Pay off mortgage or move house?

[opinionatedfreak]

I've unexpectedly inherited some money - this is likely to be the last lump sum I ever get so I am very conscious of not frittering it away.

It is likely to be enough to either pay off my existing mortgage or to move to a bigger, more expensive property without borrowing more. I will of course get professional advice but am interested in garnering opinions.

I like my current home and it is very convenient for work (30min walk, 12 min cycle). I have just spent a lot of money on upgrading my current flat and the sale price in the current market would probably be less than the purchase price + upgrade costs. My mortgage was pretty steep when I bought it but I'm now in the fortunate position of making small regular overpayments and having a nice lifestyle.

However, long term I had always planned to move to a different (more expensive) area as I think it would be a better place to be retired/ grow old in. I lived there a few years ago but moved as couldn't afford to buy there so I have commuted to my current role and it is possible (20 min cycle, 40 min bus, too far to walk in morning). Properties in this area are going down in price at the moment due to changes in work habits due to covid. With my existing borrowing and inherited lump sum I could afford a 2bed flat there now. My pre-inheritance plan had been to move to a 1 bed in about 10 years time and supplement the sale price of my current home with a small amount of my savings.

I have a stable but demanding job (but did have time off last year with burnout but am much better now and back to working full time). I currently work antisocial hours (often heading in to work at 3am so the easy commute suits me) but it is likely that in 10yrs I will be able to drop the overnight commitments hence the plan to move then.

I'm now really undecided what to do. I think I have three options:

1. stay put - invest the money and keep overpaying my existing mortgage with view to moving as planned in 10yrs when I've had a chance to enjoy my very personal renovations.

2. stay put, pay off mortgage (I'd need to work out how ruinous the early repayment charges would be vs. the saved interest costs) and start saving my mortgage money monthly to fund future house move.

3. Move now - as the prices in the more expensive area have fallen more than here and accept that I'm likely to make a small loss on the value of this flat and moving now will make my commute to work a bit harder.

4. the wild card is I buy a second home to use now in addition to my existing flat but I'm not totally sure I can afford a second lot of bills and the money I would spend each year on maintaining a second home would pay for a lot of hotel bills/ holiday cottage rentals.
   
   (in the area I would be interested in buying in annual council tax alone would be about £2k).

I’d definitely ditch the idea of a second home.

Personally, I think I’d just move to the location you want to be in. No point carrying on in the current place for 10 YEARS if you don’t really want to be there. Hopefully, the mortgage can be ported so you don’t incur an early repayment charge.

I dont view things in pure financial terms. So, if you wanted to move to your dream area and can do so now/ soon with a small financial hit, do it if it will make you happier. I did to get the house I've lived in for 24 years, I dont think about the maybe 3000 - 4000 we lost due to early repayment charges at all. It was worth it.

Do whichever makes you happier

Any of options 1-3 are sensible. It sounds to me as if staying where you are for now makes the most sense, if you are happy there and your commute is better. But if it would actually make you happier to move now, then do that.

I’d also not completely discount option 4, if it would bring you a lot of joy. The money you have inherited is a bonus, you had a financial plan that worked without it, so if you choose to use it frivolously that’s allowed!