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Ask HN: Small house vs. big house?

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Ask HN: Small house vs. big house?

#1

Post by londondev45 »

A question, perhaps to anybody who has lived through this situation.

I am luckily in an economic position to do one of the following over the next 4 years.

a) Pay off mortgage on small house b) Sell said house and buy bigger house with mortgage that will last me another 10-20 years.

Has anybody faced such a situation? I quite like the idea of paying off the mortgage and slowly becoming self sufficient whilst building personal projects without the worry of the bank stealing my house?

Re: Ask HN: Small house vs. big house?

#2

Post by bachbach »

If you want my opinion, it is to pay off your mortgage.

It's not sexy, but the idea of interest rates staying low for the next two decades is unbelievable to me.

Of course I and we don't know your full set of circumstances so ultimately you have to make the choice for yourself.

I think though - the reassurance will enable you to sleep at night and keep you on track doing your projects.

Personally I intend to construct my own house - and it is mostly because I want the security, I think it is underrated when the economy is proceeding in a generally positive direction.

Re: Ask HN: Small house vs. big house?

#3

Post by londondev45 »

bachbach wrote: post #2

If you want my opinion, it is to pay off your mortgage. It's not sexy, but the idea of interest rates staying low for the next two decades is unbelievable to me. Of course I and we don't know your full set of circumstances so ultimately you have to make the choice for yourself. I think though - the reassurance will enable you to sleep at night and keep you on track doing your projects. Personally I intend to construc…

thanks bachbach.. it requires a level of self discipline to fly against the societal movement towards the work / spend continuum..

Re: Ask HN: Small house vs. big house?

#4

Post by thisone »

pay off the mortgage. You don't know, right now, where you'll want to be when it comes to needing a larger house.

When it comes time to move, try to sit down and figure out what you actually need in a house vs what you see other people at your pay scale and age buying.

Re: Ask HN: Small house vs. big house?

#5

Post by zapperdapper »

I've done both.

It really depends on your age and what your life objectives are. I paid off my mortgage in my early 40s and ended up regretting it to certain extent - should have paid into my pension pot and got the tax benefits and growth.

On the other hand it's nice to have zero debt!

Just recently bought a bigger house after renting. Mortgage is same as rent was, but house has a self contained room for renting out. It's a new build and energy efficient. I have no plans to pay down mortgage right now as fixed on 1.44%. I love the freedom having lots of cash gives you.

Re: Ask HN: Small house vs. big house?

#6

Post by oldcynic »

Pay off the mortgage.

The sense of freedom and security from no longer being on that particular 25 year debt treadmill is quite profound. Mortgage rates could return to 1980s 10%+ and you couldn't care less.

Course if you're planning on 3 children and you currently have a two bed property I may change my answer.

Re: Ask HN: Small house vs. big house?

#7

Post by oldcynic »

zapperdapper wrote: post #5

I've done both. It really depends on your age and what your life objectives are. I paid off my mortgage in my early 40s and ended up regretting it to certain extent - should have paid into my pension pot and got the tax benefits and growth. On the other hand it's nice to have zero debt! Just recently bought a bigger house after renting. Mortgage is same as rent was, but house has a self contained room for renting out…

Reverse anecdote here. I paid into my pension and hindsight clearly shows I should have paid off the mortgage instead thanks to horrific long term pension performance. Actually I should have completely skipped any pension at all and paid it into yearly ISAs.

Re: Ask HN: Small house vs. big house?

#8

Post by hindsightbias »

My parents went thru the depression and war as kids and anti-debt is encoded in my DNA. It has led to less-than-optimal choices.

That said, you should do what gives you the most flexibility with acceptable debt risk. Where do you want to be in 10 or 20 years? How many kids will you have? How much room do your hobbies require? Do you like the neighborhood.

What about something between option a & b? Maybe you're growing out of your house, but you don't need 1200 more sqft. Maybe there's a nicer neighborhood, you could design something to your needs or resale will be more profitable.

Are you really at risk with equal or greater debt? Can there be a situation where your industry could collapse and banks won't be interested in negotiating? If you have a fear of a 2008 event, debt will be managed unless you are really over-leveraged and there's a market for your property.

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