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.

House prices are mad at the moment, I would stay put for a year or so, save up some money, de clutter and reasses.

Kids don’t need prams for ages so soon that will fine and free up your hallway.

We moved when I was 44 and my DH was 47 and have never regretted it. That was 8 years ago and I’ve enjoyed my new house so much. My old house had a big compromise and I finally decided one life and all that and we went for it. Also on the plus side this house has increased in value more than my old house and it’s a lot more sellable.
I do think the suggestion of a sideways move is a good idea for example a chunky 3 bedroom house with either a large downstairs or a large garden you could extend into.

I think mortgage free is a great goal, but interest payments have never been lower. It’s a good time to move. Personally I’d leave it till the current slightly mad market has settled down, there’s a shortage of good stock. But still keep an eye out.

We did this, older than you, went from no mortgage to a £300k mortgage. We retire in 10 years.

Love the outdoor space we’ve gained, more space in the house, nice area.

In 10 to 15 years may change again, downsize or get a bigger garden. We bought a solid house that will sell easily if we do.

I totally understand why more living and garden space is a priority and really you're only in a 3 bed if you have a box room... I moved from a 4 bed semi to my forever home which is 3 bed detached and I haven't regretted it for a moment. Added 175k onto the mortgage which had me breathing into a brown paper bag but it's been so worth it. I would move and really enjoy your home although I agree with PP if you can wait for a year I suspect the market will stabilise.

I’d do it as yout income is set to increase. Go for it op.

Really interesting arguments both ways!! I think a sideways move sounds good... I'd def sacrifice a bedroom for more downstairs space.

Re the mortgage increase, in the area we live there are very few properties in the mid-range (and overall :/ ). Our house is worth c£380k but there's very little on the market in the £400-550k range (literally 2 properties available on rightmove at present!) and they are similar properties to ours, so we really need £600k +. That would add at £250k ish to our mortgage.

Of course we could look to move area but that's a whole different decision and we love where we are so much that we are pretty set on staying...

I’d keep overpaying to get as much equity as possible and start looking but would only move if I found something perfect. I’d also put some savings into another account to cover the cost of surveys, legal expenses so you have those funds ready to go.

I’d also look at renovating/extending to see if that works out to be better value.
And I think the sideways move to a 3 bedroom is a good idea. I’d even look at 2 bedrooms if there is the possibility to extend.

380 to 600+ is a massive jump, how much would the repayments be as a percentage of your income? Are there no 400k properties you could extend?

Could your box room be made into an upstairs utility room with washing and drying machines? Clothes don't need to be downstairs. It could also be good for extra built in storage to get some of the rarely used items out of the kitchen/lounge?

@Rainbowqueeen

I’d keep overpaying to get as much equity as possible and start looking but would only move if I found something perfect. I’d also put some savings into another account to cover the cost of surveys, legal expenses so you have those funds ready to go. I’d also look at renovating/extending to see if that works out to be better value. And I think the sideways move to a 3 bedroom is a good idea. I’d even look at 2 bedrooms if there is the possibility to extend.

this

We did exactly what you’re suggesting a couple of years ago and haven’t looked back. Yes we have a massive mortgage, but it’s affordable, we even overpay! We had almost paid our old one off, and am so glad we moved.

We had the same dilemma.
We had a 3 bed cottage, 900 sq ft, no room to extend and we had maximised every nook and cranny for storage. With 2 DC and a tiny garden it just wasn't working for us anymore. We bought it when we had no DC and the plan never was to stay there long term but somehow that turned into 12 years.

We moved to a house over double the size and took out a £250k mortgage which was a bit of a shock after being mortgage free. We could only get it over 20 years due to our ages and so we pay £1100 a month.

I don't regret it though, the space alone has made life so much easier and my DC are happier too. I look at all of our stuff and it amazes me that it ever fit in the old house, we must have been bursting at the seams.

We plan to downsize when we retire though as we will need the money, whereas if we stayed in the old house we probably never would have moved again and had plenty tucked away in our pensions. Life is too short to be miserable though.

I would just advise thinking about the term of the new mortgage and when realistically you want ideally to retire so making sure it is paid off by then In my case I do not want to work FT after age 60 / 62.
( so would not want a mortgage to pay too after this age).

I can really relate to your post being in quite a similar position myself! Ours is also a 4 bedroom terraced house (that's 3 small doubles and 1 tiny box room), there's only the 2 of us living here now but we have our first baby on the way.

Although we're lucky to have what we do, it's felt cramped for a couple years even before the new baby. I completely understand how a 4 bed house can feel so small when you have an awkward layout and small living areas. Also, I would love at least a semi detached house so we're not dragging bins through the house every week. We bought this house years ago in our mid 20's thinking it would be for a few years but house prices have jumped so much since then that we've gotten stuck here.

On the flip side, our mortgage is so so affordable, we have a really good disposable income, go out socialising often, amazing holidays, healthy savings and never need to worry much about money. We could move but we'd be giving up a lot of the lifestyle we've gotten used to because mortgage payments for the type of house we want will be an extra 800-1000 a month after a deposit that takes all of our savings plus the equity in out current house.

The last poster also made a good point about the term of the next mortgage. I don't have any answers for you OP but just wanted to let you know that I relate and don't think you're being unreasonable by weighing up your options here.

OP, as many have said, life is short, and those early toddler years are great with more downstairs space. Once they start secondary, they camp out in their rooms I find, so there is only a small window of time when the downstairs space is really fully utilised.

I would start making plans to move asap, and as others have said, consider a natural 3 bedder, rather than one with a loft conversion. This should have more balanced downstairs space.

I agree with the comments saying move to a 3 bed.

Ime 3 storey houses can feel very pokey downstairs. You probably don't need bigger...just a house with differently configured space over 2 floors.

Plus more bedrooms doesn't always equal more space. I'm in a three bedroom but we have more than enough downstairs space for 5 people. Yet there are houses on my street with 5 bedrooms and 7 people living there - but the exact same floorspace as ours, just tiny bedrooms!

Presumably your own bedroom is the loft conversion, and your child is/will be in one of the first-floor bedrooms?

You could extend your living space upwards in that case. Convert the boxroom to a utility room, and turn the 2nd double bedroom into a TV room. Then the living-room area on the ground floor could be smaller - a snug - and you can then have a larger kitchen/dining area on the ground floor.

Don't underestimate the peace of mind that comes with having plenty of disposable income. It really is priceless. It's all too easy for just one thing to go wrong in life (illness, job losses, interest rates going up) and all of a sudden you're lying in bed awake at night with money worries.

You're in a fantastic position at the moment where you can have this amazing life with loads of amazing experiences, travel and opportunities.

We went with “modest but manageable”. 3 beds, 3 dc, small garden. It’s seen us through 2 mat leaves and 2 periods of redundancy. It’s allowed us to work slightly reduced hours to spend time with the dc as babies, toddlers and preschoolers, and after school and school holidays. We’ve never panicked about paying for it, overpaid a lot and it takes no time to clean!!

Don't underestimate the peace of mind that comes with having plenty of disposable income.

This

Don't underestimate the peace of mind that comes with having plenty of disposable income.

100x this. It is such a better life having a smaller mortgage. 250k is a lot, that could be private school, cars, holidays, after school clubs, music tuition, ... etc etc

@BikeRunSki @pitterpatterrain

I came on this thread to read the comments as I feel in a sort of similar situation - however I'm not almost mortgage free. I have a good few years yet but I am considering a much bigger mortgage.

This comment you've made is so true.
Right now, we have quite a bit of disposable income so I'm able to save quite a bit each month which wouldn't be the case if we were to get a much bigger mortgage.

It feels like a security risk if we weren't able to have much savings. I'm self employed too which can always feel a little risky.

Sorry @DotDotDotDot .. I forgot to include you in my previous comment.
It's a very good point you've made re: disposable income.

ISayHey my feeling is that the more I work, the more I look forward to stopping work 😅 and moving ‘up’ the housing ladder is going to slow me down

I want experiences and other things not a larger house I have to fill with more stuff

I agree with those who have raised the issue of being ‘house poor’. This happened to a friend of mine - she bought 2 years ago and didn’t realise how much of her income she would really be committing. She confided in me recently that (whilst she would never say it elsewhere) the Covid period had been financially beneficial to her, as it lowered interest rates, gave her an excuse to turn down eating out/socializing with friends and save money and holidays with friends to save money. She is a bit concerned about how re-entry will go, as these costs will come up again, and she doesn’t want to look poor by saying no.

She has a lovely house, though!

Also think about the fact you are on mat leave at the moment (and a Covid) and in the house more. Once you return to work, will you notice the house as much? Or will you nearly be in it?

*barely, not nearly