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

[BoxAndKnife]

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?

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

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!

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!

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

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.

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

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.

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.

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.

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.

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 ££££

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.

Cash buy.

I am indeed risk-averse 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.

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

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.

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

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.

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

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...

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

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

My sausage fingers 🤣

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.

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

I would be a cash buyer too. You don't know what may happen in the future and it's always better to be mortgage-free.

Better to have a house that is slightly smaller than you might have ideally wanted, than a house is that is a millstone around your neck if you lose your job.

Very few people actually need a big house, they just want one for bragging rights. So it depends what's more important - financial security or bragging rights. I went for the former.