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?

What age is DC? You may be glad of the space later when they have friends coming to hang out. Also nice for teens to be able to have their friends over and have some space without worry of infringing on parents.
You could reduce overpayments if things are tight at the moment.

@Ugutff if you are managing your mortgage I would sit tight. Moving from a house to a flat is pretty much always a bad idea as you will most likely have service charges, neighbours noise to contend with, leasehold fees/restrictions, joint energy bills maybe.

would your house sell easily now? The market where I am in the SW seems to have stalled, lots of reductions and houses disappearing then reappearing with lower price and new photos.

If you sold your current property
Then bought a flat are you hoping to be mortgage free in your 40s ?

If you were then earning at the same rate, what would you do with your spare money ?

Or are you hoping to have a smaller mortgage if you downsize ?

Now isnt the time to sell. I would review again after the next GE.

Porting is tricky if you’re downsizing as obviously it affects your LTV, which means your mortgage co may not be willing to keep you on the same rate.

I would stay put for now and consider downsizing when your fix ends. Keep overpaying if you can.

Our child is five years old and we wont have another one.

In terms of people putting all their money into their house - and this is a genuine question - why would people do that? As in - if you cut down on holidays and free spending money for the sake of a house that is too large? Is it worth it?

I certainly wouldnt mind a two bed house - there simply arent any near us. You basically get family sized houses or flat that have been converted from those same houses

I would stay put tbh.unless you are really struggling to pay .think of your house as an investment and you have the fun of a 4 bed in london! Flats usually attract a service charge usually a few grand a year. Gardens are often

Shared or non existant .

I would go for a 3 bed flat for as little mortgage as I can. To weather the inevitable 8-10% interest rates. My mortgage deal is expiring in 2024 but I don't think I will escape it. Even if it's expiring in 2025 or 2026, I would expect minimum 5% interest rate as it would take some time to come back down and that is massive on a London property. 3 bed because I think most 2 beds are just nice for a couple but 3 beds are better for small families. The extra room can be your DC's dedicated study space or to entertain friends etc.

I am in a 2 bed flat and DH wants to stay in our flat until we pay off the entire mortgage (in London and we bought in 2019 so not cheap). I am going for the middle ground and trying to find a slightly bigger flat in 2024 which we can upgrade to for a lower price (since British people hate flats) and weather the 10% interest rates. Planning for one child...

Wouldn't uou be miserable in a two bed flat?

I wouldn't downsize, unless you are struggling to afford the mortgage. House prices go up generally, with blips where they go down. I would enjoy your home and if you want to stay in London downsize in 10-15 years

I moved out of the South East 4 years ago, but not to downsize. I upsized for the same money!

My service charge is £1750. I am looking at my mortgage payment going up to £1750 from £1020 when I remortgage. That is per month. Service charge is a drop in the ocean compared to the extra hundred k that a house usually attracts in terms of debt..

Thankfully we can afford it. This is on £295k and assuming we overpay. Interest rates are expected to be 7%. If they are spending 50% of take-home pay on mortgage even with overpayments, it would be 1000 times worse in a few years.

If you mortgage is fixed on a reasonable rate till 2028 I wouldn't do anything untill then. House prices - generally - do not fall over a decent period of time. They may stagnate a bit or have a temporary fall, but - generally - are a sound long term investment.

Sorry, in answer to your question yes, owning property buys you a lot of freedom in your 50's and 60's when you can use the equity to move somewhere else.

We made sacrifices I guess. We always had a holiday every year but not long haul or anything particularly fancy.

It also depends on how much you earn, if your industry is secure, if you enjoy your job and want to keep doing it etc.

You are mad to downsize during an inflation spike. Your property is a massive hedge against inflation and in five years the value will be significantly higher in nominal terms and the LTV will be significantly smaller.

We paid off our mortgage in our 40’s with an inheritance.
Being mortgage free is fantastic.
We sold our big home and bought a slightly more modest home.
We now are late 50’s early 60’s with a nice 4 bed home in the north and a fabulous holiday let that gives us a good income and is a great bolt hole when it’s free.
We are there now having a great week and about to set off for a days hiking.
We made the right decision.

I think you’d be made to move now.

For a start the market is about to be as volatile as hell. No one should move unless they have to. You don’t have to. You have financial slack if you stop over paying and are fortunate to be fixed until 2028.

In the long run houses are better investments than flats. When your child is older extra space for guests, a study etc will be even more valuable. There are big transaction costs with moving, which is one reason we don’t have a culture of downsizing in the U.K.

We are older than you but considering similar due to other factors (not money) since dc became teens we have needed much more space, children often don’t move out until they are in their late twenties due to costs.
Id stay for another 20 years personally and the m radically down size (and help dc)
People have made millions this way.
The economy is pretty rubbish in the short term but demand dictates property prices and the demand for housing is huge and isn’t changing any time soon.

Have you considered how difficult it would be to live in a flat or small house - space, gardens and privacy are priceless if you can afford it.

I would get a lodger or airbnb one or two of the rooms out. Make a bit of cash while riding out the time there. I appreciate not everyone wants to share their space but you could make decent extra cash towards your mortgage. You could even put a tiny home in your garden to rent out!

I'd keep looking for a 2 or 3 bed house if I was you.

I disagree with those saying look for a 3 bed house. That is not a good strategy for you in London. 3 bed houses are the most sought after here and come at a premium, so with the living costs, stamp duty etc you would be throwing away a lot of cash for a small reduction in monthly spend.

I would agree with some pp that if you can afford the regular monthly payments then stay put and ride out the forthcoming recession. Don't overpay. Property prices will crash and then go up again - first in London, and you'll also need the suave once your DC is a teenager. Once they go off to uni then we'll and collect your equity 🙏

Another option is to rent out a spare room.

We lived in a two bed flat two years ago and honestly with one kid, how much space do people need really? Genuine question...

With this house I just feel like we're permanently cleaning it, trying to sort it out. It's a lot of effort and cash. But we wouldn't get a lodger, DH would never agree to that and it would be weird having a random person sharing our life with us. In no way is a large house worth that.

3 bed house are only about 50k cheaper than our one which is the price of moving i.e. 50k......our mortgage would stay the same

Would a large house lose it's price faster than a flat?

A few thoughts:

• do not downsize into a flat. The leasehold system is awful and I have no idea why England clings to it. You would end up paying endless service charges, ground rent, have no control on repair costs and you might need to pay for a lease extension. It is just a scam as far as I am concerned...
• if you want to downsize instead plan to get a smaller house, maybe in a more affordable, quieter location but still commutable to London. That's what I would do.

Are you worried you won't be able to afford your mortgage? If not I'd stay put. Two bedrooms might feel fine now but when your child is older and wants friends round, sleepovers, etc, plus perhaps your own friends or family visit, you'll be glad of the space. Moving is expensive and houses are generally a good long-term investment.

In terms of my concerns - finances - our take home is 6.5 and we pay 2k on the house. It's fine but also not great. Whenever we go over it, I get concerned about how we will pay once our fixed mortgage ends.

Its just too big and we dont use the rooms. All our immediate family is now in London so no one comes to stay to the point where one room is empty because I dont know what to do with it. I hate cleaning it - but feel that the 250-300 pounds per month that I could spend on the cleaning should instead go on the mortgage. But cleaning it is endless in a way that a two bed flat simply isnt.

Therefore, I fell like am largely here because I heard that it makes financial sense but am not really sure why.