Pay off mortgage or move to bigger house?

[SleepysaurusRex]

We have been intending to move from our very small 2 bedroomed house for some time now, but due to various reasons it has only recently become achievable. We have two dc, aged 5 and 2, and our current house is in a very desirable location. We would like to gain an extra bedroom plus more living space and a larger/nicer garden (we have a reasonably sized one but it is very overlooked).

With our budget it is likely we would have to move to a slightly less nice area and would be at the very top of our budget to tick all of the boxes. The alternative is that we stay put, potentially add an additional bedroom by extending into the loft or dividing one of the 2 (decent sized) bedrooms, and pay off our mortgage in around 10 years (by which time we'll be mid/late 40s). There is no scope to extend outwards to increase living space.

So my question is...what would you do?

Never mind sleeping in more or less the same space! One bathroom? Not ideal. Most people do not pay off a mortgage in their mid 40s. Many people are paying rent forever more. You have equity and I woud make the most of it and move now - in your mid 30s!!! You are still young. I do not know a single family who did not aspire to this. No one aspired to paying off a mortgate in their 40s over decent living space. (Assuming I have deduced your ages correctly!)

Move. You can't create space in a tiny house. And you're young enough to deal with a mortgage. The dc will get bigger as they get older. It's a no brainer.

Another vote to move. Having less financial pressure is nice plus bigger holidays, new cars etc. But day in day out where you live makes such a difference. I know l wanted to move before lockdown 1 and l am even more desperate now!!!

I think you are still seeing your children as very little. We moved when the children were 7 and 4 from a 3 bed to a 4 bed to give Dh an office in the house and a massive playroom downstairs for all the toys/games/books the children had. So essentially a second lounge.

They are now teens, I am the shortest person in the house. Ds1 is 5'11" and Ds2 is 5'9". Now imagine a typical school day morning where they shower before school, that is 4 people all needing a bathroom in the morning. Think of 2 fully grown adults in that bedroom they must share.

Think of clothing being adult sized. Dh, Ds1 and Ds2 have size 10 or 11 feet. Their shoes are huge! Imagine 4 adults in your lounge and add in a couple of their friends and you start to get an idea of why you may well need more space.

There is always this push to pay off a mortgage early, I would rather have the space to find peace and quiet in the house.

We had a similar dilemma - I was definitely in favour of a small place, but DH definitely wasnt. But then am 5'2 and here's 6'2 and DCs more likely to be his height than mine. I really wanted to be mortgage free or have a tiny one at most - but are just about to take on a larger one to ensure there's enough space. My plan (or at least this is how it's in my head) is that as soon as we're child free again to downside so not seeing it as a long term debt but a form of cheaper rent. But I think it's true that when DC are little it's hard to imagine then big. But if I think that there will be lots of people of DHs size - it makes sense to go a bit bigger

I'd try and stretch to the bigger house but still in the nice area. Don't move to a slightly less nice area. That's a step back. IMHO.

I’d move. Aim to pay off your mortgage by mid 50s.

Salaries (generally) only go up whilst your mortgage payment will remain the same so, eventually, it feels cheap.

Gives more scope for downsizing later on too.

Since when do mortgage payments remain the same? Have you not heard of interest rate rises? Not so much recently but never say never! Just borrow sensibly.

Ok, good point, mortgage repayments do change with interest rates if you have a variable mortgage. Up or down.

My point is that, in general, a mortgage you took out quite a while ago based on income at that point tends to feel 'cheap' 10 years on.

re. the mortgage - i think women's earning potential peaks at around mid-30. Of course, incomes can rise, but I also think that people can reach that tricky point around your 50s/60s i.e. you cant always assume that just because you get a 30year mortgage that you will be earning the same in your 60s as in your 40s for example. Nonetheless, you can always downsize etc once the kids leave home

@PresentingPercy

Since when do mortgage payments remain the same? Have you not heard of interest rate rises? Not so much recently but never say never! Just borrow sensibly.

When you have a fixed term rate

I'd move. I grew up in a small house and hated it!

If you could convert the loft then I personally wouldn’t move. I find as children get older they need more personal space but they actually have less physical stuff. We paid our mortgage off in our mid thirties and have had a decade plus of lovely holidays, topping up our pensions, and never worrying about a bill.

We had the same dilemma and decided to move. We couldn't extend though.

We are not moving to a horrible area, just one that is a bit more soulless. Where we are now has a nice community feel and I will miss it but this past year has taught me we actually spend quite a lot of time at home and the lack of space really gets to me. We are going to be about a mile away from a "nice" area and our DC are staying at the same school as work near it.

We had paid off our mortgage a few years ago and are now taking one out for £250,000 which is not too bad considering our income but it still feels like a massive decision. It just means we cannot save as much in our ISAs, the savings will be in the house instead.

We wish we had done it years ago as we are early 40s now and getting a mortgage that could potentially last into your 60s is not that appealing (although we plan to overpay).

Fixed interest rates are fixed for a term. Not forever. Rarely for the whole length of a loan. Slightly self satisfied comments without understanding the big picture I think.

Yes, we have had unprecedented circumstances which have caused rates to be low for years. However there is never any guarantee this will continue 10 years into the future. Inflation has stayed low and many people would argue their wages are not growing much either. People often need promotion to earn more. Or work their way up through grades. In uncertain times, that’s not a given over 10-15 years.

In the OPs circumstances I would get a mortgage however. Just to make living more of a pleasure when DC get older. But I’d never be complacent about mortgage rates. 15% when we had our first mortgage. We got mortgage tax relief but it was still very expensive. 3 times 1 salary plus 1 x of the second salary was normal but the 15% was limited to the 3x sum. The extra was at 18%. Fixed rates were not available - as you can imagine. Utter joy when rates came down. Now we have much higher property prices but there is still a need to be sensible.

There is also a need to balance house, savings and pension planning.

I would move, but since you're in no major rush I'd look into different areas properly and wait for the right property, increasing my deposit / lending potential wherever possible. Check property auctions too, not all are uninhabitable and you can sometimes get more for your money.

I’ve had a mortgage from the age of 23 and I am now mid 50s and have another 10 years. House prices where I now live have gone up consistently above the cost of borrowing. It is an investment and a great way of saving.