How do you feel about paying a mortgage

[illovefisk]

I'm grappling with this a bit and would like others perspectives.

We have a big mortgage on a small 4 bed z2 London house with a tiny garden (not complaining about the size just factual). The mortgage is just over double my income and very low loan to value ratio so very small risk of negative equity. It has increased in value.

What I'm struggling with is the feeling that maybe we should cash in and move somewhere cheaper. I do feel the strain of cost of living and I can't work out whether we just suck it up and know it will get better as we pay down the mortgage or downsize to a flat. 2 primary age DC.

Pros

• because it's close to work our commuting costs are very low
• location means no need for car and the cycling and walking helps with fitness
• short commute means I have more time with kids in morning and evening
• the kids each have their own room and there is an office (DH and I wfh 3 days a week)
• it's a new build so very energy efficient (albeit less attractive than a period property)
• because its a house we don't have leasehold or service charge worries or any neighbour noise/ impact
• close to a number of good schools
• close to central London and nice green spaces

cons

• big mortgage with 20 years to go
• not an attractive property although very well built and comfortable

I know no one has a crystal ball but what does sensible future planning look like exactly? We have pensions, rainy day savings but not much. We live ok. I can't tell if this is the right thing to spend a big chunk of earnings on or if we should downsize and save / invest more.

Background to all this angst is that we are both from very working class backgrounds and don't have anyone to advise us really.

I think you’re in a really lucky position - that’s a very small mortgage for both the size of your income and the size of a 4 bed property in zone 2. We are looking to upsize from a 2 bed flat and would like to stay in zone 3 for all the reasons you describe, especially being able to get time with my daughter which commuting further would take away from me, and are looking at a mortgage of at least £550k to do so.

I don't really care if you don't like the parameters of my problem

i think most people just didn’t understand the problem…

You asked for this from another perspective. I gave you it and now you don't like being told how well off you are compared to the rest of the population.

I feel pretty happy about paying a mortgage. It means I'm independently paying off my own home. It means eventually we will have an asset and a place to live rent free in old age. If I can pay it down sooner, yes I will, but I don't cry about it.

Like other people commenting, I don't see any problems with your current set up either. You are in a very fortunate position compared to most people and compared to myself at your stage of life with school aged children.

You've got a 4 bed house in a good location in London, jobs you like, you can afford pensions and to save, you can easily afford the mortgage and even have outstanding schools in your catchment. Lucky you having all that.

I wonder if you're even being quite serious, but assuming you are, I can tell you that the middle class way would be to hold onto that asset that you can easily afford, let it increase in value over the next decade or so, let your children grow up in a house not a flat and downsize if you want to when you have repaid the mortgage and the children have left home.

You don't need to give them a lot of money for university, they take out student loans these days. Although extra financial support is always welcome the middle class way is not to provide so much that you have to sell your house. Just keep doing what you're doing and be happy!

It doesn’t make sense to downsize unless you are really struggling financially and moving to a smaller property where you will all be on top of each other; I don’t think you will be happy. There are more positives than negatives. Releasing equity and you will probably ended just spending the money; at least you have a good investment now

You just need better planning on how to pay mortgage and reduce monthly payments

Hold on to the asset; I won’t compromise on my living standards unless it is really needed; your kids are only in primary; you are over thinking it; concentrate on try to pay off the mortgage earlier

@illovefisk I absolutely understand your fear of debt and I think people who have not grown up in poverty don’t understand how all encompassing fear can be. It’s hammered in to your that to be in debt is the worst possible outcome and a one track to total destitution. I vomited the day I exchanged on my home from the thought of that debt of hundreds of thousands of pounds now sitting on me.

Given your low payments relative to the value, think of the mortgage as your investment fee or goal. Every payment and overpayment brings that down but returns more money to you in the long run.

Threads like this really hammer home how lacking education is when it comes to money management and investment especially for kids from lower socio-economic backgrounds. If you grow up hearing about mortgages, rates, investments, banking, loans, pension plans etc then you absorb some of that knowledge and it holds less fear because it’s your normal and you can ask someone in your family for advice. If you don’t have that, it’s a mysterious and terrifying minefield.

Another way to keep the social divide alive and thriving really.

@illovefisk I don't think you stand to gain much by moving. selling properties in this market is not advisable.

and if you owe 200k with annual income of 100k, personally I would make extra payments on the mortgage as much as you can. you could look at shopping around for a lower interest deal (depending on penalties on your current deal). even if you are on a fixed rate deal, you can make a certain percentage in overpayments each year without incurring. and usually even when you incur penalties, it's much lower than the amount you will save on interest. not sure how high your general outgoings are but you could pay that 200k off a lot sooner than 20 years with the right budgeting.

Neither. No way I would think about down sizing but also no way I would be thinking about paying the mortgage off in 20years. With the size of the mortgage, which I know feels huge to you but is absolutely tiny* for a zone 2, four bed, and your household income, I'd be looking at how much I could be overpaying. You could reduce that 20 years to 15, maybe even 10 with not enormous overpayments. I paid mine off in 11 years rather than I think 25 was the initial term by doing just that as I too don't enjoy being in debt.
*My guess for your incomes and the estimated cost of a house of that size and location would have been £500k, not £200k.

With income after deductions if £100,000, that's a very modest proportion. When we bought our previous house, our mortgage repayments were over 60% of our combined take home pay, and the week we completed, the interest rate went up to 18%, although it came back down to 16% quickly. That was quite a long time ago now, but the principle is still the same.

The most important things have already been said, that you sound to have the right house in the right place for your family for now and the forseeable future. A 20 year mortgage that you can afford, with some leeway if circumstances change. Housebuying has been broadly structured in this way for a very long time (and in a number of different countries), if it was truly inappropriate the model might have changed by now.

But, you recognise that you are risk and debt-averse, so are keen to reduce your debt. Have a look at a calculator like this one:
Mortgage Overpayment Calculator: Pay off your debt early?... (moneysavingexpert.com)
And think about what you can currently afford. You may be pleasantly surprised at the effect of making overpayments when you can, that will further increase your safety buffer, and mean that when you wish to support children at university your costs are decreased (regardless of whether the whole mortgage has been paid off by then).