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To buy a house in cash even if it means smaller house and using savings?

(107 Posts)
BoxAndKnife Thu 18-Jun-20 12:55:27

DH and I are 1st time buyers in the south-east. We are in the very fortunate position to be able to afford, potentially, to be cash buyers but it would mean a smallish property (eg 2/3-bed terrace) in probably a less sought-after area (but still perfectly acceptable imo).

We would also have to put some of our savings in as well to cover stamp duty, fees etc.

Alternatively we could apply for a mortgage, keep our savings, and buy a bigger house in a 'better' area. We are both over 40 so would be looking at a relatively short mortgage term eg 15 years.

The idea of being mortgage-free really appeals to me, though, especially as my 2-year plan is to set up my own business. It would be great not to have the worry of mortgage repayments. But we would definitely have to make more significant compromises on space etc.

What would you do? Does the freedom of being a cash buyer outweigh the negatives of a smaller place, or should you always buy the best house you can afford?

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YouDirtyMare Thu 18-Jun-20 13:00:55

I would take out a small mortgage and pay the rest in cash so you keep some savings

parentofteen Thu 18-Jun-20 13:02:24

I'd go for the house in cash, no question: you could build up savings again pretty quickly, presumably, with the money you won't be spending on a mortgage. What a lovely position to be in!

Stripeytopgirl Thu 18-Jun-20 13:05:07

I would go mortgage free, without a doubt. I’m south east & it’s bloody expensive, so you’re in a great position to be able to cash buy!

RHRA Thu 18-Jun-20 13:05:09

I’d buy the best house I could now , while you’re in a position to get a mortgage.

Oddgirlout Thu 18-Jun-20 13:05:45

We are thinking along similar lines. Move and have a mortgage or stay and pay it off by end of year. We are thinking stay. The freedom of not having a mortgage is really appealing. We have kids and have never really been able to pay for much for them, now facing being able to go on holidays etc. Seems like a good opportunity and also to be able to save more for them in the future.

RHRA Thu 18-Jun-20 13:06:01

It may not be possible to get a mortgage for a while if you become self employed.

Sandybval Thu 18-Jun-20 13:07:58

I would use it for the house, no question. Being mortgage free offers a fair bit of security, you can build your savings up again but might not be in this position again.

BoxAndKnife Thu 18-Jun-20 13:09:37

I know, if feel very lucky to even have this dilemma, we are very fortunate.

RHRA, the move is likely to happen long before the job change.

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JacobReesMogadishu Thu 18-Jun-20 13:10:12

I’d take the mortgage and keep savings. Or at least some of the savings. You can always downsize in the future if you need to and pay cash. But you might want the savings for the business.

Thneedville Thu 18-Jun-20 13:10:40

I’d go with small mortgage and nicer house, with a fixed rate seeing as you are risk adverse. It costs a lot to move so I’d rather have something I am happier with, without stretching myself too much.

OpenWheelRace Thu 18-Jun-20 13:12:18

Why not go middle ground?

Get a better house with a small mortgage?

That way you benefit more from any increase in value, but aren't handcuffed to a large monthly expense.

It dies have to be no mortgage vs ££££

Cam2020 Thu 18-Jun-20 13:12:19

I would take out a small mortgage and pay the rest in cash so you keep some savings

Exactly what I thought. Get the house you want with a big deposit, small mortgage and money left in savings.

Redleathertrousers Thu 18-Jun-20 13:13:14

Cash buy.

BoxAndKnife Thu 18-Jun-20 13:14:08

I am indeed risk-averse grin I am one of those people who really values the security of a good cushion of savings 'just in case' but equally never having to pay rent or mortgage feels pretty tempting.

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user1493494961 Thu 18-Jun-20 13:14:44

I would take out a mortgage and buy a better house.

BernadetteRostankowskiWolowitz Thu 18-Jun-20 13:14:52

Pick the best location. A great location guarantees an easy sale if you want to move again.

Buy what you can afford in the best location.

BoxAndKnife Thu 18-Jun-20 13:19:42

OK so the voting suggests buy in cash, the comments are going towards taking out a mortgage grin

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Zenithbear Thu 18-Jun-20 13:22:22

If you were you were 20s or 30s I'd say go for a bigger house with a mortgage.
But at your age I would choose mortgage free.
Me and dp bought a smallish house but in a good location outright and have added loads to our savings and investments, had a brilliant lifestyle with lots of holidays as well as being able to afford to buy a holiday cottage.

janinlondon Thu 18-Jun-20 13:23:32

Get a mortgage the equivalent of your cash and savings, link the accounts, and pay no interest. Its very simple.

JadLi Thu 18-Jun-20 13:25:44

Maybe compromise somewhere in the middle... Take out a small mortgage and buy something nicer/bigger.

We have a similar dilemma in that we would like to move to a bigger house with a bigger garden which would mean getting a big mortgage, but if we stay where we are our mortgage will be paid off in 4 years.

But being mortgage free just sounds amazing!

A nice problem for I have I guess...

chargeorge Thu 18-Jun-20 13:27:13

I used all my savings and inheritance to buy my flat and then the money I wasn't paying in rent or mortgage became my savings - it soon adds up again - I'd recommend not having a mortgage as the house is all yours

JadLi Thu 18-Jun-20 13:28:10

That was meant to say... A nice problem to have*

My sausage fingers 🤣

Alanna1 Thu 18-Jun-20 13:28:21

I think you’re very lucky. Interest rates are very low at the moment; it is a good time to borrow, if you are able to do so. Holding some cash gives resilience, especially currently. I would look for a house you like and take it from there - size, area, etc. If you find a smaller place in a good enough area to be happy in forever then that’s great. If you need to borrow a bit that’s fine too. Having eg outdoor space that could take a garden office, the ability to take a lodger, etc, gives you flexibility too.

BoxAndKnife Thu 18-Jun-20 13:28:41

Yeah, I think our age is a factor, Zenithbear. If we were younger / had young kids then I'd be up for maximising the house in terms of space and 'growing potential' but it doesn't seem like such a priority now.

But...I would also like a bigger house in a better area grin

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