People could cut housing costs to retire early

[ThoughtsQuestions]

The statement is "people could cut housing costs to retire early" but I'm not sure how much I believe myself and trying to figure out my priorities.

Here's my situation for context;

I paid off mortgage on a very small home in my late 30s. It's a safe area, close to shops and a park. It's cheap because it's small and not a fancy building. My living costs are quite modest because I don't need to pay for housing. But in some ways, I'd love to live in less cramped conditions

Our annual family income (pre-tax) is over 50% of the value of the house. People on a similar income live in much bigger places, with a big mortgage.

I changed sectors and pay went up more than expected. The big pay feels temporary, ie if I stop working, I doubt I'd be in the position again. But I don't get enough time with my young kids

I'm weighing up my priorities at the moment.
Pros : financially free, could retire early if trajectory is same for a few years.
Cons : work's very stressful for the high pay AND we have a v small space to bring up kids. But really the kids don't notice, yet!

Lots of questions.....
Is a home that's much cheaper than you can afford worth the freedom it enables?
Curious what others would do, I notice the mismatch in finances + stress + free time vs the quality of our living accommodation compared to the norm?
Have you been in this situation and gone through this phase? What did you think in retrospect?
Why are so many older people living in such valuable homes and not making this trade off? I always assumed that if your house went up by so much money (those in detached homes in SE worth close to or way over £1m), people might cash out more. Especially as children moved out.

Sounds lovely 😍! And really worth the investment to be able to enjoy it now.

I guess not being able to host guests is the reality for most. Houses and excess space is so expensive on today's market. A hard reality, rather than communist state

@ThoughtsQuestions Yes but when there’s just 2 of you, you do want to see friends and family. I have no friends my age living in a 1 or even 2 bed property. They all have family come to stay and guests. I know some people might have downsized to a 1 or 2 bed (DM did at 72), but I had everyone to stay here. Some people buy retirement flats (they exist!) but we don’t know anyone who has appart from a friend’s 90 year old DM. It’s just not that common.

This is where there is a big divide based on price of houses when people bought them.

Those that bought their first house in the last 10 years, are unlikely to ever be able to afford that.

Whilst you and all of your friends have and want enough space for guests. Myself and all my friends do not have space for guests.

It's just worth acknowledging that having space for guests is not something most of the country can not afford. Very lucky to be able to prioritise that luxury even if it might feel normal to you

I think if you are thinking and worrying that you won’t have in your 60s what someone in their 60s or 70s now has because you are .. early 30s … and can’t afford a big house ….

then step back - you have no idea how much the world has changed and how much the world will change again in 30 years

I am not quite your older generation yet but in my 30s it was a damp cold 2 bed tiny terrace - now it’s a 3 bed semi with spare room ( DD transitioning to adulthood but not yet fully flown so no thanks I won’t downsize )

jelousy is never a good look

but you are right to be concerned about house prices which mean tha most of the income inprovenents over the generations are now going to the bank via mortgage interest rather than supporting improving lifestyles- house prices need to decline in real terms

and you are right to be concerned at the direction of travel of the world - the slowing down of income improvements, the increased instability, climate change , right wing extremism - that make it much harder for current young generations to improve their lives the way older generations have

just please - blame the right things - because then changes can happen

blaming “others” is an easy distraction mechanism which protects the wealthy people and institutions- which are more nebulous and harder to grasp into

So if they go to uni you will presumably need to be working until your mid 60s to fund their living expenses. So how to you retire significantly early?
DS is 17, I'm 56, he won't finish uni until 2030, I'll be 61. That would be before state pension age but not massively so.
Retiring early is in your 50s in my mind.

Could you extend the house? Possibly paid for from savings - and yes it is stressful!

Firstly, I don't feel jealous and I'm definitely not blaming anyone.

I think it's worth acknowledging a difference in those situations.

My original post was about whether it's worth getting a bigger house if it delays retirement. I'm lucky enough that my salary gives me that choice, it's totally luck from a random choice I made around my work. So no jealousy, I can be in that situation too but most of my peers can not. I'm lucky and so is any one in my position, or in the position of people who bought property when it was cheaper

I did take an objection that to the suggestion that not having space in your house for a guest would make it like living in a communist state. In some people's bubbles, that's totally normal, in others bubbles they could never do that - the maths doesn't work. Even with your terraced house example, the rate of growth does just mean it's out of reach for many. I think it's fair to highlight this without judgement, these are 2 different realities. Are my friends living in a communist state? nope, it's real life in the UK.

You talk about change. I do wonder what can change realistically. A financial crash? It's probably but I actually really hope not. It would be horrible to live through. It would be to be a bigger crash than 2008. It might need to be the size of the great depression or a world war. No one would ever want that more than the current situation of not having a guest bedroom 😅. I hope change looks like a mindful approach to the situation of people who have less.

You made a larger political point. Actually, a lot of our political challenges comes from people living in bubbles and not being able to see others perspectives. It caused riots in London a decade ago, huge surprise at trump being voted in (and brexit came as a shock to many) and lots of other things.

I'm not jealous. But I do think it's worth pointing to the differences. I do not blame people that were lucky, I feel I'm lucky. But I don't want to ignore those who are not.

Ha ha this got deep but hopefully that helps explain.

This is an option! Might be nice.

I have savings and a well paid job. Mortgage will be high interest. If i don't put more money on a mortgage, by mid fifties, I could retire on savings. If I put money on a new property, I'd need to wait until mid sixties to retire. That factors in costs like kids at uni etc.

That's the trade off from a cramped 2 bed vs what people used to call a big "family home"

There is no way I would want to trade our home for a smaller one just to enable an earlier retirement*.
Hopefully we are a long time retired and the thought of doing that in a smaller house is just not appealing as personal space is important. Pottering in the garden, hobby room, OH in his garage, room for guests without it causing upsets or falling over one another etc.
If it came to it, I would rather stay at work a bit longer.

*I did retire early (without the need to downsize) so the question is academic but that is my take on it. I know my OH agrees.

That sounds lovely. Nice to hear your priorities when both options were available to you.

In theory, I could sell my house and move into a small flat and then retire early and live off the equity for a few years. It's an option.

Would you do it to get a nicer lifestyle or is it something you would only take as a safety net?

I'd sell my small flat and retire abroad.

We replaced a grotty conservatory with a nice new single storey extension and the garage is now a bedroom

These are the sort of jobs that might be affordable from savings

Obviously I don't know anything about you house but there is an event each September from memory when you can get an hour's advice from an architect

It depends how I age, but I tend to think that I'd rather live in a small, minimalistic place when I'm older and enjoy the world. We're just about to upsize into a place where we'll be working and raising our family, including hosting our family and friends.

But I'm not worried about hosting my son into my dotage - I'd rather fund a big house for him where I hope I'll be welcome, but at least he'd enjoy it!

That's cool, do you have any details on the event? We also have the grotty conservatory and maybe space to extend in other directions. But if pushed the the max, the flow of the house would be awkward and the interior dark, as it's a narrow building with a relatively large garden out back. So advise about light pipes and celling window would be helpful

That's cool, do you have any details on the event? We also have the grotty conservatory and maybe space to extend in other directions. But if pushed the the max, the flow of the house would be awkward and the interior dark, as it's a narrow building with a relatively large garden out back. So advise about light pipes and celling window would be helpful

I’d prefer to live in a bigger house than be mortgage free in a too small house in my 30’s.

In the north you could get a nice 3 bed house w with garden for about 160, maybe even less.
Eg. This is a quiet estate in Durham city

https://www.rightmove.co.uk/properties/170423567#/?channel=RES_BUY

House prices are going to plummet in the long term due to the incoming drop in population. In 30 years big houses will be cheap as chips.

It's not that easy to make money by down sizing unless you are also willing to move to a different area or you have a huge house and want to love into a tiny one.
The costs of moving are very high once you take into account estate agent and solicitors fees, tax, removal cost, cost of new curtains, furniture etc for new house.
We have been looking to down size for a few years but because we don't want to move out of the area we live in now we haven't been able to find anything that we would want to live in that would make it worthwhile to move

Answering questions like this is almost impossible for two reasons. Firstly , everyone's circumstances are different and can change over time. Secondly you can never identify the best investment advice except with hindsight. Increasing house prices and low interest rates meant stretching your mortgage made perfect sense over the last 15 years. As we stand today house price rises are behind inflation and other investments are performing much better

Oooh interesting take. What about inheritance? If lots of people pass with very valuable assets, the inheritance is likely to be used in housing. Depends on the tax rate, that could maintain prices given the strong preference for larger homes here.

Well it would definitely boost my pension to a level where I could afford more trips and tickets etc but, for me, the cost could be not having a garden or a spare room for my family to visit so may not be a good trade off as I love having a small garden to sit in and family aren't local so that is important too. It's a tough decision I will have to make in a few years.