. I then rent using this money plus top up (rents are expensive where I am and until kids move out I need a 4 bed home. Top up rent will likely be close to the mortgage amount in option 1. Carry on like this until eldest moves out (planned for early 2027) then downsize and get a smaller mortgage. But then I'm probably going to be close to early 60s.

I keep changing my mind and I just don't know what to do. Once we retire I have a state and private pension and OH has state pension only. Business will stay with my son and so we could take some passive income if needed.

Can anyone help me please I'm so stressed I keep having panic attacks.

Many thanks

silvercar

To me option 1 is by far the best option.

Less upheaval, you all just stay put. Saving on moving costs etc. Option 2 relies on the adult kids moving out when you think they will. These days they can often stay far longer than anticipated. You may easily be tempted to stay rented with option 2 until you are empty nesters and then buy a much smaller place, but you will have the rent for much longer, which I would consider wasted money when you have the option to buy for the same monthly outgoing. You could even be forced to move again by a landlord deciding to sell.

The only tweak I would make is to see if you can get the mortgage over a longer term. This will reduce your monthly repayments, though I would save alongside them to build a cash buffer with the intention of paying it earlier. It just gives you some leeway, having the fixed monthly repayments at a lower level.

You also need to budget so you don't end up owing hmrc money.

If your adult kids are earning and living at home, you could consider charging them some board if you needed to, though I know some people find that unpalatable and could delay them moving out if they have no spare cash. But it is a back up plan.

shell18

https://forums.moneysavingexpert.com/discussion/comment/82105429#Comment_82105429

Thank you so much. What you've said makes good sense to me. I can't get the mortgage over a longer period due to our ages unfortunately. However, in 5 years when need to remortgage we wont have the tax debt and maybe we can downsize as you say and can hopefully get a much better rate bringing mortgage costs down.

Jemma01

I would choose option 1. You can always sell after your kids leave and pay the mortgage and rent if that's what you want. It's not a life altering decision. You don't need to wait 5 yrs either if suddenly all your kids leave next year.

Option 2 is a mess and conditional, you are paying rent for a big house, costing you too much because your kids are still around. Rent is a waste of money, whereas mortgage is an investment into your own property that you can sell and get your money back.

RelievedSheff

Option 1 every time.

I wouldn't even consider 2 as an option. It seems to be the worst of all worlds!

jackieblack

I would also go with Option 1

Option 2 relies on selling and you've already said there's been little interest so far… you may end up having to drop the price in order to sell in the necessary timeframe, leaving less for when you want to buy in a few years time (and house prices may have risen in the intervening time)

kingstreet

Is this a mainstream lender willing to lend to pay a tax debt, or a specialist?

shell18

https://forums.moneysavingexpert.com/discussion/comment/82105618#Comment_82105618

Its a specialist lender - yes they are happy to clear the debt.

Smudgeismydog

Another vote for Option 1 ✅

shell18

I am absolute gutted. Despite the company initially agreeing to the mortgage they then changed their mind and so I am stuck with option 2. Does anyone want to buy a house in Essex…sought after area, backs onto countryside walks, 5 beds with an annexe….😪