Mortgage free or bigger house?

Anyone here made or making this decision?

Currently live in a two bedroom, mid-terrace house we got 3 years ago on the outskirts of London. We're happy with it but at times it can feel a little small with the baby and we plan on trying for another later this year. The current plan is to save for a loft extension once the second child arrives. So, current situation is

Outstanding mortgage around £246,000
House worth around £290,000
Monthly payments of £1,472
16 years left
Joint income around £85,000
Both 30 years of age

We could significantly reduce our mortgage payments and have more money to put on the side by extending the term or keep the payments roughly the same and move into a bigger place but again, extending the term and amount. An early retirement/being in a position where we don't feel the pressure of employment is both our goals. But with house prices in London rising (we are already in one of the cheapest boroughs) and the commuter regions, I am wondering if it's worth jumping ship now and whether I'll regret not doing so in the near future.
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Replies

  • PurseyPursey Forumite
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    We were in this situation too a couple of years ago, so decided to look at what was on the market in our price range and then decide. At first there was nothing that gave us any motivation to move, as, like you we were happy and wanted certain options/freedom, but then we found our dream house and it made the decision clear. We bought and now have a much bigger mortgage, so no chance of paying it off soon, and we can’t go down to one wage (yet), but it was definitely the right decision for us. Our old home had become too small for our expanding family, and the new place offered our children (and us) more longer term.
    Is it worth/have you explored your options of moving?
  • newgirlynewgirly Forumite
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    How much more can you get in your budget? I’m also in a london borough and we bought our house 2001 with two babies and a toddler thinking we would stay a couple of years and move up again. We are still here :rotfl: But although it was a three bed terrrace, we put another bathroom and bedroom in the loft and conservatory on the back (couldn’t afford extension at the time).

    Will moving to a bigger house mean moving to a worse area school wise? Are you good with the money you have left, could you if you do borrow more to overpay to get it down quicker?

    Is a tough choice as the market is just SO unpredictable in London and even with price drops will be crazily expensive, the worry of being priced out of your next move hangs over you if you do decide to stay.

    I’m glad I did stay now, our three adult children are still at home and location wise it’s perfect and we are close to being mortgage free.

    Best of luck :)


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  • dano17439dano17439 Forumite
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    We have had this dilemma for ages. Me and my wife both 43 and if all goes to plan will have our current house paid off in under 2 years.


    We like our house but its no way our dream house. Being early 40's its now decision time whether to move or not into our dream house. However to get anything close to our dream house would be 500-600k, meaning back to 20 years paying a mortgage.


    We would only be moving for the sake of moving! I guess being we haven't done it yet, means that we probably won't but doesn't stop us looking lol
  • tacpot12tacpot12 Forumite
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    If you are certain that you will get permission for a loft extension, then staying in your current home and extending it is likely to be the best solution financially. If the second child never arrives (sorry to raise this dreadful prospect, but it does happen :-( ), then you will have saved a lot of money just on the mortgage/home.

    You are likely to add more value if you extend than the extension will cost.

    Do make sure you can extend into the loft before committing to this route. If other properties on the street have already had this done, I might go as far as commissioning plans to be drawn, as this will confirm whether the current building regulations can be met if you extend. The risk here is that the building regs. change in future and what is allowed today is not allowed in future. I think there is relatively little risk of this though. There is no point applying for planning permission though until you actually need it. Poring over the plans will also give you something to keep busy with, rather than looking at houses that are going to stretch your budget...

    Extending the mortgage term is not a sensible approach to financial independence. If financial independence is your goal, you should see chopping an arm off (and selling it!) as being more preferable to extending your mortgage term.

    Hope everything works out for you both.
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  • MichaelDHMichaelDH Forumite
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    It's a difficult one...

    You have roughly £44k equity in your current home, so in theory you could move and not increase your mortgage balance, if you buy a new house for less than £334k minus fees.

    Would the loft conversion be enough for you to stay longer term in your current home or would you still need to move for more space? Will it add enough value to be able to justify the cost, or are you better off putting that money towards you next home?

    If your new home is going to cost more than £334k do you have savings that you could use towards it or would you need to increase your mortgage? If I was in your position I would be keen to make sure that mortgage payments were not going to rise to a point where I couldn't afford to make over payments.

    If moving to a bigger home is the most practical option for you then I would do it sooner rather than later before prices rise too much. Yes there's a lot of uncertainty about Brexit, but there's a lot of scaremongering too, and in truth no one really knows what will happen to house prices.
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  • VDOT47VDOT47 Forumite
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    We're in a similar position now - we're overpaying as much as possible now (and ploughing into savings) but not with the intention of being mortgage-free (or even mortgage neutral) any time soon, but purely to increase equity as much as possible to create as big a deposit as possible for moving! So for us, moving to a 'dream house' is worth it, even though it will mean increasing the mortgage in the short term.
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  • chunkytfgchunkytfg Forumite
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    JackeeBoy wrote: »
    Anyone here made or making this decision?

    Currently live in a two bedroom, mid-terrace house we got 3 years ago on the outskirts of London. We're happy with it but at times it can feel a little small with the baby and we plan on trying for another later this year. The current plan is to save for a loft extension once the second child arrives. So, current situation is


    Snip

    In what respect? Is the addition of another bedroom going to make the house feel more spacious?

    If its just the two of you with a third in the near future you don't actually need 3 bedrooms as long as the 2 are a decent size and not a double and box room!

    Would an extension out the back be a better option over a 3rd bedroom? If this is the case whats the cost of it compared to finding a house with more downstairs space that might already have a 3rd small box room anyway as the house will be just a bit bigger.

    Myself and the OH recently went through the house hunting process and all Estate agents kept telling us was how great the house was for doing a loft conversion in which would be great other than we don't need more than 1 bedroom as we have no kids and don't plan on them but need living space for an office area, lounge, dining room, space for gym equipment etc! We looked at loft converted houses and they were lovely houses but you couldn't get past how cramped the main living area felt in some of them
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  • JackeeBoyJackeeBoy Forumite
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    Thank you all for the replies. To answer a few of your questions...

    We live in a mid-terrace house and there are a notable amount of houses in our area that have had there loft extension done. We have played with the idea of moving but don't think we are at the point where we want to move up north and the other houses in our area quite overpriced for what you get.

    When moving house, we didn't take into consideration schools as I though any school that is good or crap now can change in the future. Our main concern was commuting and distance from the train station. We are a 10 minute walk away from the station (also an option to take a bus) and when walking, you are not going through any dodgy or dark areas. I feel okay with my wife walking back from the station when it's dark.

    We are happy with the location of our house and not too fussed by the size (though when I do visit my mum, I am in awe of how big her living room is). However, with the child he has taken over the living room with his toys. We also have a standing wardrobe in the second room (soon to be the kids room) as we can't fit all our clothes in our room (99.99% because of the wife). I typically work from home and the computer desk is also in the second bedroom and would have no where to go when the little one actually moves into.

    It is a dilemma because I know we can sell this place and move into a bigger house and paying roughly the same that we are paying now, only problem is the 16 year mortgage we have would have to be extended to at least 25 years and both my wife and I are just a little fatigued with work and my roles haven't be stable/enjoyable over the past few years.
  • JackeeBoyJackeeBoy Forumite
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    MichaelDH wrote: »
    It's a difficult one...

    You have roughly £44k equity in your current home, so in theory you could move and not increase your mortgage balance, if you buy a new house for less than £334k minus fees.

    Would the loft conversion be enough for you to stay longer term in your current home or would you still need to move for more space? Will it add enough value to be able to justify the cost, or are you better off putting that money towards you next home?

    If your new home is going to cost more than £334k do you have savings that you could use towards it or would you need to increase your mortgage?

    Not too sure I understand this....If I was buying a house for £334k, I would have to take out a £290,000 mortgage which is more than my initial mortgage and what I have now.
  • MrSaver96MrSaver96 Forumite
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    Have you calculated whether you can make overpayments in the event you moved now to a bigger home? If you can (and your mortgage provides for it) there is nothing stopping you overpaying your mortgage each year to reduce the term, allowing you to still retire early.

    Even if you couldn’t make overpayments, retirement at 55 is still very good! Remembering of course that retireing any earlier would mean you have to work harder to bridge the gap between retirement and being able to drawdown on your pension.

    I should say, it makes me weep at the thought of paying circa 290 K for a two bed house! In contrast, I have just purchased a 2 bed semi detached new build for under £100K in Greater Manchester. That comes with 2 double bedrooms and a very big garden!
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