
Ask HN: Small house vs. big house? - londondev45
A question, perhaps to anybody who has lived through this situation.<p>I am luckily in an economic position to do one of the following over the next 4 years.<p>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.<p>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?
======
badpun
How is this related to "Hacker News"? Are we slowly becoming "The Middle Class
Life Advice Club"?

------
godot
There's also c) Don't pay off mortgage on small house, rent it out instead
(and hopefully have it cover its own mortgage and property tax), and then also
get a new mortgage and buy a bigger house.

It's similar to (a), but makes more sense if you're in an area like SF bay
area where you might take a bet on real estate to keep rising. London may be
similar? Just another idea!

------
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.

~~~
londondev45
thanks bachbach.. it requires a level of self discipline to fly against the
societal movement towards the work / spend continuum..

------
petesmithy
[https://www.reddit.com/r/personalfinance/](https://www.reddit.com/r/personalfinance/)

~~~
skellera
While this whole post is off topic for this site, r/personalfinance has lost
it ways in the past few years. everyone thinks their a stock market genius and
no one is saving for the future because the market is full of gains. I'd
really think carefully about any advice coming from there.

~~~
zapperdapper
I thought everyone was recommending index funds these days and holding them
forever?

~~~
fulafel
That's not saving, because stock market goes up and down.

------
EliRivers
If you've got that kind of money, and you're after financial freedom and a
house to live in, have you considered dumping it all into index funds and
living off (rent+bills) the winnings?

Sure, there are no guarantees in life, but the same truism applies to a house.
I don't know your circumstances, but it's not uncommon to need far less money
in investments to cover the rent than the amount needed to buy outright.

------
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.

------
chris11
I think this is also a lifestyle question. Are you happy with your current
home, and will you need a bigger house shortly? If you get a bigger house,
you'll eventually expand to fill it. That might not be a great thing if you
are happy right now.

------
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.

~~~
oldcynic
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.

------
cdnsteve
Check out F.I.R.E, financial independence retire early. Basis is reduce your
spending as much as you can and basically save 40 to 70% of your income.

------
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.

~~~
zapperdapper
I would agree and as you say we don't really have enough info here. If the OP
is planning a family he needs a bigger house for sure!

------
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.

