Would we be mad to downsize

[YoBeaches]

Logically I feel we wouldn't. But the thought of leaving our current home seems bonkers.

We live in a coastal town and dd starts reception in September. There is me, DH, Dd and dog. No other children planned (I'm 44).

We have a perfect home we bought 10yrs ago. Needed gutting, we've probably invested £100k in our time part through major remodel then just ongoing work. It's. 3 bed detached, driveway for 3 vehicles, on a close, garden is 40ft x 80ft. It's a quiet close, mostly retired neighbours, couple of other families recently moved in.

I work full time in Exec role. 6 figure salary. I've worked really hard to get to that level. I go to the office 2days a week the rest wfh. It's a mentally challenging job.

Dh works full time and is away 2 nights a week. We have a great income between us and currently will pay the mortgage off in 11yrs.

But I feel more and more each day, like I'm dying a bit on the inside. My work motivates me less. I want to be with dd after school. I want more time for myself and to feel less busy and more connected. The weeks disappear into months and I feel like everything is passing by so fast

We'd always said we'd sell our home and downsize when dd leaves home/ part fund retirement etc but I'm wondering whether we should do this now. If we downsized we could stay in the same town, same lifestyle same great schools, but likely live mortgage free with a little left over. This would give me the opportunity to reduce my work or consider new opportunities, or less demanding work where I don't need to earn top whack to pay the bills.

When I say this, and write it down it sounds amazing if it were possible. But I have this fear that I might regret it, or regret leaving this home, our forever home as we thought. That it all sounds a bit mad.

For what it's worth I have been suffering some elements of stress the last 6 months. I feel like life is getting out of control and it's alll too fast.

So, what would you do? Am I having a midlife... has anyone ever done similar?

If you’re going to pay the mortgage off in 11 years, why don’t you just extend that period, pay it off more slowly and take a step back at work whilst staying where you are? Then you can carry through your plan to fund your retirement by downsizing and get to stay in your home. There’s no need to pay it off so quickly.

I guess because we spoke to a financial adviser some years ago and he advised to pay the mortgage off as soon as possible so that income would then be diverted more heavily into pensions pre- retirement.

But you raise a good point. Our pension plans would be based on us earning the same for the remaining period and I'm not sure that's feasible. Nor required.

Even thinking about this makes feel like, all this planning for the future and not being present enough now.

Well, paying your mortgage off as soon as possible makes sense financially, but that’s not the only consideration - quality of life is important too. I’d look at how much you could save by paying it off more slowly and whether that would allow you to make the career change you’d like. It matters less about paying into retirement pots I think because that is essentially what you are doing by paying for the house because you can downsize when you retire - plus, you get to live in it.

If I were you, I would extend your mortgage term/stop overpaying, negotiate part time (3 days a week jobshare? 4 days?) and then see how you feel.

The role I have (divisional director) they would be reluctant for job share etc. I think I could possibly cut down my hours in general though and take associated pay cut.

So the monthly mortgage has to reduce which as you say could be achieved without moving.

Alternative to that is a lesser role overall somewhere else.

Perhaps an interim step is increase the mortgage term and decrease the hours, then see how that sits in another year or so.

I guess there is something very tempting about being mortgage free completely though.

Is there anywhere else in the town youve got your eye on? If you want to move move! I think you should do it. You can make any decision you like if you can afford it, so do what you fancy

Personally If it were me I’d downsize buy a little motorhome and enjoy a less stressful life. Tomorrow is never promised and if your heart is telling you something and it’s a real possibility you can do it, then I would go for it.
there’s no point stressing yourself and missing out on the real world whilst rattling about in a big detached home. Just not worth it on the grand scheme of things.

The other thing to consider is you can only really downsize to release equity once.

If you do it now you won’t be able to do it when you are older so if you use the money now will you still have a comfortable retirement. Keep in mind your pension will likely decrease if you reduce your hours or income.

Unless you do downsize again and go for a one bedroom flat but I can’t think of anything worse than being retired with DH in a tiny flat with no outside space.

Having said all that there is more to life than money. Your mental and physical health and time with your child are also important.

I’d downsize and spend more time with your family. Without trying to bring down the thread my mum died when I was 23 and my dad a few years later. I am grateful beyond belief for the fact that she went part time when we were at primary until part way through secondary - those days out, holidays, and coming home to a (usually!) smiling happy mum are times I will never forget.

I wouldn't underestimate your value to your employer - to keep a good senior level person, many employers will agree to working arrangements that you wouldn't expect. In the civil service, jobshare is the lead option for very senior roles (there is even a jobshare Permanent Secretary), because there is cover every day of the week. It's not for everyone but just putting it out there.

Is freelance/consultancy an option in your line of work?

Yes I have seen houses that are smaller 3 beds, semi detached but good layouts and gardens which we could afford to buy outright and pay off remaining mortgage here.

@Mumtothreegirlies yes this is the tightrope. I feel I've always planned ahead and looked to the future and the time is just passing me by so fast.

@PauliesWalnuts sorry you lost your mum so young in life. I've never felt my own mortality until I became a mum myself. Time with her is something I can't buy, only find a way have the time available to her.

Do it. If you are struggling now with time it get's far worse when kids start school

If you plan to move eventually then extend the term and pay extra into your pension now so it has time to grow and you’ll have the option to retire early.

@Belindabelle yes, this is where the maths comes into it. Though I presume we can all assume some continued growth in house prices, without extending a 4/5 bed to this house, I suspect we have just about peaked value wise. So sustaining that through another ten years with perhaps some minor market increase feels the best we could get here.

No we wouldn't downsize again I suppose. Though the houses I've seen are 3 mins walk to the town/shops/gp rather than the 10 mins we are now. So in theory a good spot for later years if we assumed to stay there.

Ill have to work through some numbers.

@sweepleall thanks that's a nice perspective.

I could freelance. I did it for 8yrs before in fact it helped us buy this house in the first place.

I could and would consider doing it again but would rather have minimal mortgage/mortgage term before doing that to balance the security element.

Halt, stop, OP.

Have you considered that while you are on this six figure salary is the best time to make additional contributions to your pension and get maximum tax relief? It makes a big difference whether the tax man contributes 20%, 40% or even 62% tax relief to your pension pot. If you haven't looked into this, please do so before you do anything.

If you are thinking of scaling down your job in the future, it makes far more sense to maximise your pension contributions at this stage with maximum tax relief and hopefully time for your investments to grow, than to pay off the mortgage at this stage. You get no relief whatsoever on your mortgage payments if you focus on that, and will pay a shedload of tax on your salary to the government. (Remember you can draw down 25% of your pension tax free in the future, in a lump sum if you wish to).

I'd do that for at least a defined period, with the prospect of perhaps changing jobs or downsizing after a while. You and your DH need to sit down and formulate a plan.

Good luck.

It sounds like you're having a stressful time, and selling up to be mortgage free is a way to escape.

Life is always a balance, trying to find the best possible combination of present and future, and it may well be that you need to shift the balance - but don't ignore the future. You want to still have choices then.

You're in a senior exec position, so you're well able to calculate the financial impact of different choices. Try to treat this as though it were an investment decision at work, and use the same logic.

A few thoughts:

• Work out what the mortgage is costing you in interest vs what you'd get investing that money, and what you think will happen to house prices, interest rates and the stock market (for pension investments)

(I'm not convinced it was a sound financial decision a few years ago to prioritise paying off your low-interest mortgage. With 20-25 years until you retire, you would have been better with a longer mortgage term and putting the rest in a sipp in the stock market. But that might be different now with higher interest rates)

• do you have a fixed rate mortgage, and until when? Where do you think rates will be when it ends?
• you don't need to sell your house to reduce costs. You could extend your mortgage term. But do think about what will happen when your fix ends.
• How is the rental market? Could you rent your house out and rent a much smaller one, to try it out (and reduce hours with the saved money)
• Your DD is still at an age where she won't care where you live. You'll want more space and stability in a few years.

Most importantly, I think you need to create some breathing space for yourself so that you're making a well-thought-out choice having worked through all the implications, not acting rashly to escape stress.

You can sell your house in a years time if you still want to. But down-sizing is probably one-way (and as a pp said, something you can only do once)

Very good point from SeatonCarew on the pension tax relief!

It really doesn't make sense financially to be mortgage-free at 45 instead of keeping that low-cost debt and investing in your pension.

You seem almost afraid of your mortgage, and you're not thinking about it logically. Why would you pay down your mortgage before going freelance? Having some savings as a buffer would be enough.

It's the mortgage, mostly, that requires my level of earnings to be sustained. And with that comes the hours, the stress, and lack of balance at home.

Some pp here advise lengthen the mortgage term to reinvest in pension but that still depends on sustaining the level or earnings.

I could put more into pension now, certainly in September when we stop nursery fees this was on the agenda, but again requires a sustained level of high income for a number of further years to make any difference.

I struggle to see that any of this creates time for me and dd in her primary years.

I think @nordicwannabe describes it well. I am stressed, I have been, and I need a way to change that which doesn't compromise our future too detrimentally.

And maybe some of that is mentality, working for that salary might not feel as stressful if I don't 'have' to do it, but more so through genuine choice.

Another consideration to me would be going back to being semi-detached. Having lived in a detached house for nearly 30 years, and hearing on here and from others, about neighbour noise, I would be very reluctant to go back to living in a house joined to another.

Will you really need to sustain that high income though? You're about to come out of the nursery years. Are you planning on private education for your DD? If so, maybe reconsider. If not, then you're about to have much lower outgoings.

You say you're on 6 figures and your DH also works full time. A couple if nights away from home each week suggests he's in a reasonably high earning professional role too.

Presumably it's a pretty high mortgage? You don't say if you have a fixed rate. If not, then things will feel painful just now. But rates are likely to come down in a couple of years. And remember that the high rates are due to even higher inflation. A physical asset like a house is a pretty good inflation-proof store of value for your equity - and the mortgage debt is being inflated down.

Selling the house and having the equity in cash would feel like you had more money, whilst actually leaving you with less in the long run.

Yes, living in a detached was a major part in buying this house and it has crossed my mind.

I'm reading up on the pension angle to try some calculations.

My DH and I kept our mortgage payments low and then cleared the mortgage with some of the 25% tax free pension lump sum. Would this be an option?

No private education, schools here are fantastic and we're very lucky.

Here's some numbers.
Current mortgage outstanding £300k
Estimate value of current house £900k
Estimated spend on smaller house £500k
Additional disposable income if no mortgage and nursery fees approx £3500pm on current earnings.
Current mortgage fixed for 5 yrs (just before major hikes) appreciate redemption fees at play.

Our house isn't massive but location inflates the prices round here being near the beach and great area.

So in theory the investment in smaller house should be just as safe.

It how well we could then invest the additional disposable income, and/or how much that could be reduced by if I were to earn less, whether that's less hours or less draining position.

DH earns less than £50k, his line of work his is passion and niche skills but doesn't pay mega bucks. He sacrificed time for childcare when I went back to work from mat leave and dropped to £30k and has just recently gone back up to full hours. He's 46.

We've benefited massively from this house purchase as an investment clearly. We intend it a 25yr home. And my career has sustained motherhood (so far).

But I don't feel like I have the right balance. And I'm sad at the lack of quality time I have with dd.