What do you invest in if you’ve paid off your mortgage?

[Twoshoesnewshoes]

I’m getting in a right muddle!

looking at a house which is a bit smaller than ours - we want to downsize at some point as our DC have left home.
Im late 40s so intend to work and earn at the same level I am now (ish) for at least another decade.
we spend around £1k a month on mortgage currently and try to save a further £1k a month, doesn’t happen if we’re on holiday or a big car bill etc.

so - if we downsize, we could pay off our mortgage in 5 years instead of 19.
Im concerned though that, after that, we’re no longer investing. Our property would obviously be worth less than the one we’re in now, so we would get less return from property prices increase.
we would still have the £2k per month for at least five years after paying off the mortgage.

should we stay where we are and pay more on our mortgage?
downsize and buy another property?
downsize and invest in SIPP and ISAs?
any other options?

thank you!

I let a property but as you would be a new investor I would say don't bother. My adult children don't want the property. I will sell it soon and honestly with CGT, fees etc. not worth the hassle.

S&S isa is a really good way to invest tax free. Lots of information on which long term funds you can invest into. Compound dividends and interest. Not risk free though. But the more I read the more comfortable I felt about it.

Cash isa is an also tax free, fairly low returns.

Top up your private pension so you're at least taking advantage of the full 20% relief.

I've opened pensions for my kids, and s&s isa too. So hopefully they will add to it over time and have a nice nest egg in time.

Bigger house = bigger mortgage payments, more interest payments, less financial flexibility, higher bills and maintenance costs.....

Also "downsizing" is not as easy as people think, proportionately smaller houses cost more because more people live alone and there is a premium on them.

The tax free status of pension contributions makes them pretty unbeatable in terms of a return. Yes you will pay tax claiming it, but with ISA, house, other savings that money has already been taxed so it's costing you more straight away.

The only answer really is to have a mixture.

Good advice, thank you everyone.

I have definitely been put off getting a BTL 😂

we are considering a house which is a bedroom and a lounge smaller than ours, still a three bed with two reception rooms, but would mean we pay off the mortgage in 4 years rather than 19 (if same monthly payments).

the bit that concerns me is, in a decade or so, we think we’d like to move again to be near the sea and this would cost more. So the dilemma of being in a cheaper house and making less on the house price increase would then mean we can’t step up again in the future? Hope that makes sense?

we don’t want to live near the sea yet - full of retirees 😂

Me and DH are approaching retirement in the coming years. Both taking early retirement in 2026 at 62.

For us, we invested into property in the late 90s and early 00s.

The home we live in we purchased back in 1991 for £43k and is currently on the market for £375k as we are downsizing to a bungalow hopefully - planning to buy one that is in really poor condition that we completely gut and renovate. With the sale of one of rental properties, we will be able to fund the renovation!

We have 4 rentals. We purchased between 1996 and 2004. All cost no more than £80k each.
We’ve just agreed a sale for one of the properties to a tenant for £200k.

The other 3 properties we don’t plan to sell right now as they generate us a combined gross income of £3,250 per month. We will probably keep these for years to come and then leave in our will - unless we do need to sell. With our pensions too, we are in a real comfortable position.

Gosh @good96 you're very well set!
looking at downsize option this weekend…I think I’m being influenced by potential cash for a camper van upgrade 😂