A retirement/house dilemma - what would you do??

[AddictedtoCrunchies]

I'm 53 and ideally would like to retire by 60 latest. However current plan is to go at 62 because I still have £188k on my mortgage and I have projected that with some serious saving and a bit of my tfc at 62, I can clear it by then. Pensions are OK ( a DB, two paid up DC and current workplace scheme that I'm getting 19% into). I'm a single parent and my son is yr11, hoping for a three year apprenticeship from.next summer. Mortgage payment due to go up to £1245pm from 1.1.24 to 31.12.26. Eek.

Just recently I've been thinking that I need to change tack and I'd be grateful for thoughts and opinions.

House is a 3 bed with a fairly big garden, garage, shed and large driveway. It's a bungalow in a street of bungalows so ideal for retirees. Bungalows go like hotcakes round here. Bought for £220k, mortgage £188k and value c£290k so around £100k equity. (Totally appreciate valuation does not always equal sale price.)

I live here with my son and the dog. I want my son to always have a room here but am aware he'll be off at some point, probably before I turn 60. Third bedroom is an office as I work at home. Salary is c£53k and job is secure (as it can be).

My dilemma
As much as I thought this would be my forever home, I'm thinking that maybe I should spend the next three years of my fixed rate saving as much as I can, then at that point sell up and downsize to somewhere smaller with a smaller mortgage (what I paid off plus what I saved up plus cheaper house).

My current house is lovely and I'm really happy here but there's lots that needs doing. Kitchen and bedroom 1 are still the original 1970s as I couldn't afford to do it when I moved in. However I did rewire, replaster, refloor and rebathroom plus had a new boiler in March so the key things are covered. But I have a hankering for nice skirting boards and a less mature garden!

I'm just feeling that there are things I want to do (complete the Abbot world marathon majors, travel more, buy a newer car, support my son financially) and with a smaller house and mortgage I could do that. Plus I could retire at 60 when my pensions will be ready to take. As long as I have a secure home, it doesn't need to be this big and this expensive.

What would you do (and thanks if you've read all that ^.)

We will downsize when our current (2.6%) rate ends in 2027. I'll be 58 then and planning to retire from teaching.

Very much like you, I love our house. We've been here for 8 years and done a lot to it but it's too big now. It's a 4 bedroomed, 3 bathroomed three storey house. 2 bedrooms and one bathroom are barely used.

Older son moved out, younger son nearly 21 and will leave within the next 5 years I imagine.

I think we will have about £50-60k equity which will bridge the gap to state pension at 67.

No point having empty rooms.

I love our house and garden, have a fair bit of equity in it, and I don’t really want to move but it is a bit big and I’ve no energy for the amount of cleaning it actually needs. I was also overwhelmed at the amount of stuff we had to clear from DGM & DF homes. I can’t bear my young adult to have to do so much one day. If I downsized I’d have to get rid of stuff.
I’m on RM every day. I figure the lower a remaining mortgage is, the more chance I do have to be able to retire early.

I plan to downsize and will need a bungalow and will also move to a cheaper area when I retire, so only plan to do that on retirement. If you downsize in three years, you will know more about what life is likely to look like on retirement I.e. where you want to be and where your son is.

The only thing I do think about is whether I would want to rent out a room to top up my pension.

Thank you all. Food for thought.

Looking forward to moving nearer to DD and DGSs in the future. Currently stuck with an interest only mortgage (only option at the time to get abusive exH out of my life 😞) Lots of equity but very cash poor presently, can't move atm because of elderly relatives and unhelpful sibs 😞 Hoping everything will come together eventually!

If you downsize you can consider all the longer term costs of running the house you choose.

Council tax band, energy rating, type of fuel it can run off. Smaller and efficient to heat etc.

How are you going to pay £188,000 off in seven years?

We will probably move, I love my house but it’s turning in to commuter belt central as people move further out of cities and we are on a fast train line. We will go just a little further North but because it isn’t on the fast train line houses are cheaper. I will have been here 25 years but we will be looking for a very big garden. I think to retire early you will need to downsize regardless of if you want to.

I would take a look at what you can afford if you were going to downsize, as it would make a difference to me if it meant you were going to have to move to an insecure area or somewhere with a lot of renovations. If you were going to get something very nice, just with a bedroom less, I would probably do that.

But I would probably in any case use the time while on fixed-term to save aggressively and reassess in three years. Even if you don't move the savings can go towards earlier retirement.

I think it's a good idea to future proof your home . I think it makes perfect sense to downsize from a larger property especially if it has a too large garden . Retirement is generally for travel hobbies etc not constant gardening and cleaning .
I have accepted I will need to move , I have ' land ' and all I want is a manageable container garden , I also have no public transport near me so again no use when I no longer drive

Thank you for this. You've actually made me realise that my calcs are out so I need to rethink.

I've decided to spend the next three years overpaying my mortgage by as much as I can. I'll be 56 then and will decide what to do then.

Thank you all for the wise words.

You have more or less decided to go on till You are 62. Why not do reduced hours for three of four more years. I don't think you need to consider downsizing for a good number of years yet.

We thought we’d downsize on retirement but …

we love having separate space in the house ( maybe not applicable if you’re single)
grandchildren came along and when they stay with or without parents the rooms fill up
we love having a fully equipped guest room for friends and overseas family
less bedrooms usually means smaller entertaining spaces
we’re detached and I fear noisy/difficult neighbours
we do love our existing neighbours and area

I fear I will be carried out of here in a box! Consider what you’re giving up.

Ultimately whether you downsize or not, saving / overpaying the mortgage as much as you can over the next few years will help whatever you decide.
The only downside to throwing your money at the mortgage that might be worth considering is that you could throw it at your pension instead and get the tax relief on it.

You’re only 53 and the house is completely appropriate for your current needs. A nice bungalow is the sort of place people a few years older than you would be thinking about moving into not out of.

I would say you’re overthinking it a little. Just keep doing what you’re doing for a few more years and reassess it then.

Will you be able to take a lump sum(s) from your pension? Depending on how much your pension income is, you could consider assuming a that might go to pay off (some of? All?) outstanding mortgage when you retire.

But it may not be wise if taking a large enough lump sum would mean you didn’t have enough to live on later, and may not be good value over a lifetime depending on the formula for moving it from one to the other if you can. You probably need a pension projection, and advice on that decision.

As you’re happy in your current house I would overpay your mortgage and see what you could buy later when your son is leaving home.
If you could use lump sums from your pension then I’d plan to do that.
Partial retirement from 60 could be allow you to keep the home you love and fill the gap in funds until your state pension kicks in.
A lot can change in 7 years and you do have a good salary so i think you’re right to be open about what you may decide to do.

Could you get a lodger in the third bedroom?

Sadly not as its tiny and set up as an office to work at home.

Tbh I suspect that you would not be able to reduce your mortgage by much when you factor in the cost of moving unless you buy something a lot cheaper which might not be very attractive. I would try and DIY the jobs that need doing, and try and reduce your mortgage. You may feel differently in a decade

Moving costs money - you'll have estate agents fees, stamp duty etc, plus you may want to spend money on getting a new house the way you like. Have you taken that into account?

Rather than equity release latter just keep paying min on mortgage ?