Be mortgage free or stretch ourselves on bigger property?

[Paris2019]

DH and I live in a 4 bed terrace in a nice area. It's fine and we've been happy here for 5 years, but there's not much living space or outdoor space, and now we have a DS it is feeling more cramped. The dilemma is, if we want to move to the 'next size up' home in this area (where we ideally want to stay), it's a big jump and we'd be really stretched by the mortgage payments. We'd manage, but have nowhere near the disposable income we have now. If we stay put and continue to overpay, we'll be mortgage free in 7 years.

On the one hand, I love the idea of being mortgage free and then being able to go on great holidays, save for DS's future etc. But on the other hand, this is just not my dream home, and not really a home I'm proud of or where I imagined I'd be at my age. Also, I'm conscious that a higher priced property will make more money in the long run.

I know there's no right or wrong answer, but wwyd??

For info there's no way to extend our current property. We don't plan to have any more children.

Personally I'd go for the dream home but I can't understand how in a 4 bed you are feeling cramped!

Can you tell us how much disposable income you have now and how much you'd have if you went for a bigger house?

If it was manageable I'd say move, simply because it's a way of saving. However, if it means you can't have any holidays and you'd struggle to make ends meet, then I wouldn't do it.

Could you move to something that was more affordable - a kind of middle ground?

I certainly would not get a bigger mortgage! You've got a 4 bed house and one child and that's not big enough? Why? What do you want? A bigger garden or something?

Look for properties in your budget with more space...a 4 bed should be big enough...more than...for a family of 3!

I'd have to move - space for me is just what works for keeping me sane.

How old are you? Do you want more DC? What type of increase in borrowing are you thinking?

Nope wouldn’t move. Look up “house poor”

An easy mistake to make yet you just restrict what else you can do - pensions, savings, early retirement, travel, experiences etc

We had this dilemma around 8 years ago. We choose to stay and was mortgage free around 3 years ago. In December I was made redundant and I am struggling to find suitable employment. As no mortgage, the pressure is off as redundancy money/savings will keep us going for a few years.

Could you do a sideways move into a same sized, but different layout house?

Swap a bedroom for more living/outside space.

Another one who can't understand how a 4 bed feels cramped with one DC.

Plus having a bigger garden isn't all it's cracked up to be. Extra work and/or expense to keep on top of.

I’d look at how you could rejig your current house.

Also a point to consider is that depending on your age, you only have a certain amount of time to be eligible for a bigger mortgage.

I'm guessing they have a loft conversion which makes the house top heavy? Quite common in London with Victorian terraces!

We were where you are fifteen years ago. We moved borrowed six times our joint income There were a few hairy moments, but although we still have 7 or 8 years left in the mortgage (we're mid 50's) we have a large detached with all the room we'd ever need, and a huge asset which we'll sell in 15 or so years time once we've spent our pension lump sums on exotic holidays

Can you do a house re- jig, a la Phil and Kirstie's Love it or List It?

Quite a lot if your reasons seem to be about keeping up appearances and being seen to be succeeding. But it sounds like you’d have to give up many years of your life to buy this space, which you’ll then have to maintain, as opposed to having the financial freedom to travel, invest, retire early.

You definitely get houses with 4 bedrooms but teeny tiny downstairs space. And when you have young children it's the downstairs living space that matters so I get how a four bedroom house can feel small.

For the love of God, do not saddle yourself with a massive mortgage when house prices are at an all time high and interest rates are at an all time low. Only one of things needs to go in the opposite direction and you are screwed.

Even before that happens, the ‘house poor’ thing flagged by @pitterpatterrain upthread is absolutely real. All of your wealth is used up servicing your mortgage.

Thank you all for the helpful comments! To address the comments re how a 4-bed can feel too small... as PPs have pointed out, the house is over 3 floors so yes, absolutely we have enough bedrooms (loft conversion, 2 doubles and a box room) but downstairs we are squeezing past the pram in the narrow hallway; have a teeny tiny kitchen; a living room through dining room which is straight out into the back yard (no garden); no utility space etc. Of course we could manage... but there are a lot of impracticalities and it would be lovely to have more space as it is a daily frustration!

I'm in my late 30s, DH in mid 40s. We don't plan to have more kids. We currently overpay our mortgage and our mortgage payments plus overpayments is approx 30% of out net pay but of course we have the flexibility to stop the overpayments if we need to (and sometimes do). For the kind of property we'd be looking at, the mortgage repayments would be approx 35% of our net income (which is set to go down as I'm returning to work on reduced hours after mat leave) over 20 years. We'd obviously have higher bills etc on a bigger property and we'll also have nursery fees to contend with.

Lots to think about!

You have one small child and your four bedroom house feels cramped?!

Are you here to stir?

Sounds like you have similar space to me, and there are many more of us, but we have a better layout, although we are also spread over 3 floors.

Maybe getting your ground floor remodelled would be cheaper and easier?

@rickitarr I wish there were a way to make more of our ground floor space but I honestly don't think there is :/

I would do a sideways move to a 3 bed house with larger downstairs space if possible. But I don’t see how the next house “up” can be so much more expensive that it locks you in for another 20 year compared to just another 7. An additional 13 years is a hell of a lot more, how much are we talking?

In our area a 4 bed terrace would be about £400k and you could get a 4 bed semi with bigger downstairs living for about £475-500k. I don’t think that would increase mortgage payments substantially each month AND also add 13 years onto the mortgage.

My point is, there must be something in between eg a house that keeps your mortgage payments the same each month but locks you in for an extra 5 years? If you’re in your 30s there’s no need to be mortgage free in 7 years as I assume you plan to work for the next 20-30!

We were in a v similar house to yours but had 3 dc and we had enough living space but the lack of off road parking, no garage and small garden were all daily/hourly frustrations.

We didn't massively increase our mortgage, but moved to a newer build house with parking and garage and in a quiet cul de sac so kids can play front and back. We were overpaying in the old house and can't do that here, but it has been so worth it.

@Bobbots

I would do a sideways move to a 3 bed house with larger downstairs space if possible. But I don’t see how the next house “up” can be so much more expensive that it locks you in for another 20 year compared to just another 7. An additional 13 years is a hell of a lot more, how much are we talking?

In our area a 4 bed terrace would be about £400k and you could get a 4 bed semi with bigger downstairs living for about £475-500k. I don’t think that would increase mortgage payments substantially each month AND also add 13 years onto the mortgage.

That makes sense.

Sometimes the next move up can be that much - we had similar when we moved from 4 bed semi to 4 bed detached, added 300k to mortgage.

We made the move and don’t regret it, the space has been invaluable esp over last year with all at home. Both likely to wfh perm so that will also take up 2 rooms.

I would say you are relatively young so I wouldnt be concerned about extending mortgage. We set our mortgage over a longer time than we would ideally like, but after a couple of years we have been able to overpay but with a lower committed monthly payment if we did need to reduce. You may be able to overpay in future, depending on careers etc.

Normally I would say stay and go mortgage free but the layout of you house clearly doesn't work for you.

Move on and enjoy your home.