Mortgage free or bigger house

Maewyn Succat

My wife and I are in our early 40's and are considering buying a bigger house. The house we are currently living in is worth approximately €275k. We are very fortunate to be mortgage free.

The house we live is fine but doesn't tick all of the boxes. We would prefer to have a bit more space and a garden which our current house does not have.

We have a combined income of around €80k a year and 2 young children.

We have recently seen a house for sale which we like for €400k. This would probably mean borrowing around €150k. The repayments on this over 15 years is about €1k a month which would be very manageable for us.

I'm not looking anyone to make a decision for us...just some advice or pros and cons.

herbalplants

https://www.boards.ie/discussion/2058306289/mortgage-free-or-bigger-house

Totally go for it. The only issue I would see is you need to sell your home first and then look at buying the house you want. But for this, you will need to move somewhere in between perhaps family?

Coordinating selling and buying at the same time with 2 young children would be extremely stressful.

pat_sconce

Absolutely go for it and it's a long term investment too.

I enjoy a decent size rural house with 1/2 acre. Only two of us, but the extra space was worth the high mortgage we had. (Thankfully only 3 years left and a small balance)

riclad

Go for it your income means you can well afford it even if interest rates go up in a few years .

Padre_Pio

Go for it.

2 young children turns into 2 young adults quickly and you'll be happy with the extra space.

Mrs OBumble

What is the status of your pension savings: Have you taken professional financial advice about retirement planning? I think this is essential before you make any decisions.

Also, how secure are your jobs? In the current economy, I'd be nervous about committing to extra debt.

markodaly

https://www.boards.ie/discussion/comment/120892343#Comment_120892343

You mean an economy with ultra low record unemployment?

To the OP.

Go for it. As when you retire you will have an asset that is worth more in the long run, then you can downsize and pocket the difference tax-free.

3DataModem

I normally reply "no" to questions like this, but in your case "yes" is a good answer. You can pay that 150 off pretty quick if you both stay working, and as someone said above you'll need the space for the 2 kids. I did the same 5 years ago (two 8 year olds, now 13 year olds!) and glad I did.

mulbot

Stay mortgage free.!!!

Former Former Former

Two small kids and no garden?

Yeah, I would move. A 150k mortgage in your early 40s is nothing, especially if your LTV is so low.

DownByTheGarden

Bigger house every day. Wont be long til the mortgage is paid off and you can enjoy your later years in the house with your family. If you decide to downsize at that point its easier too.

A2LUE42

Did the same about 8 years ago and would recommend it. The only concern with kids would be moving schools or any impact on that side of things. As regards the logistics of buying/selling same day, it can be tricky, but it is manageable.

Beta Ray Bill

https://www.boards.ie/discussion/2058306289/mortgage-free-or-bigger-house

I'm gonna be a total prick here but I'm being a prick to make you think a bit and I apologise for that in advance.

You're in you mid 40's and are borrowing €150k to get a bigger house that's €125k more than the one you're currently in. (why the extra 25k?)

You both earn, at this stage in your life you should have savings (a lot of savings, particularly if you've been mortgage free for the last X number of years)

If you have no savings or have very little savings, how do you expect to pay €1,000 a month every month for the next X number of years?.

Based on the number you've quoted I'm "guessing" 16/17 year loan. meaning the cost of credit is €40,0000 approx.

It's common knowledge that if you want to be poor: borrow money. Clearing your mortgage is the fastest way to save money over the course of your life.

I'd be using a very good portion of my savings to move rather than borrowing money off of a bank. You basically have what the rest of us only dream about, being mortgage free in your 40's. You're a Unicorn :)

My advice is move if you have the money but do not borrow it.

Mrs OBumble

https://www.boards.ie/discussion/comment/120892349#Comment_120892349

You don't know what industry the OP and spouse are in.

There are signs of trouble ahead in certain parts of the economy.

That's why I started by asking about job stability.

SupaCat95

https://www.boards.ie/discussion/comment/120892967#Comment_120892967

I wouldnt say you are being a prick but a reality check. We have record prices being paid for houses. we have near full employment. We have country that is bursting at the seams. The housing market is very stressful with people topping out on their mortgages paying low interest rates. What would happen if those interest rates were to raise to 5%? Also a lot of jobs are going to be phased out of existence very shortly with AI (see Tesco GO! Aldi robots, M&S facial recognition tracking software). Thread carefully. Be carefully of the bank manager. He will offer you his coat on a dry day but want it back on the wet day. If you are doing well on your ordinary mortgage keep going, hard times are around the corner.

jonnybravo

We've moved a couple of years ago to a bigger house when our kids were still small and it was the best move we made. The extra space just makes life easier and kids enjoy it more. We were similar that we were pretty much mortgage free and then took on a bigger mortgage and done regret it.

A new mortgage of €150k is around 2 times salary which is very manageable. As someone else said you should also look at your pensions as part of an overall review of your finances.

pjordan

Nice position to be in for starters. I guess it's a debate about quality of life v's affoardability really.

Few points:

1. Seems ye are looking at the upgrade more in terms of space and liveability rather than any "notions" of moving to a better area or looking to accumulate a more valuable "asset" rather than a home to live in - that's a good thing.
2. Presume ye are looking at a short term (15 year mortgage) to clear well before retirement and funding kids further education, etc?
3. Is the €1k per month sustainable in the longer term i.e would an interest rate hike up to say €1200 p/m stretch ye? Need to plan for such possibilities. Presumably you will get a favourable LTV rate also?
4. Will the move have any impact on kids school options or commute, either positive or negative?
5. As mentioned above, is your current house easy to offload in the same time scale as purchasing the new house, or would it involve an interim rental and two moves (very stressful but also an opportunity for a good clearout!)
6. Is this planned as a family home to be possibly offloaded down the road and downsized at the empty nest stage as a supplement to retirement funds or is it a home for life? (as above - a home not an assett!)
7. How are your savings / pension funding? Can you dip into savings or also fund pension provisions while also paying €1k per month or more?
8. Will the upgrade involve much more outgoings in terms of property tax/maintenance/ etc? Have ye budgeted for this? Will the new house need any works beyond redecorating, will your current furnishings suit or will ye need more? (maybe thats what the extra €25k is for?)

All In all, I'd say there's a whole lot more pro's than cons and I'd say go for it. FWIW I bought my house in my early 40's just over 15 years ago and even with considerable refurbishments, we are now thankfully almost mortgage free with a house worth over €300k (though I try to look at it as a home rather than an asset in that context)

The general thinking from most financial advisors is that funding you mortgage followed by pension provisions are possibly the best two investments you can make so effectively you are in a similar position to a couple with a 25 year mortgage on a €450k house with 10-12 years already paid and 2/3 positive equity in the property.

Good luck in any case

o1s1n

https://www.boards.ie/discussion/comment/120893186#Comment_120893186

1000 euro a month on a mortgage over 15 years is peanuts really. If they ran into trouble they could easily apply to extend their mortgage over a longer period up to potentially 30/35 years and it would seriously cut down on the monthly repayment. You'd easily cover it on one salary.

I say go for it OP. Usually I'm in the 'stay mortgage free!' camp but you're getting quite the quality of life upgrade in your plan for not very much at all.

Maewyn Succat

Thanks for the replies. It seems most people think moving to the bigger house is a good idea as the debt is fairly manageable.

An issue that was mentioned was how buying and selling the houses would work. I would be optimistic about this not being too much of a problem as houses seem to be selling reasonably fast in the area. There would possibly be the option to stay with family short term if this became an issue. Does anyone have any experience with this?

We are not looking to move far from where we currently live so not worried about disrupting the children's lives too much.

Maewyn Succat

Duplicate post

Maewyn Succat

In response to Beta Ray Bill:

Thanks for the advice and you're not coming across as a prick.

I realise there is only €125k difference between the 2 houses but I'm allowing for any change in asking or selling prices of the houses plus estate agent fees, legal fees etc.

I have around €50k in savings...I'm not sure how that compares to your idea of lots of savings.

I made a career change a few years ago from electrician to electrical engineer during which time I returned to college full-time for 3 years. This meant that my wife was the sole earner. As I am still omly at the beginning of my engineering career I would expect my earnings to rise over time so would expect my ability to add to savings to rise too.

Maewyn Succat

https://www.boards.ie/discussion/comment/120892543#Comment_120892543

Anything else to add to this? Wait until I have enough cash to buy the house I want? Buy a house that I can afford now? Stay in a house that I'm not satisfied with knowing I can afford the house I want?

Oscar_Madison

My main concern for you OP is to ensure you sort your retirement regardless of what you’re going to decide on your house.

Pension investment with tax reliefs is one of the best ways to save for the future. If you haven’t done anything about retirement planning, then you need to and need to now- just over 20 years to retirement is not much time - to gain a decent income in retirement will likely mean a hefty investment monthly for the next 20 years.

You can of course factor in potential future inheritances but people are living longer and elderly care still costs a lot even under the fair deal scheme, which actually isn’t that fair as people are led to believe.

My key question is- can you afford both this house upgrade AND save for retirement?

Maewyn Succat

https://www.boards.ie/discussion/comment/120896120#Comment_120896120

I currently have around €65k in my pension and am paying 6.5% of my salary into a company pension. My employer pays 9.5% into this also.

My wife and I have recently been looking at getting advice from a financial advisor. I would be expecting they would advise putting more into a pension fund so this is something we will probably start doing.

Oscar_Madison

https://www.boards.ie/discussion/comment/120896267#Comment_120896267

Good to hear - do get that advice before making the decision. around buying and selling the houses but if the sums add up then super, and best of luck with it all

Madd002

I'm on the keep the mortgage clear fence.

1. Bigger house Bigger Bill's

2.Bigger garden lots more maintenance.

3.Kids grow up the house your in now will feel empty and more spacious.

4.150k will cost more than 1k a month over 15years especially the way interest rates are at the minute.

I got my 100% 160k mortgage in 2006 for self build on half acre,we are on track and ready to clear off in November and I cant wait, thank you tracker mortgage. We are now rattling around only using main kitchen, dining & living all open plan. All other rooms are dusted and hoovered once a week and doors closed. Our older 2 have already flown the nest and we are down to 1. I'd downsize in morning as my home would make a wonderful house for a family with mature secure gardens. The only issue is there is nowhere to go in my area as, I wouldn't like to move younger from secondary school and I'd say alot like me are stuck in same situation as me which doesn't help the housing crisis. Maybe in 5yrs youngest son might not mind moving as much then..?

DownByTheGarden

https://www.boards.ie/discussion/comment/120896832#Comment_120896832

They might all move back in with you :)

Oscar_Madison

https://www.boards.ie/discussion/comment/120897160#Comment_120897160

Yep- housing shortage and prices won’t end soon

listermint

https://www.boards.ie/discussion/comment/120896832#Comment_120896832

Sounds like your sitting on an asset making your choices quite large. I'm not seeing a single downside.

You could build or renovate again easily with an existing roofed building, you could avail from vacant housing grant.

You could simply wait and buy. Houses do come up.

The powers all in your hands due to the choices you made in the past about building larger.

k mac

Almost in the exact same position as the OP. Mid 40s 2 kids, we both have very secure jobs, mortgage free and a nice bit of savings. Want to move purely to get something a bit bigger for more room for the kids. Seen a house we really like only a few miles away so no effect on kids school etc. Have mortgage approval got for the full purchase price of the house we are looking at, so won't be in a chain as in waiting on the funds from the sale of our current home, which will sell fairly quickly i would think.

If we sell and buy this house would have a mortgage of around 120k. Only problem is we put a bid in on the house a few months ago of 20k under asking price. Now i think it is a fair bid i think our bid is in my opinion circa 20k more than what the house is worth, but as we like it we were prepared to do that. Now i know other people have looked at the house since and as we haven't heard much since from the EA we are still the highest bidder i would think. but the seller is obviously in no panic to sell and seems to be holding out for the asking price. I suppose my question is do we wait and see and risk losing the house. Or bite the bullet and go to the asking price.

Oscar_Madison

https://www.boards.ie/discussion/comment/120897477#Comment_120897477

I was in a similar position some years ago when property prices were much lower- I bid on an apartment on behalf of someone-it was the top offer- however the estate agent was pushing for an extra 3k to bring it up to a round 150k (might have had an impact on commission or maybe this came from the seller, I don’t know) - I thought about it and figured if any other offer came in I would likely have to surpass 150k to get the property (which the buyer really wanted) so I upped my offer to 150k on the basis we went sale agreed- offer was accepted -best decision I made.

I think the real test here is - how would you feel if you lost this property to another bidder? Answering that question will help make the decision for you. Are there other properties likely to come up even better than this one for similar money?

Id talk to the estate agent and ask them what would clinch the deal- I don’t think you should go the whole 20k here and also make a big deal about bidding against yourself (I did this and it helped get the deal sorted) - but IF, someone else comes into the bidding war, then you’re possibly going to have to up the offer you made and it might well exceed the asking price by the time the seller accepts the offer.

Sometimes, throwing in 5-8k makes sense but they need to accept and go sale agreed- any sh1te post sale agreed and I’d walk.

k mac

@Oscar_Madison thanks really good advice there especially about making the EA aware i am bidding against myself

Oscar_Madison

https://www.boards.ie/discussion/comment/120898349#Comment_120898349

Best of luck and yeah, my words were “this goes against everything I believe in when it comes to bidding “😂- the reality was, it was the perfect home- location, condition (needed some work hence low price but we had factored that in and wanted to make some changes anyway) etc so we didn’t want it to go to someone else and we knew the property market was starting to rise rapidly so wanted to clinch this deal before others woke up .

If the seller has common sense, they’ll take your raised offer- I’d offer no more than 3k first on the basis of sale agreed, no more bids taken and contracts underway - the seller, if interested will likely come back with 8-10k- raise to 5k and really grumble to the estate agent how badly you feel about all of this - chances are they’ll squeeze one more grand so 6k - it’s likely what you’ll pay anyway at least if a new bidder joins- one question I do have though considering lack of bids vs demand right now, do you have a theory as to why there aren’t more bidders? Is it location, condition of house etc or do you just think coz it’s holiday season less bidders in the market?

Former Former Former

https://www.boards.ie/discussion/comment/120897477#Comment_120897477

If the vendor comes back and rejects your bid, only then should you consider upping it. Give the EA a call and ask for an update, say you might have to look elsewhere, but don't do anything more than that.

If you're not going to be in a chain, you have a very strong position as a buyer.

tom1ie

https://www.boards.ie/discussion/comment/120896832#Comment_120896832

What don’t you rent out a room?

14K tax free a year and you won’t be a landlord either if you live in the house.

Nice little earner.

k mac

"one question I do have though considering lack of bids vs demand right now, do you have a theory as to why there aren’t more bidders? Is it location, condition of house etc or do you just think coz it’s holiday season less bidders in the market?"

Not sure but think maybe because its at the high end of prices there may not be alot of people able to buy at that price, also maybe it is priced too high.

Oscar_Madison

https://www.boards.ie/discussion/comment/120898914#Comment_120898914

Then certainly proceed with caution if price is already on the high-end of what it’s worth- you’re in a strong negotiating position assuming the seller is willing to sell below asking price/ if the seller is a total dreamer then they’ll be waiting for the market to catch up with their sell price - you’re reliant here on the seller anxious to sell - no amount of offers under asking will work if seller is adamant they won’t sell below asking figure

Maewyn Succat

https://www.boards.ie/discussion/comment/120896832#Comment_120896832

I understand what you are saying and the ideal position for anyone is to be mortgage free but if you were to go back to 2006 would you build the house you have now or buy a semi-detached house in an estate with no garden, which is what I currently have?

Madd002

Definitely not, I get why you want to move though, it's taking out the mortgage again that would have me fearful, but if you can afford it great!! I was 23 at the time & hadn't a clue was paying 400 rent per month so jumped at the chance for 100% mortgage but we were sensible with what we borrowed and I come from a family of trades, so built a 4 bed bungalow with sunroom that we seen somewhere else and we done upstairs at same time so we've 6 beds 4 baths, maybe cause the kids grew up so fast that I feel like I'd like something smaller.

I'm just happy to be able to clear mortgage, I dont earn much more than minimum wage so we have been so frugal, managed through the recession, I'll be just glad to see my wages now and to buy something I want instead of need. I'd be afraid to start again. On the upside if we were to sell or build again we'd still be mortgage free.😊

Madd002

https://www.boards.ie/discussion/comment/120898856#Comment_120898856

Have thought about it, but I'm liking the peace and quiet, not sure how I'd feel with stranger in house.

tom1ie

https://www.boards.ie/discussion/comment/120900681#Comment_120900681

Yeah it’s definitely something to factor in to the decision alright.

Bass Reeves

https://www.boards.ie/discussion/comment/120897477#Comment_120897477

I would not disagree with @Oscar_Madison in playing it that way. You could also tell the auctioneer you are going to move on as your mortgage circumstances are in danger of your limit being changed. Play the game that there might be a bit of flexibility to move slightly present

It amazing the way the danger of losing a bidder can change a vendor thinking.

Citygirl1

https://www.boards.ie/discussion/comment/120897477#Comment_120897477

Hi @k mac : Regarding your first paragraph, a piece of advice: Before purchasing a new property, first thing you should do, is engage a good solicitor, and get them to review in full the title deeds of your existing property, and ascertain upfront if there are any issues, including land registry, boundaries, planning etc. Do not assume that all is in order, even if it seemed ok when you purchased. If the solicitor is not willing to do this, move on to another one.

Equally, look to see if there are other issues with the property which could hold things up considerably. Don't assume that you can sell fairly quickly.

You don't want to be left with a very large mortgage, and two properties.

A few years ago, I was in much the same position. I wanted to move from the place I was in. Was in the fortunate position position of having the mortgage fully paid, with some savings, so was able to draw down a large mortgage sufficient to be "bridging", for what I thought would be a few months. I closed the sale on my new home, with my old place already sale agreed. Happy days. Then the nightmare started, as over the next year, the property was sale agreed, and fell through, three times, main due to unexplained issues with the title. After a full year, I sacked my solicitor, and engaged a new one, who very quickly found a fundamental error made when I purchased in 2007. The original solicitor was either so incompetent or so lazy, to be unable to see this.

Four years later, I have the place sold. But, in the meantime, had so much expense, stress and uncertainty, it really ruined my enjoyment of my lovely new home.

what_traffic

Could have written what the OP wrote two years ago (other than went 20yr mortgage rather than 15yr to bring payments down a bit further than OP).

Moved last Winter into a much bigger house.

Every month - the kids are get bigger & when the mortgage payment goes out I say to myself it has been worth every penny. Only regret not doing it a couple of years earlier.

k mac

@Citygirl1 good points i hope i will have no such issues as it was a house i built so should be no issues with deeds. Before it goes on the market i will be getting a report from an engineer to say there are no planning issues (can't remember what this is called), was advised to get this by an EA just in case any issues arose at a later stage that might delay a sale

Maewyn Succat

https://www.boards.ie/discussion/comment/120907813#Comment_120907813

Great to hear from someone else who has done similar.

I definitely wouldn't be against going for a 20 year mortgage as long as there was the option to overpay so it could be paid off sooner.

Citygirl1

https://www.boards.ie/discussion/comment/120908000#Comment_120908000

Sounds like you're getting your ducks in a row. Best of luck with finding a new place!! Being able to draw down the mortgage, without being in a chain, gives you so much more flexibility. And, puts you in a better position than any other bidders who are reliant on a sale.

And of course, you have some time to do any work on the new place before moving in. It's so much easier to put down flooring, carpets, paint etc, before heavy furniture is in place....

pjordan

https://www.boards.ie/discussion/comment/120910127#Comment_120910127

AFAIK, unles you tie yourself into a fixed rate mortgage, the option to overpay or pay off lump sums periodically on a variable mortgage is always an option open to the borrower.

o1s1n

https://www.boards.ie/discussion/comment/120920150#Comment_120920150

Some fixed rates will let you overpay too, Avant 'One Mortgage' for example lets you pay off 10% extra of your balance every year.

Just going to say been morgage free since our early thirties has given us a stress free and flexible life. Life has been good and now at 56 we are moving back to town morgage free still.

The stress of a mortgage tying you to jobs which you may or may not enjoy. Having the flexibility for one of us to take time off until the two kids were in school.

Mortgages are a burning tyre around your neck.

You also need to factor in college (if your kids go). It won't be cheap and SUSI won't be helping you with that salary.

I know that's years away but still.