Currently in a conundrum about what to do next.

Background, 45 yrs old, two 3 yr old kids, married, £26k left on mortgage (house worth around £280k) with very affordable repayments, modest self employed income, absolutely no other debts (ie car loans, visa bills etc).

Choice one: Pay off mortgage – 11 years to go at £200 a month but a flexible mortgage so in reality it will be paid off in full in around 3 years. This means we can start to save for our kids later lives, have a modest income to enjoy. But the house is quite small and has no private garden. But it *is* in a perfect location for the best primary and secondary schools in the area and has beautiful countryside views (why we fell in love with it in the first place, long before kids came along).

Choice two: As it is looking like I am going to have a reasonable set of figures for last year, do I upgrade the house and go back to a larger mortgage (still wouldn’t borrow more than around £150k so still relatively affordable). This would get us a house with a nice garden and more space for our kids to enjoy as they grow up.

Choice three: Sell the house, move into rented, put the ‘profit’ into a high (although I accept it won’t be that high right now) interest account and hope that when interest rates start to rise at a point in the future I wil then get an income from that (and any extra I will be paying in) money that will far outstrip rental costs. Fair enough, this last option isn’t well thought out yet.

Our heads are spinning with what to do next.

Depends on how secure your self-employment/additional income is.

We’ve almost paid off our mortgage and we are tempted to move up the chain, but at the moment it just can’t happen, so I’m choice 1. If I felt at all secure, or if I genuinely felt that I’d have consistent income for the next 10 years I may go for your choice 2.

I’m not sure how the rental option would work. Wouldn’t the interest you earn be offset by the rental sum you pay, which I’m guessing would be pretty high?

Pay it off asap and remortgage in a few years time.

Any potential future windfalls/inheritance to consider?

Pay it off. Buy a campervan.

Or…

Pay off your mortgage asap, then you rent out your own house and rent a larger house for yourself in another area.

Obviously this isn’t a prime way to make money and the difference between what you rent yours for and what you pay could be a few hundred quid a month. But you still own a property outright and could move back to that when kids have grown up.

Not sure I’d want to take on a 150k mortgage at 45 that could take you well into your 60’s to pay off. Especially as you say your income is modest.

I wouldn’t do option 3.

I paid off my mortgage rather than upgrade to something bigger. Quite happy with that choice, as being completely debt free is quite a nice feeling.

being completely debt free is quite a nice feeling.

I’m not far off that and I have to say I’m looking forward to being a master of my own domain (currently, the Yorkshire Building Society has part rights to said domain).

Freedom from debt must be a wonderful thing.

No income is secure for anyone, so I would go the paying off the mortgage route (trying to do the same here, just got a bit further to go than you!), then save the money up. That way, you have got yourself a lovely bit of optionality as to what you do next.

The downside with what I say though is that interest rates are currently less than inflation.

If you love the house – as you say – why would you consider selling it?

Clearly though it is your circumstances and your call entirely.

Any potential future windfalls/inheritance to consider?

Part of the reason it is almost paid off is an inheritance from my parents (both sadly died in the last 4 years). Sometime in the future there will be a significant inheritance from my wife’s parents but they are both in good health thankfully.

Stay where you are and pay it off while waiting for the appropriate property locally to come up that you can upgrade into. Talk to the local estate agents about what you are planning and they will hopefully keep an eye out for what is suitable for you.

If you love the area and it has the right schools for your kids then it makes no sense to move away from there.

Once it’s paid off and you still haven’t moved start paying the same amount away into a savings account.

If you love the house – as you say – why would you consider selling it?

It’s size, lack of garden, lack of storage and lack of private drive.

We will be in a similar boat soon – and have decided to extend. from what I remember about previuos threads about your place John, you won’t be able to do this?

If you are sure of income, I would get into a bigger place with a garden – let your kids enjoy it now!

Pension?

We have already extended but we are bursting at the seams. We are also going to speak to the farmer whose land adjoins our property to see if he will sell us a small plot for a garden which would, to an extent, solve many of our immediate issues.

If I were in OP’s position I would pay off the mortgage ASAP, then cut down to working 3-4 days per week and spend more time with the kids/riding my bike while I’m still young/healthy enough to enjoy it. This would be a no-brainer for me particularly as you say you are expecting a large inheritance at some point in the future which wil see you right in your twilight years.

We paid our mortgage off many years ago. And it’s been great not having one. But I’ve grown to hate our house. it’s too small, not where I want it to be and it’s a dormer which if you don’t know, means upstairs is made of wood and is therefore akin to sleeping in a wooden shed. I really **** hate it.

So, new house time. now we probably should have done this years ago and now I’m 45, it’s really pushing the boundaries of lateness so here’s what we’re doing.

Remortage our existing house on a buy to let mortgage (interest only).
Use the capital raised as a large deposit on a new house with a repayment mortgage.

With no tenant in our house this means we’re paying an eye-watering £900 a month which we can afford but it’s not pleasant. With a tenant paying around £500+ we’re down to a more manageable ~£400. At some point we’re hoping the housing market picks up enough to warrant selling the old home which we’ll use to reduce our residential mortgage to a level where we barely notice it.

It’s a very wrong time to sell but a brilliant time to rent out and buy. All the signs to me are we’ve done this at exactly the right time. We got our new house for a billy bargain with the vendors very willing to negotiate (we got them down £10k from their already reduced asking price), the mortgages are in free fall with the rates we got dropping by £20 a month as well as having £750 added onto the cash back signing deal in between us agreeing and signing. If house prices ever do pick up again we’ll be in possession of a house we would never normally be able to afford with a mortgage that I could pay easily.

It’s a risky venture for sure while we’re going through the signing process I’m having quite a lot of literally sleepless nights which I’m hoping will go away once the paperwork is sorted.

but it’s a forth option for you.

Pension?

Currently have some money in pensions, but need to do more, however I am not convinced a traditional pension is the best answer (currently planing on trying to purchase a business property in the next 5 years for our small business which will help towards pension provision).

Crikey Samuri – that sounds complicated but I can see the thinking. It is only going to make my choices even harder to work out though!

pay it off asap

your kids will get far more out of life with happy chilled out parents who maybe take a bit more time off work to spend with them and have a couple of nice holidays every year, than a bigger house with a garden and parents stressed out about paying the mortgage and always at work.

We are currently in a similarish position. A bit more left on the mortgage than yo but we also don’t live in at the moment as I have a house with heavily subsidised rent with my job so we live in that and rent out ours. With house prices not going up at the moment (if anything going down outside London) it seems to make more sense to over pay on the mortgage rather than buy a bigger better one.

We need to do something though as this is not the house (or value of house) I would really want to move back into and end my days when I finish up working where I am.

Pay it off, live the dream, if the dream changes change your world. My life insurance paid out, fortuneately my life continued. We lived mortgage free and it was wonderful and a real load off while going through treatment. Got through, felt good moved house. Living a new dream now.

you are expecting a large inheritance at some point in the future which wil see you right in your twilight years.

Not worth relying on inheritances e.g. if they develop dementia, in could all be eaten up in care home fees…

Very true footflaps – another family member is currently dealing with this scenario, but with the size of property the in-laws have, I think even a carehome for 50 years would struggle to use it all up 😯

1.it is the least risky and a bigger house for your kids might be nice but you need it for what 10 years max

Probably better to save some dosh for their future rather than give them a bigger bedroom and it sounds like you would like to live where you are in old age and soon enough your kids will leave the nest.

3 is madness IMHO

I went down the pay it off route a couple of years ago. Being mortgage and totallyy debt free at 32 was a nice feeling. In some ways a bigger/better house might be nice but this gives me more options on what to do with myself and my time and I really dislike owing people money!

see what the farmer says.

the only thing i want for at my house is an actual double garage as oppose to the 2 singles i have.

when the time comes im going to see if the farmer will sell some of the field out the back for a double garage to go up in it- or in my garden and using the field for garden if plannings an issue…..

I recently went for option 1 (ish)

Chose to minimise risk of future reposetion and enjoy the security and extra cash that a compromise brings. In reality we got the location we wanted but the garden / house is smaller than we would have ideally liked, but at least we will have a roof over our heads if either of us is unable to work

Blimey steveh – how on earth do you get rid of the mortgage at 32?!! I’m impressed. I’m closer to 50 than 40 and got a big chunk to go – trying as hard as I can though.

Well option 3 seems somewhat crazy.

Personally and mortgage free myself now I’d go for the mortgage free option. The feeling of owning your own place is great although I don’t have the OP’s problem of disliking our own house. Btw moving doesn’t guarantee future happiness either.

I don’t dislike it (I love it) but it just isn’t practical. And now the good weather has arrived, it is sad that our girls can’t just go out to play in a secure environment (other than our tiny yard at the back). At the front is a shared garden that we can only see 1/6th of from the house and the gate at the far end opens onto a road.

Very true footflaps – another family member is currently dealing with this scenario, but with the size of property the in-laws have, I think even a carehome for 50 years would struggle to use it all up

Let the kids wreck their garden, problem solved!

Oh to be mortgage free in a nice house in a nice area!

Defo not 3

Re-mortage the house rent it out and move.

If you can do it on a let to buy all the better.

Defo not 3

Yeah probably right – it was late night, unable to sleep mad thinking…

If you want any advice on that approach then email me on samur2@hotmail.com
We’ve spent a fair bit of time talking with financial advisers and buy to let landlords. There’s plenty you can do to reduce your risk and maximise your investment.
The good news is that they were all fairly consistent in their advice.

Many thanks Samuri – I might well take you up on that offer.

Option 1 every time. Your current place might not be perfect but living debt free feels good. Your kids won’t have lifelong memories of what their garden was like but will definitely have happy memories if you’re free to spend time with them and are unstressed over a mortgage.

Option 3 is madness IMO. Beware the advice of financial advisers, solicitors and mortgage providers; their ultimate goal is to make money from you, not do what’s best for you 🙂

Your kids won’t have lifelong memories of what their garden was like but will definitely have happy memories if you’re free to spend time with them and are unstressed over a mortgage.

I like this sentiment. 😀

Personally I’d pay it off and then buy a second smaller property for rental purposes.

I’d go option 1… pay it off ASAP.
The extra cash you’ll have from not paying a mortgage can be used to do lots of cool stuff at weeknds with your kids to make up for not having a big garden etc..

The other option is buy a small holiday let somewhere that you can use to get away to aswell?

I probably should take some of my own advice as we’ve just taken out a 240k mortgage which runs until i’m 70! (i’m 40 at the moment)

It is only a stop-gap as we needed to raise some funds to develop (and add value to) our house, which we bought in order to bring our kids up in a nicer area, and send them to a good school. (they are currently 2 & 5)
We’ll re-mortgage in 18 months time and shorten the terms.

We both have fairly good jobs (Engineer+teacher) so i’m hoping we should be able to overpay a little bit and shorten it even more.