Paying off your mortgage might sound like a dream come true. After all, once you’re free of the shackles of bank-based living, you can pretty much do with your property whatever you like. What’s more, you’ll have pots more cash each month to spend on upgrading your home. However, many people juggle two clear options on the home owning front – to pay off mortgage or move to a bigger house. Which option is likely to work best for you?
Ultimately, and I’ll throw a quick spoiler out here, it’s going to depend on your circumstances. Is moving house going to cause you major upheaval? Does living mortgage free really appeal to you? Maybe you’ve been dreaming about keeping enough money by for a house extension. Regardless of your mortgage term, there are plenty of points to consider.
Should I Pay Off My Mortgage or Move to a Bigger House?
Many people dream of living mortgage free. Paying out to the bank or the building society can be a bit of a bind. What’s more, living without a mortgage will mean it becomes easier for you to save money, to plan for a house extension or two, or to sell your home altogether.
In fact, many financial gurus will advise that mortgage payments are priority debts. That is, unless you have anything pressing that you owe elsewhere. Beyond this, however, you need to remember that plenty of mortgages are secured loans. That means that you could lose a serious asset if you fail to make repayments. You may well be in a bind where you lose access to your home altogether.
However, the appeal of moving to a bigger house is always going to be fairly strong. If you come into capital, and you have the choice between paying off your mortgage early, or transferring and extending your mortgage to a bigger, better property elsewhere, you may find it quicker and easier to up sticks. In many ways, I really wouldn’t blame you!
Paying off your mortgage does also have a few drawbacks, and I’ll cover those shortly, a little later on. In the meantime, let’s stick to this idea of moving house vs paying everything off where you are. What’s really going to be worth it for you in the long run?
How Do You Know When It’s Time to Move House?
That’s a question many people ask, whether or not they want to pay off mortgage or move to a bigger house. Moving house can be very stressful. It’s something that people really only want to do every so often if they have to! However, there are plenty of occasions where you’ll find it’s time to move on.
For example, it’s time to move house when you’ve outgrown it. You may be raising a family, or you may find that your needs have simply outgrown your property. You might not be able to set up an extension, or it might not be financially viable to do so.
In some cases, you might want to move house to be closer to family. In other less fortunate circumstances, you may move for your own safety.
Regardless of why people move, they will mainly tell you that it ‘felt right’ to do so. As mentioned, there are a few clear circumstances where you’re going to need to move for practical reasons. However, if you’re doing so for the sake of your own happiness, it’ll feel like time when your gut tells you so.
It’s also a good time to move house when you find you’re just not getting much value out of your mortgage. Make sure to find a property that suits your needs as well as your financial prospects.
Will a Bigger House Make You Happier?
Well – some will say yes, others no. Happiness is relative. Some people will be happy that they can raise their large or extended family in a bigger property. Others will love the practicality that a bigger house can bring. Others, meanwhile, will love the wide open spaces and the luxury of having a bigger property to play around with. There’s also a group of people who will find moving to a bigger house much better value than staying put, and that all revolves around the dreaded interest rate.
Then again, there are plenty of people who might not find buying a bigger house particularly fun. These people may choose to stay put and to pay off their mortgages, instead opting to set up a house extension to cope with changing needs. Beyond this, some people might choose to stay put for the surroundings and the amenities. They might be close to the end of their mortgage term, but there’s no reason why they feel they should move on.
There’s also an argument that a bigger house can be a lonelier place. However, that all depends on who and what you fill it with! If you have a healthy, active imagination, there’s nothing to say you can’t make it work long term.
Should You Renovate Rather Than Moving House?
If it’s the look and feel of a home that’s making you want to move, you may wish to simply redecorate and renovate. Think about paying off your mortgage, perhaps, and using any residual cash you’d otherwise pay to your lender into extending and renovating your existing property. If you are looking for a change in style and furnishings, this may well be the best option to take. After all, it means that you don’t have to go through the rigmarole of moving at all, and if it is convenient for you to stay in the area, you won’t have to make any sudden movements.
There are plenty of ways you could renovate your home. Regardless of whether or not you pay down the mortgage on your property, you could search for quotes and prices on conservatories, loft conversions, and complete repainting. You never know – a little bit of money could transform the look and feel of your home into something completely new and refreshing.
It’s also a matter of cost, as well as a matter of hassle. Is it going to be easier for you to move straight into a fresh, new home – one that’s bigger and brighter than your current property – or, have you got the time and interest to revamp your current space? It’s another side to the debate which really depends on individual circumstances.
The Disadvantages of Buying a New House
Yes, believe it or not, there are disadvantages to buying a new house. Some of them, again, will likely tie in with your own personal circumstances. However, let’s consider some of the more common reasons why people choose to stay where they are.
- Moving to a new house means going through the motions of moving out of your old home. This can not only be emotionally difficult; it can also mean that you end up having to take time out to pack everything up and take to the road. It can be a lot of hassle.
- You may end up extending your mortgage term by moving to a new property. This means that you will continue to owe money to a bank or building society for a much longer term. Some people are uncomfortable with doing this.
- It may likely end up meaning less value for money than paying off your mortgage. Unless you really need or want to move home, it might actually make more economic sense to stay the course.
- Buying a new house means, potentially, having to negotiate a mortgage term with a whole new provider. If you’re at the point where you are close to paying off your mortgage where you are, setting up a whole new line of credit with a whole new firm might seem like a hassle too far.
- Of course, buying a new house also means you have to sell your old one, unless you’re in fortunate circumstances. What’s more, you may have to negotiate the property chain. This means that you’ll have to wait for someone in the chain to sell and buy, and they’ll have to wait for someone else. In some circumstances, you can avoid negotiating the chain at all. However, this is going to be pretty rare.
Are There Any Disadvantages to Paying Off Your Mortgage?
Believe it or not, yes. There are a few disadvantages in paying off your mortgage early, though again, your personal circumstances are going to come into play. Here are a few points you should keep in mind.
- The key reason many people don’t pay off their mortgages is, of course, that they will largely use up all of their savings. This means that once your mortgage is gone, you’re back to square one.
- It might be more flexible and more appealing for people with mortgages to, instead, invest savings in buying a new property, or in holidays, or similar. However, the main appeal of paying off a mortgage lies in the fact that, at least, it’s paid off!
- Some mortgages will actually penalise you if you pay off early. This might sound bizarre, but it is another charge that lenders will be keen to apply. Therefore, there’s little reason to pay your mortgage off early at all if it means you’re going to be stung in the bargain.
- If you are unlikely to receive any big windfalls in the future, paying off a mortgage will leave you without much of a leg to stand on. If you know you’re going to get more capital in the months to come, there’s less need for you to worry about paying it all off.
- It might simply be more beneficial for you to use your savings on improving your home. This way, you could help to increase its value, and therefore, once you are able to pay off your mortgage in full, you could make back a nice profit in return.
- Paying off your mortgage also makes little sense if you either have no pension scheme, or no fund to help your family once you pass away. In most cases, it makes sense to protect your money and to pay into these coffers first.
Consider Your Remaining Mortgage Term
One thing you should keep in mind when it comes to paying off your mortgage is, of course, how long you have left to go. Consider your remaining mortgage term if you’re thinking of paying off soon – as if you really don’t have many months left to go, it’s probably not going to be worth the effort.
Should you pay off mortgage or move to a bigger house if you have months and months of repayments left? In some cases, moving and extending your mortgage might be a good idea. If you can keep up to repayments and your lender is happy to continue, there’s no reason you shouldn’t be able to make the most of your credit.
Living Mortgage Free
This topic is perhaps a little bit more complex than it might seem at first. Living mortgage free seems like a dream come true, but in the grand scheme of things, it might not actually be worth it. If you have plenty of payments left, and if there are other things you could be spending your savings on, why throw it all into your mortgage?
That being said, there are also positives to paying off a mortgage. For one thing, it means that you’re free from debt. If you can feasibly pay off your mortgage, you are free to do whatever you want with your home – within legal reason, of course.
Mortgage over-payments are all well and good in theory, however, varying circumstances will dictate whether or not it is all worthwhile for you in the long run. Think about what’s best for you and your money long term – and if you do feel paying off debt is more beneficial to you, then who is anyone else to disagree?