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?

It is a lovely problem to have, you're right. (I hope this isn't coming across as smug or greedy!)

Only you can decide that.
Personally, given a mortgage is the cheapest form of debt available to consumers, and rates are at an historic low, I’d be inclined to get a small one with easily affordable monthly repayments that won’t affect your lifestyle much.

That said, I’m all about location. I’d live in a worse house in a better area any day of the week over a good house in a shit area.

No, not coming across as smug at all. I understand the dilemma!

As someone else said above, interest rates are very low at the moment so borrowing a small amount would mean low repayments plus you've still got some cash in the bank as your security.

Hmm normally I’d say take out a small mortgage and get a bigger house.
You don’t mention children so I think a smaller 2/3 bed bought in cash would be perfect.
Be sure it’s what you want though, as if you decided to go bigger in a few years needing a mortgage, it will be much harder once you’re self employed.

I would decide on the location I wanted to be in and look what’s available. I would probably go for a small or no mortgage. Certainly not a large mortgage for a large house at your age if there is only two of you.

I'd go mortgage free

Go with a location you love and detached if you can. So I would take a mortgage and keep savings. It gives you more flexibility financially if hard times hit.

I really regret buying our cars in cash rather than taking out a loan for them. The loans would be paid off by now and we'd still have the savings. Our plan to pay to save what we would have paid for HP, just didn't happen. Whereas if they had been outgoings, we would have cut our cloth accordingly.

www.rightmove.co.uk/property-for-sale/property-78612226.html

www.rightmove.co.uk/property-for-sale/property-78612226.html

First one is the kind of thing we'd be looking at with mortgage

Second is nearer what we could afford 'outright'

Examples only!

First, I really envy you 😁. Second, considering age and no kids, I would go mortgage free. Hope you guys reach an unanimous decission.

Ha, they're both the same bloody house, sorry

Those two links are the same?

That's the same house

I had a similar choice. I went mortgage free. Psychologically, especially with the current economic uncertainty the security of owning outright, can be very freeing.

Will you still have some savings left if you buy outright? That’s the only thing - make sure you’re not house rich/cash poor.

www.rightmove.co.uk/property-for-sale/property-77473609.html

Although buying mortgage free would be nice, it might be a false economy. If you choose a house that becomes too small quickly then you will want to rebuy and that would be more expensive as you'd have moving costs again..
When you are self employment it often rules out getting a mortgage on your earnings, for several years as you have no track record of earnings.
I would get a small mortgage and buy a slightly better house. When you are self employed it is good to have some hard cash savings to access too, rather than having them all tied up in property.

I would suggest a. going with your heart as you have the opportunity to do so and b. making sure you have enough savings left to cover any unexpected expenses. I'm keen on the edit of having the equivalent of 3 month's salary available just to cover my arse if & when.

(And, I know these are only examples, but based on those there is a BIG different between the Horsham and the Horley house. Horsham place much nicer/better location. I know what I would do ..)

You can also always plan to overpay the mortgage as & when you can to reduce the term as much as possible.

It genuinely depends on how you feel about the house - if you are happy with a small 2/3 bed house and you’d be buying a bigger house just because you can, go cash. If you’d be looking to upgrade in 5 or so years or less, get the mortgage. This is because (a) stamp duty is massive so moving more than necessary is throwing money away and (b) house prices are very unlikely to increase over the next 5 or so years so you won’t make any gains to cover stamp duty

Personally I think you have to optimise the cost of the mortgage (or lack thereof) against how soon you’d have to move to be in a home you feel truly happy in. I personally would find a 2/3 bed terrace a bit small for my home and so would take on a mortgage to avoid having to move again in the next few years. But I have other friends for whom their house isn’t that important to them, and who would go for the mortgage free option. So it depends on your personal priorities.

Mortgage free -you aren't then paying interest for 10-15 years. It's a no brainer.

Just looked at your examples. I’d take the mortgage personally. I also know the area and Horsham is a lot lot nicer!

If you are planning on staying in the house long term, buy in the area you like the best. Mortgages are very cheap at the moment.

Get an offset mortgage and have the best of both worlds. Keep savings in the offset savings account which means mortgage repayments are lower but the cash is accessible for starting a new business.

Based on those 2 houses I’d definitely just get a small mortgage. The more expensive house is so much better

I would buy the house outright with cash (didnt know you could pay for a house with cash?) and then rent it out for abit to save more money.. then given a few years... put that money towards a bigger home and sell the house you rent out.

I do love that Horsham house