Future proofing- downsizing now in our 40s or wait

[Ugutff]

I will preface this with, I grew up in Europe and would love to get feedback from Brits on what makes most sense.

We are both in our 40s and have one primary school age kid. All this talk about recession and rising interests got me worried.

We live in London in a four bed house which we bought assuming we'll have another kid but that never happened. But we still owe 400k on it and are clearly not getting any younger.

Would it be totally silly to downsize now to a two bed flat and cut our debt?

Friends have pointed out that people usually do that when they are older and often to release equity. Because we moved to London in our 30s, we never got a chance to buy when houses were cheap. At the moment mortgage is 50% of take home as we are overpaying.

Family back home all rent so no advice from them. What would everyone else do? Is this doom and gloom just getting to me? Or would it make sense?

How long is your mortgage agreement? Are you on flexible rate?

I would get mortgage advice and do whatever will help you ride out the next crash.

Could you afford to pay 6% more than you are now and stay longer term.

If you move you have all the fees and might not spend much less monthly even though your property price would be lower due to mortgage rates.

Sorry if my lingo is all wrong I used to own but rent now due to separation.

People are going to be crossing fingers and riding out the next crash paying more and hoping they won't loose too much equity.

I've heard many experts say the housing market is circular and had already predicted the next upcoming crash. But apparently this one's going to be bad.

Sorry for the doom but like I said get mortgage advice

I would wait another 10-15 years. Let your house earn some more money first.

I wouldn’t do this unless you are struggling to afford the mortgage. If your property is worth £500k now, in 10 years it could well be worth £1m, with the gain in value most likely free from tax (unless the tax system changes). Then you could downsize. If you downsize now then you lose 10 years of growth of a house with a bigger value. But you’ve got to weigh up if paying the mortgage for those 10 years will be too much of a struggle or worth the potential gain. Obviously if you hang on to it you also get to live in a bigger house too.

@Ugutff I don't fulfil all your criteria, I'm older than you (and don't have a London house!) but I did sell an old large house & moved with my kids to a 15 yr old 3 bed semi which I bought for cash.
The only downside is that I've put weight on! I assume I'm just more contented & don't need to worry any more about leaks, roof slates coming off, etc! I'm warm, cleaning windows takes less time than doing just one room at the old house, even the garden is just the right size for me to look after.
In short, no regrets! More disposable cash.

Would a flat be better for you than a house? Just thinking about noise, service charges etc - but obviously you're not in a mad rush, so will have thinking time. :-)

So our rate is fixed till 2028 and we are trying to overpay but will probably still have quite a lot of debt left by then.

So I've been trying to figure out whether in the next ten years, large houses are more likely to rise more or fall quicker? Will we lose more equity on a large house or a smaller flat? My experience of mortgage advisers is they just tell you about rates etc, never got much useful advice

2 bed flats in london have been struggling for years. There were too many small ones built and people want space post covid.

But will the two bed flats crash more than the houses or less if they've been devalued for longer.

Personally am not sure that we really need a big house. More of a question whether it's prudent to in light of future economic uncertainty

If you are on a fixed rate until 2028 then you would likely have to pay a hefty exit fee on the mortgage

I’d stay put and reassess when 2028 comes around. One thing to be aware of is that teen DC take up more space. They need quiet dedicated study space for example. They will want to have friends over.

Id also stop overpaying the mortgage if 50% of take home pay means you will have difficulty with other bills due to cost of living increase.

I'd stay put unless another factor comes up which means you need to move locations.

You could easily choose to rent out one of your spare rooms to increase your income if need be.

5 years is a long time. Houses will go up faster and down slower than a flat in London.

down size later if you want. More room gives you more options. Ie when dc older you might rent out a room.

Only if they can’t port it. If it were me I’d downsize asap. The housing market is about to change radically.

Our plan would be to port our mortgage. I am concerned that say 25% of our house is more than 25% of a cheaper flat.

You need to do the maths!

Bigger houses will have bigger profit. flats are difficult to sell when there’s lots the same on the market unless there’s a rela selling point.

Money wise - what are your life plans? Would you prefer the extra money for pension or even traveling?

Why a two bed flat and not a 3 bed semi?

Look at the fees and removal costs, solicitor fees etc they aren’t cheap.

How secure are your jobs? Personally, unless your jobs are not secure, so long as you can still afford it (even if the rate goes up) then hang on for as long as you can. I assume you have some headroom since you are currently overpaying. The moving costs/stamp duty are significant, so consider how that would stack up against any interest rate savings from a smaller mortgage.

40s is relatively young to pay off a 400K mortgage.

A Brit hangs on. As one poster said, you can always rent out a room.

Why a flat and not a 2 bed house?

Why is the choice between a large 4 bed house or a 2 bed flat? Why not a medium sized 3 bed?

You don't need to do it in your 40s. If you do it between 60 and 65 you'll feel the real benefits

You’re right. Most of the responses you’re getting are ignoring the deep shit the economy is only just beginning to slide into. Some of us remember the early 90s. It wasn’t pretty.

So we are thinking about 2 bed flats because there just don't seem to be 2bed houses about. The price difference between 3 and 4 bed houses just isn't big enough to account for the moving costs.

My main concern is do people really spend all their free money on servicing a mortgage till they are 60 and then downsize?

Yes very many people do spend most/a lot of their income paying off their mortgage until their 50/60s.

You could extend the term of your mortgage to reduce the monthly payments if needed.

We relocated and were able to reduce our mortgage in our 40s and yes it made a big difference as we carried on over paying.

With flats there may be high service charges and more difficult to sell on should you need to.

If your DS is already 10 then see where he ends up for secondary school then look at areas to live that works for his school etc.

Keep looking for 2 bed houses and get yours ready to sell?

Not all free money (well I don’t count it as free I started my property owning life thinking better pay it into a mortgage just after pay day and I won’t spend it! Unfortunately as I got pay rises I did spend it and regret not overpaying earlier).

Id stay put in your situation. Consider renting a room. You can earn c £7.5k pa tax free. Depending on area of London you may be able to do it a few nights a week eg Monday night to Thursday morning, or if you are near a research university weekend nights.

Rarely

Once you have lived in a place for 25 years and raised your family it seems very hard to downsize

Don’t sell now; you’ll regret it. A house will be worth far more long term.

If you buy a 2 bed flat now you then don’t leave yourselves a way of making more money later. Interest rates are fine for now, especially if you’ve got a 5 year fix!

Flats are far less popular since Covid, and much harder to sell.

Don’t sell your house unless you cannot afford the mortgage.

Most people don't downsize either. For the very reasons you highlight. It's often not much cheaper to go to a 3 bed semi. A bungalow probably costs more. Noone likes flats (UK).

I downsized from 4 to 3 beds in my 40s and went mortgage free, so it was worth doing for me. Wouldn't catch me in a 2 bed flat with a primary age child unless I had to, though. Not enough space as they get older.