Buying a home outright

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peoffrey

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To cut a long story short, I'm aiming for a huge life change next year and should be able to buy a comfortable two bed apartment in full after my house is sold. However, part of me wants to put a large deposit down on somewhere bigger and mortgage the rest.

What are the pros and cons of doing this aside from the obvious? i.e. No monthly installment to pay. Perhaps a daft question to ask but I really am useless at this kind of thing.

Cheers.
 
We are in the process of downsizing and will be buying a 2 bed flat, we'll have to pay management fees , £85 a month which I'm told is cheap , but I won't have the worry of a new roof and windows , our utility bills will be cheaper.

We'll be buying it outright and have a few £ over.

I think a lot depends on your age , I've just turned 50 so it makes sense to us.
 
The significant pros of a mortgage are as follows:
It’s very cheap long term debt – that makes it better value than any other credit you would pay for (from car loans to credit cards etc).
It can scale up your purchasing power – allowing you to buy bigger and better! Or use your cash to fix something up.
It can improve your returns – If you assume that your property value will increase by 20% and you bought a £200k property with cash your 20% increase = £40k, If you ‘gear up’ with a mortgage to a £400k property your increase = £80k. (note: the same applies the other way in a downwards market)
The downside is the initial set up cost and ongoing interest and the inflexibility. You also have the risk of not being able to repay or falling into a negative equity position.
On balance – it works out very well for the vast majority.
 
Lucky13 said:
We are in the process of downsizing and will be buying a 2 bed flat, we'll have to pay management fees , £85 a month which I'm told is cheap , but I won't have the worry of a new roof and windows , our utility bills will be cheaper.

We'll be buying it outright and have a few £ over.

I think a lot depends on your age , I've just turned 50 so it makes sense to us.
Click to expand...
when in your 50s its a good move to start downsizing
I've been dealing with people who are getting pay rises late in their careers, but monster homes with huge mortgages, now looking to retire and don't have the cash to pay off the mortgage.
 
As someone who spent 30 years paying a mortgage I can tell you the feeling you get when you pay off that final payment is amazing. You are free from any threat to your home, indeed once completely debt free you are untouchable as long as you have a source, however humble, of income.
 
I'd say it depends on income/age.

Much better if you don't have a lengthy career ahead to own your own place because you then don't have to worry about monthly mortgage repayments.

But... depending where you are looking you could make a good bit of profit from buying a bigger house so long as you get a good mortgage and then you'll have a bigger asset once payments are complete.

Totally depends on individual circumstances. Do you need more room? Will you have enough space in a smaller place? etc.
 
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