To abandon the extension?

You’ll wish for more room when your kids are older! I’d do the extension if the moneys there. Plenty time for holidays.

I definitely understand the desire to travel etc and I imagine it was very stressful dealing with the works with children and you might be doing that again if you want more and to do the extension/renovations.
But I agree that with 4 children, if this is your long term home, having a good downstairs space will be a good investment for family life.
We didn't go ahead with our extension because of costs but it was replacing our horrible conservatory with a proper room, we hadn't borrowed the money yet but it was eye watering for us and meant we wouldn't be able to have nice holidays or enjoy any days out as a family so we decided that it wasn't worth it. But we have spruced it up a little so the space is slightly more useable than before and that's made our living room & kitchen nicer too.
I would not spend borrowed money on a holiday though, ever. That doesn't feel financially sound at all. I would put it against the mortgage if you don't do the extension.
We are definitely 'holiday' people rather than 'house' people though.

Definitely agree you should do the extension. It's easy to see the appeal of better holidays but you will enjoy the house year round and you will benefit as the children grow.

It’s highly unlikely a well built and pleasant extension isn’t going to increase the value of the property quite considerably.

You have 2 choices (or maybe 3):

Spend the money on experiences - memories but money is gone

Invest the money into your home - will go up in value and will likely be a good investment. It will also provide nicer environment for a large family - as the children are older they will need more space and who wants to live in a pokey home?

Use the money to invest into your futures. You mention your husband is self employed. What are your retirement savings like? For a modest retirement, you will need £500k in savings and pensions are amazing products. What about your savings for your children and their grandchildren - what does that look like?

I know what I would be doing and it wouldn’t be burning through the money. We live off income, not capital and certainly not borrowings.

I’d do the house … you can worry about the posh holidays later down the line.

The only thing I would say is it sounds like the house is quite unbalanced with 5 beds and really that isn't going to be improved much by knocking the kitchen through into dining area.

I know you plan to extend with a utility but actually that isn't going to add much living space, it's quite functional, and what you'll be left with is only areasonably big kitchen diner, and a lounge, as the total usable living space for what potentially might become a family of 6.

Sometimes being able to separate out from each other a bit can be quite useful - I would worry with what you propose your teens will just spend all their time in their bedrooms due to lack of living space downstairs.

Is it possible to extend the ground floor out at the back as well as the side, in order to do utility plus make kitchen and second reception room both bigger? This would increase the value of the house more I think but I appreciate would also cost more.

Don't use money borrowed as part of a mortgage for holidays! You're then paying back that holiday over the term of your mortgage. Do the extension and add that value to your home

Another vote for doing the work OP. It’s getting increasingly expensive to move nowadays and given your house is quite top heavy I think it will balance it out and add loads of value.
We knocked through our kitchen and diner and added a large conservatory to the back of our house when we moved in and it’s definately been worth it as it’s given us the ability to stay here longer term. The removal of the wall did create a lot of dust though so just be prepared !

My house sounds exactly like yours, we’re on the end so have a lot of space at the side of the house. We haven’t yet built into the loft but there’s plans to. I’d absolutely go for it, I have 3 kids (teen, pre teen and almost 10) and I’d 100% go for the utility and extra space. Holidays can come later but you’ll always enjoy your home.

I am the one person probably that hates the idea of a social kitchen. The kitchen is my space I don’t want other people in it and I would love to be able to shut the door on it. Would love an utility though. Also hate kitchen islands and breakfast bars and want to put walls back in barn like open plan kitchen/ diners…

We're in a very similar position and in fact our extension has started today! Like you, we felt the living areas were small. We have small, separate kitchen and dining rooms. We've remortgaged to do the build as well.

I'd personally worry about negative equity too, surely this will affect you if you ever need to sell the house unless the value of it has significantly increased since you bought it anyway? Holidays are lovely (we haven't had one in 8 years!) but investing in the home means it works better for you, adds value and is permanent. If you search for a new house what are the odds that one would be decorated exactly as you'd like it? We saw lots of properties on our house search that were very modern but not to our taste so we'd have still wanted to change things anyway.

Also the one thing our house had going for it is that it already has a separate utility room. I couldn't be without it, it's such a game changer.

Ive not read all the responses, but could you fit a utility in upstairs? Then maybe all you need to do is knock through to create a kitchen /diner?

@Extendorsave not really enough showering facilities for 5 bedrooms. we have 2 ensuites and a large bathroom for 4 bedrooms( 1of which has never ever been used for a bedroom in 30 years). even though we also have 3 toilets I have seen me running around with my legs crossed in the morning looking for a loo!

Have you considered knocking through the kitchen and dining room and remodelling the conservatory as a utility room? More useful to you and more attractive to buyers. And within budget.

Knock through between the kitchen and dining room, and extend the downstairs toilet to create a small utility with a dryer stacked on top of a washing machine. Remove the conservatory and put bi-folds there. You don’t need to extend.

Remember, one of you could get ill, lose your job or interest rates can double. I’d prioritise repaying the mortgage.

I’d look to get 2 quotes:
1 - to extend out very slightly across the back. On my as far as your conservatory goes so that you’re just squaring off the space. With also the kitchen wall knocked down and a stud wall going up to make a interior utility.

2 - just knocking the kitchen wall down and building up a stud wall for utility but with a lightweight roof on the conservatory.

in both scenarios I’d keep the kitchen where it is and have a table over looking the garden and a seating area along the new stud wall.

Would be lovely and if you do sell at some point, would be a big tick for buyers

@Extendorsave you only have 2 bathrooms though for 5 bedrooms!! nightmare fighting for the shower in the morning. you really need another shower room!

Why not just do the work that you need to do in order to sell your house, and then move to a place you like better OP. It doesn't sound like you'll ever be happy where you are, so get in a couple of estate agents, ask them what you need to do to make it sell for the price you need it to go for, then just get that work done. While they are there, you can also ask them if building the extension or whatever you are debating doing will be worth it, or take you over the ceiling price for your area. This way, you will actually have all the information you need to make an educated decision.

Glad to read that we have managed to talk you out of blowing that money on holidays, etc. which would have been a really silly move to make.

I am ridiculously in love with my utility room. It is so amazing for have my washing machine and tumble dryer out of the kitchen. all my coats and shoes. Lots of storage for vacuum cleaners and even Christmas decorations! And a sink for the messy stuff. Oh and the cat litter out of sight.

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We also borrowed extra on the mortgage to get an extension to give us a kitchen/diner/family room and a utility. It was a hard six months but soooo worth it! We got it done as soon as we could to get our moneys worth out of it! It’s made such a difference to the house and to our lives. I would also look into getting a downstairs bathroom like others have said. But if not, knocking through the kitchen and diner and having a utility would make so much difference. Don’t just spend all that money on holidays. If you have 4 kids you will definitely want a utility and a bigger living/eating space