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Maxing our family house budget now then planning to downsize at 60(14 Posts)
Posted this in property too but I thought I may get a more financial perspective here:
We will be looking to move within 2-5 years to our 'long term family home'. Currently we have a small mortgage, but we're thinking of buying as much as we can afford, with a view to downsizing to release equity at 60. This would (part) fund our early retirement (we also have pensions and savings), and also potentially allow us to gift the DC deposits for their first homes. The benefit of this plan imo is it allows us to also enjoy a fab home while forcing us to 'save' every month ie pay the mortgage. Are there any negatives we should consider? Has anyone done this? Or planned to and changed their mind?
I keep thinking we should do this too but then our kids are aged 17 down to 11 and I worry that potentially 2 of the kids could have left home in a few years time and we will be rattling around in a big house ! We are currently mortgage free and the thought of taking out another mortgage isn't appealing even if I think of it as saving/ investing. I also worry about one of us losing our jobs or needing to reduce hours due to caring for elderly parents etc. I think we possibly have missed the boat and should have upsized a few years ago. We have 4 kids and our current house is adequate, kids all have their own rooms but downstairs feels cramped.
When do you anticipate that their current rooms might be 'freed up' though?
We've done something like this, having had a big 4 bed family home when kids were at home, and now in a much smaller 2-bed place in a city since they've left home. We also have friends in the same age group who are doing the same thing.
It's been OK, though you can't predict the future. For example I was made redundant and am now earning much less than in our big house, but we still have a mortgage to service, and as you get older it is far more difficult to find work.
Also downsizing into a property you like is not that easy. We (and friends) have found the price differential between our family homes and empty-nester one (but still in an attractive area to live in) is much narrower than we expected e.g. friend recently sold their place for £1 million (SouthEast of course) but ended up paying 750k for their smaller place. Once you've included the costs of moving, and some work on your new place, there's not that much left!
Having said that, I do not regret for one minute maxing out our mortgage to live in a spacious family home which easily accommodated visitors, teenage sleepovers and parties and great social events. Just go into it with eyes wide open!
I think you might be underestimating the room / space you need when you are 60, tbh.
We're looking to move to gain more space. Ours are all teens / into 20s, so they take up much more room individually, and then you also start having partners being there too. We really struggle now at Christmas or any other family occasion as can't get in our living room together.
Also depends if your dc are likely to be established at work then.
Also depends on if they are living local to you, or if you want to retain enough space for them to stay over when they come and see you - potentially with partners and then even children.
Don't get me wrong, I think you need as much space as you can afford when they are little, but you might find you aren't ready for your retirement bungalow at 60
Some interesting points thank you. I hadn't even considered the DC could still be living with us at 60! I guess if we can offer them a house deposit by downsizing that would encourage them to move! I actually prefer smaller houses in lots of ways- big houses are a pain to redecorate and clean. Keeping spare bedrooms for Christmas get togethers really doesn't appeal, but I guess I may change my mind.
Possible issues to consider would be how much would downsizing cost in x years into the future, perhaps the value of your home will not be as sizeable in comparison to a smaller home in the same location, not freeing up as much equity as you'd hope.
Is the plan only viable if you are to sell at 60? Or just to give the early retirement and children's deposits hope a reality? I think a lot of people assume 60 to feel like a turning point into older age and ready to settle, but really you'll have emotional attachments to this home and you won't feel old, you'll be comfortable with your surroundings.
How sure are you the children will move out? My ds is 29 & only now getting a mortgage even with help. My friends dd has just moved back from rented as the payments are too high.
People can't necessarily afford to upsize for you to downsize today and things may get harder.
I always thought we would do this and wondered why our parents hang onto big houses...but now we have made the house so nice I am starting to feel I will not want to move. I think it can work if you know you can afford to move to a similar or nicer area, even if the house is smaller.
Paying off a mortgage isn't saving it's paying off debt.
Take out redundancy protection insurance and make sure you have income protection insurance, life insurance etc. We have an insurance policy that pays off the mortgage if one of us dies.
I Agree about the downsizing it may not be possible till later than you think, you may need unable to sell or it may he at a lower price than ideal. It seems optimistic to release enough capital to downsize and give the kind ds a deposit. Our Rd last house move cost £30k we have spent double that on the house.
Do the math, if you buy a house say for £800k, will you have paid off the mortgage when you are 60 or will you still owe the bank? If you still owe the bank will you have the retirement nest egg and deposits for kids?
I'm so glad I posted it really isn't as straight forward as we were thinking!
So very rough figures would be to go from 300k house to 700k house (possible with our incomes now). We would get a 20 year mortgage that would be paid off by the time we were 60. Ignoring inflation/housing market fluctuations, we could easily downsize to a 300 k property again, giving us back the 400 k we borrowed. I would love to retire at this age, and also would much prefer to give the DC a lump sum for house deposit when they need it (rather than when we die!) Our house I am thinking may be needed to pay for our care (or lavish lifestyle )in old age, so they probably wouldn't get it anyway!! Eldest would be 30 so a good time roughly for them to buy.
I think the 2 biggest risks are one of us not working, and falling in love with the house and not moving.
Another option would be to buy our 'forever' home that we don't want to move from and start saving. But it just seems impossible to save the 400 k plus inflation that we'd get from plan A. However I am naturally very cautious so it may be better to do this. Thanks for all your thoughts.
Don't underestimate the potential for interest rates to rise, they've been artificially low for years now due to the govt's policies, and this could change (esp brexit-wise and all the other chaos currently going on).
We're considering the same. However, I do worry that we might not want to move at 60 or that interest rates go up to the point of us having to cut back a lot on our lifestyle. The idea of having a lovely house really does appeal, though.... I also think that it would be a lot more disciplined way of doing things - currently we meant to be saving a lot but end up spending a lot of it on expensive stuff we could do without. Having a larger mortgage to pay would solve that problem.
We're planning on doing similar. ATM in a big 5 bedroom with two living rooms, bathrooms etc. It will be too big eventually and we want to be able to give the DC some money from the sale as well as free up some money for us. Not at 60 though that would be too early for us, we were thinking of downsizing around late 60's.
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