People could cut housing costs to retire early

But there isn’t always a trade off, financially I won’t ever need to down size, so why would I? and downsizing would actually cost a huge amount of money in many cases so again what’s the point? I

I wouldn't retire at your age. Enjoy your house while it suits you, but you may need to upsize as the kids grow. We were in a terrace for years. We could have afforded a bigger house but it was cosy, safe and we could lock it up and go away for the summer without thinking. Then all of a sudden the kids grew to our height and it felt overcrowded plus there was no private space to work from home so we moved. The bigger space is very much appreciated.

How can you "cash out" you still have to live somewhere?
The only way to benefit from an increase in property values is to downsize or move to a much cheaper area- which people either, can't ,because of work, or don't want to.
Older people can use equity release- but you only get about 2/3 of the value at most, and none goes to your estate, so you have basically handed over a third of the value of your home, plus the increase in the value of the property from the time of the release until the time of your death over to the equity release company.
For this reason it's mostly used to avoid care home costs, it isn't something you would do if you have anyone to leave the property to, or if you don't want to make huge amounts of money for parasites.
You would only do it if you were going to lose the money anyway in care home costs.

Could you consider renting out your place, and then temporarily renting a bigger place for yourselves. That means you keep your options open/a fall back plan, and keep the value from the home you’ve cared for for many years.

Could you get something medium sized that suits, no need to go from small and cheap to large and expensive. We just have a very average 3 bed detached which was just right with having the one DC, and still fine now we have retired.

Many many dc return home after graduating. I don’t know a soul who has downsized when dc gone to university. They come home and often don’t earn enough to rent. The days of parents not offering a home to their graduate dc is long gone.

I won’t downsize from my large family home, spent over 20 years getting it exactly how we want it, it’s in town so fab location for all amenities, plus if I did want to downsize it would be to a detached bungalow, which would cost the same as my house, when you take into account the costs of moving, stamp duty, the inevitable refurbishment costs which are now huge it would be financial suicide for my retirement, much easier and cheaper to pay for a gardener and cleaner if needed when the time comes. Downsizing with vast equity left over isn’t always a given unless you move from and expensive area to a cheaper one.

We have an option now - buy mortgage free. 4 bed house on a nice estate with medium garden. Might need to do a bit of work but not a priority and would have the money almost immediately to do it. There is a house in mind. Or take out a mortgage for a potential (none yet on the market but may be) bigger house, bigger garden, not on an estate, potentially 20 yr mortgage if we went large or 10 yr if smaller. Repayments 1500 per month min. Not sure. I am coming round to having a less prestigious house and more fun!! In your position I might go halfway - move and take out a small mortgage but one that's probably doable to be paid off by 50.

I mean bloody lucky to have this dilemma.

IMO, pensioners tend not to cash in on their property values and downsize because the place they are in is HOME. Not just a "property". That matters.

I think there's a trade-off for most people - but that the choice isn't as stark as it is for you because you're mortgage-free, which is so unusual at your age. We have talked about moving to get more space, but don't want to either increase or prolong our mortgage payments. But either way we have to pay a mortgage - so I can see why someone might decide it was worth paying a few hundred a month more to have the nicer house.

Also, it sounds like you live in a very cheap area? You say: Our annual family income (pre-tax) is over 50% of the value of the house.

Where I live, you literally couldn't buy any property for twice our (decent) annual salaries. So again, it maybe feels like a more stark choice to you - you have the option of spending very little of your income on housing. We don't - the choice for us is to spend a lot of our income or loads, so the trade-off for the smaller place feels less immediate.

The current state of property market in most of London and SE is depressed owing to higher taxes eg Stamp Duty and the increase in Council tax by 75% over next 3 years in places like Westminster - now Labour in charge there. Flats are not selling well at all in London especially newer ones with cladding that has not been replaced so long after Grenfell, These uncertainties and new taxes tend to make people stay put in many cases.

You’re incredibly lucky to be able to live in an area where a house costs less than twice a standard dual income.
That’s not really a situation where you downsize to release wealth. Those people will be the Londoners etc who can move to cheaper areas or those who have far too much space when DC leave home.

Days out, holidays, meals, travel to and from uni, uni living costs as the basic loan doesn't really even cover accommodation, learning to drive, things they need for their hobbies and interests, costs of extra tutoring and educational supplies - revision books etc. Then they start wanting and needing friends to come with them. Etc.
They're considered an adult for most purposes at 16, for prescriptions it's 18 but the cost naturally falls to parents.

Mine were never that bloody expensive. Didnt have expensive clothes, often chose stuff to wear at bootsales , not avid followers if fashion lol. Only one took school bus the other 2 could walk 10 mins up the road. I got unwanted computers/ laptops and upgraded them with spare parts. Phones were never more than about £80 even if new. Often bought secondhand from people who " must have the latest" despite nothing wrong with the ones they had

They all had part time jobs for their luxuries and tbh at uni was cheaper for me than them being at home. Sent a huge box of basic foodstuffs at start of each term and they paid gor the rest themselves

As adults they still look for value in everything they buy/ do rather than throwing money around unneccesarily. They also grew up in an affluent town in the south east so plenty of friends who lived luxury lives

I have never really understood why I should want to up my housing costs in line with salary. DH and I bought out 3 bed house with manageable sized garden when we were each on around £22k a year and the mortgage was around 1/3 of our take home salary. now our household income exceeds £150k, we have no mortgage, we are able to save a significant amount each month and enjoy a few luxuries. Our house has tripled in value and if we ever needed to we could extend into the loft or on the back.

we absolutely could sell up, put £150k down as a deposit, take out a £300k mortgage, buy somewhere a bit bigger or in a more affluent area but it wouldn’t drastically improve our lifestyle and would drastically reduce our financial freedom.

With our savings and our mandatory outgoings at this point either of us could lose our jobs and we’d be fine for a couple of years before it became an issue.

Is it a genuinely small space or can you declutter or work to the space you have? For example, do you have 2x wardrobes worth of stuff in 1x wardrobe of space? 2-3 sets of bedding or 20?

I'd consider how long you can live in a small space for. If you are mortgage free and looking at a house that costs 1k a month in mortgage, start putting it aside now. Is that comfortable? Ultimately 1k in savings earning interest will work harder for you than 1k on a mortgage where you're servicing a debt on a house (that you think won't increase in value).

Saving 1k a month for 3 years until kids move school would give you 36k towards moving or uni fees (without interest).

And consider how long you need the bigger house for if kids are moving out for uni.

But also think about why you want to retire early. Could part time or alternative work be an option in the later years? Do you just hate your job now and see retirement as an escape or are you wanting to raise grandkids?

DH and I borrowed less than we could have to buy our first home together. We wanted children and to be sure we could manage on one income. In the event the children did not materialise but we paid the mortgage off early, I was able to retire at 58 (early severance package) and we are still happily here in our three bed semi to which we have added an extra room at the back and converted the garage into a home office/woman den.

@ThoughtsQuestions You are nowhere near high point expenses for dc! Teen years cost and dc might want and need more space. I’d move to somewhere with more space for dc as you are there so much! Being cramped is surely no fun.

Retiring early sounds fairly impossible for you. University is very expensive. The minimum loan is under £5000. Cost of housing and food is nearer £11,000. You will make up the difference every year if you are on decent salaries. If you are on a low wage, dc get full maintenance loan of £10,500. So you will have choices to make in your 50s.

I’ve always enjoyed our house. We don’t enjoy lower quality housing but could afford better to give us some space. You don’t value this but you need to have a much better grasp of teen and uni expenses because you might need to start saving! Plus pension saving is usually out of non taxed earnings. It’s tax efficient. So you should look into this too.

@TheQuirkyMaker That was remarkably generous of you.

My paid off house is worth almost 400k, we retired in our fifties. I live in quite a deprived Northern town, ex mining area.

If my house was where DH grew up in Surrey it would be pushing a million and my South-coast home town probably about 700k.

We are actually going to relocate around 30 minutes away as house prices are even cheaper. One of the main reasons is there are no fast train lines but as there is no more commuting as DH and I occasionally had stuff in London and he was always needing to fly from London we simply don’t care anymore.

We don’t want a huge house but it will possibly be bigger as if we do live to a great age we want a house with a downstairs bathroom, bigger drive and a slightly bigger garden with a better view. We are really after a better layout. I really don’t want a bungalow as we like to sleep with the window open and I do not fancy that on the ground floor.

In answer to the actual question we stayed in a smaller house so we could retire early. I have now been diagnosed with angina, honestly 2 of my friends dying when we were all 54 and DH mate dying at 38 spurred us on to retire early.

Sometimes they can't face it, feel overwhelmed.

Not sure how relevant this is but: we downsized to a small 2-bed semi to release money for children's deposits. We have saved a bit of money since and can't wait to upgrade to a 3 bed detached, like we used to have! Storage is the main problem, but also not being able to have a big table and an empty room for hobby stuff, etc.