Can I treat mortagage as a long-term rent?

[MandalaYogaTapestry]

Let me explain. We are homeowners at the moment but would like to move to a slightly better area and a bigger house. It would be a 'want' move, not a 'need' one. With the prices in our area, we will need to take on a substantial mortgage in order to afford a property which would be tangibly different from our house. But it would be a dream house. We are in early 40s, stable jobs, kids are teens.

So I was thinking, if we were to take out the big mortgage with manageable monthly payments, would it be unreasonable to accept that we may not pay it off? I.e. we live there for 10, 15 years, enjoy it and then sell up, clear the mortgage and move somewhere cheaper.

Or we might stay there if everything works out.

Choosing a cheaper area to live now is not really what I would like to consider because the children's schools are here, all our friends are here. And this area has always been a very popular one which means that we should have no problem selling if we ever need to.

We're doing similar to this. We know we will move again as we won't need such a big house.
My dream is a 2/3 bedroom cottage in a lovely village.
We're buying a 4/5 bedroom detached in a sought after close that is quiet and very convenient. It needs work and I can't wait. But I definitely see us downsizing in 10/15 years.

I think lots of people do that don't they? Buy a house suitable for them and their family and then when the kids leave home downsize to be able to buy somewhere outright and clear their mortgage.

Thanks for your replies.

I guess it's a different mindset to what I had before as I did initially expect to pay off the mortgage on our existing property. But then, I have never seen it as a forever home.

If numbers are helpful, the 'want' house will be circa 700k, with a 400k mortgage. Our incomes are around 115k.

This is what we’re doing, technically our mortgage will be paid off when DH is 72, but he’ll want to slow down before then and the kids will be long gone! We bought this house as a bit of a doer upper and have the money to do so because we kept back equity from our old house. I don’t think I’ll want to live in such a big house when my kids are grown, and our need to be so close to a mainline station will also disappear when DH retires. So basically, it seems worth it to me, because we need the space now!

I’m too risk averse for this. We’re Mid 40s and are overpaying to be mortgage free in 10-12 years. I feel like you never know what life is going to throw at you - particularly ill health. I’d rather be mortgage free

Yes we’ve done that. You can get income protection (Although impossible you find at the moment) and critical illness cover. Then downsize if you need to. SIL and her husband have got very rich and now in their dream home through buying houses they can barely afford then selling onwards.

Agree I think that lots of folk do this and downsize to be mortgage free once life circumstances change. I’ve never understood the whole “forever home” thing different things work at different life stages. I’ve already told my husband I won’t spend my retirement in this house, maintainence costs, bills and the garden are all too big!

You do tend to find that it's cheaper to remortgage after a couple of years of fixed rate mortgage, too, which I suppose is similar?
Are you thinking interest only (which is more risky IMO) or repayment but aiming to move before it's paid off?

Can you afford the mortgage? Are you going to have it over a long period to make it affordable? Have you been through the numbers of what you'd actually pay off a big mortgage in 10 or 15 years, and what the difference would be in price between the "dream" house and the "retirement" house.

Also, I think people sometimes plan to downsize and live off some of the equity (depending on pension provision etc). If you still have a fairly big mortgage by the time you retire so the same of the dream house covers paying off the mortgage and buying a smaller house outright, will your pensions give you a sufficient income?

*sale of, not same of !

Surely by the time you've been there 15 years it'll be mostly paid off? You won't get much more than a 20 year term given your ages.

It's not something I'd do in the current climate personally, but I'm fairly risk averse and being mortgage free in my 40s is more important to me than a nice house.

Isn’t that what a lot of people do? I took on a bigger mortgage a few years ago as I wanted to live in a lovely house and ensure kids had a nicer upbringing. I could have stayed put in our smaller house and been mortgage free before the age of 50 but I prioritised our living circumstances now. I expect I’ll downsize when kids leave home as I don’t want to be paying a mortgage until I’m 67 as currently forecast and won’t need the big house. I also hope to made more money from the house value increase than I spent in extra mortgage interest but that is not the driving factor.

Other people want to be mortgage free young and so will stay in a house which is not as nice to do that. They might not want the hassle of moving again or want to retire really early.

There is no right way to do it as long as you can still live the life that you want now. No point in being encumbered with a huge mortgage and living a bleak sparse life to cover those payments. Equally I don’t understand why someone would chose to live in a house that doesn’t work for them just to say that they’re mortgage-free.

So basically you’ll take the mortgage out for 25 years based on paying it off at 68-ish but in reality you want to retire and downsize sooner?
I can imagine quite a number of people do that.

I’d just think about how manageable the monthly payments are. Might be a bit stressful if you max out and then need to watch every penny.

We're doing this - we've just bought our first family house (moved from a flat), put in less equity to it than we could have done (only just enough to get the interest rate we wanted), and taken out a 40 year term to reduce the monthly payments. We know we'll be moving within the next 10 years, don't anticipate the value will go up much, and have a baby with the intention of another so childcare to consider. All in all we have no interest in burning through money for a house we'll never own. We'll properly invest in the next one.

That's what we did. We're due to pay off the mortgage on our current house when DH is nearly 70, assuming we don't overpay. In reality he won't earn enough past 60ish to do this (although we're comfortably off now) so we'll sell and downsize once the kids are grown up. This house will be far too big for us by then anyway. Difference for us though is that we had a mortgage of around £500k on combined incomes of nearly £200k (more if I went back full time) so we're not quite as highly leveraged as you. We also had a big slug of equity so we know that we'll be able afford something smaller outright. But yes, I treat mortgage payments effectively as rent.

Yes, I'm doing similar in that we have a extended a 3 into 5 bed on a interest only mortgage. In theory we have another asset to sell off to pay this one off, but in reality I dont think it will completely cover it. It suits us right now and we wont need a 5 bed when our kids leave home. We cant remortgage either as dh has since got a DMP.

Who knows you might even pay it off, if you dont, your not alone in doing this

What if you can’t sell the house though? Some huge houses sit on Rightmove for years! Make sure you are covered if that would be the case.

Nothing wrong with that. You get to live in the house you want in the phase of life you want it. When the time comes you can downsize if that suits your circumstances. Some people don’t want a bigger/ better house in their retirement, others prefer to keep it.

Thanks so much for all the replies. I see the overall opinion is pretty much uniform. It makes me feel much better.

The new mortgage would be about 200-300 (at most) more than what we are paying now and it is quite manageable.

The potential house isn't huge per se by the way. A 4-bed detached with a decent garden.