Better to own outright smaller property or port mortgage for larger one?

[Meralia]

Hi all,

Currently in the process of putting our house on the market, we have a mortgage and have renovated so we would have about £330k after the mortgage is cleared if our house sold for just under the asking price.

We currently live in a 4 bed detached house, and if we were to buy with the proceeds of the sale we could afford a smaller 4 bed detached or a larger 4 bed semi in the area that we are looking. But, if we were to port the mortgage we could afford something on par (or better as we will be moving out of a village to the town) with what we have. It is tempting to think we could own our house outright, but, we would sacrifice on space. We have 12 years left on the mortgage. The mortgage payments are quite high, so getting rid of it would free up a good chunk of money.

We have 2 teens and a toddler so space is something we appreciate!

What would be important to you?

We have just moved to a much cheaper house - same space inside, much smaller garden, cheaper area.

The whole reason for our move was to have the smallest mortgage possible so I don't have to work.

I think it depends on your priorities. Do you value space and location over freeing up cash or do you want financial freedom more?

I’d say probably financial freedom. I’m at home at the moment with the toddler, so just relying on my husbands wage.

Do you miss the larger house?

I think it depends on your priorities. Do you value space and location over freeing up cash or do you want financial freedom more?

This. I would value being mortgage free above all else.

A 4 bed detached is pretty big, it sounds like you only "want" more, not that you need it? By the the time the toddler is big, the teens will probably have left? Would you then want to downsize again?

That's a choice only you can make though.

We are in this exact position and we are going to pay off the mortgage and use the extra cash for holidays!

We downsized when we moved a couple of years ago as my DDs had both left home. We only had a small mortgage and carried it over but spent some of the equity on doing our new home up. We completed all the renovations and paid off our mortgage last week. The feeling of being free of this burden is immense!
I had concerns at first about having less space, but actually I prefer it. Less cleaning, fewer heating bills, amongst other things. Everything in my home is new. I love my home and love the extra money which has enabled me to retire earlier than planned.

Yes, I think I’m swaying more towards clearing the mortgage, and buying somewhere smaller. It’s a good point about the bills being less too, I’m assuming council tax will be less in addition to reduced heating bills.

I think I’ve got so used to living in a large house, it will feel strange to downsize. There is something really attractive about being completely debt free though.

I would never live in a semi again, I would rather have less space AND a mortgage than ever have to put up with noisy neighbours the other side of a wall ever again.

If it was possible to have a smaller detached and no mortgage that is the option I would choose.

Thank you. Yeah that’s one of my reservations about being attached to someone else.

I saw a really nice 4 bed detached house with garage and driveway in the area we want, easily within budget, walkable to town and school and college for the kids on rightmove but my husband isn’t keen due to the street it’s on.

I think it also depends what you will do with the free cash. If you will save (most of it) it in equities / bonds then definitely go mortgage free. If like me you would fritter it all away then I would be wary. Interest rates are low - so it's a relatively low cost investment. We could downsize and be mortgage free but we would waste the extra money.

How about a small house with potential to extend if you need more space in future?

I've always thought buy as much as you can housewise whilst you're earning. Mortgages are cheap borrowings. And then reap the rewards when you downsize later in life. If I have the disposable income now whilst working I will spend it, better to invest it.