Ask HN: Small house vs. big house?

[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?

[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 → bachbach]

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/

[skellera → petesmithy]

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 → skellera]

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

[fulafel → zapperdapper]

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 → zapperdapper]

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 → oldcynic]

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.