Buying a house outright - views please

[vetran]

Seconded

If you fall on hard times, having the house paid off is a good move. Cuts your running costs down to sub average wage levels without trimming your lifestyle too much. I know this the hard way!

Also with the average mortgage at about £800+ a month thats a lot of cash you can put in the bank for the lean times, or wait until the time is right and you can invest it wisely.

Or with that much equity why not take a punt and split it? Say go for £20 - 50K investment (not in UK property) and minimal mortgage on the main house.

[ratewhore]

Wait until the new supercasino opens, sell the house and get yourself down there.

Balls of steel my friend, balls of steel...

[vetran]

I said investment

Try opening a casino instead!

Maybe talk to MF and buy some Thai Tat?

[lukemg]

Want to swap ? I have a 250k house and want something bigger and better. I have 200k ish equity to carry to the next one. I could pay off my mortgage with investments I have built up over time but see no reason to do so currently. The reason is to spread the risk about. My Pep's/Isa's are averaging 12%/year return (range from 2%-26%) without any of the hassle that you might get from BTL etc. Mortgage is 55k, got 10 years left on it. Chucking a few bob in a pension - soon to transfer to SIPP in May.
This gives me reserves to turn into cash if need be and a manageable mortgage.
I wouldn't move to lose the mortgage unless you need the cash/want to retire, the house is paying it's own mortgage in price rises currently i.e. every bean you put in, you will get back if you need to !

[threaded]

Having the cash in hand and able to make an immediate exchange can also bring the purchase price down significantly.

[Churchill]

Having the cash in hand and able to make an immediate exchange can also bring the purchase price down significantly.

Cash?

How vulgar.

[rootsnall]

Just wondered what the view from the pub floor would be on the following.

Let's say you have a house worth £450K with a mortgage on it of £180K, for £250K you could buy a house that would be big enough (the current house is too big anyway) and in a nice enough area, would it be wise to sell up and buy outright, thus having no mortgage? Or would this be a daft thing to do?

I'm trying to think of all of the pros and cons.

The big pro of buying a big house is that any gains are tax free when you come to cash in. You are also leveraging the gains if you are taking out a mortgage. In the long term I think you'll struggle to beat it as an investment when factoring in tax. It can be argued that by investing fully in ISAs each year you may give it a run for its money but you won't have the same leverage.

If you know you will be defo happy in the 250K house and aren't looking to trade back up again then selling up now ( at a time of high house prices ) and removing the worries of a mortgage could be a good idea. However if you are trying to time the market and eventually buy back in again then I reckon its not worth the hastle on what is a gamble. You might make a killing but the odds are that you won't !

[Paddy]

If you have enough cash to buy property then the most sensible way is to take your money out of the country and purchase your property through your own offshore company. Under Panamanian law company directors can remain anonymous. This way you will avoid inheritance tax and capital gains tax. Most large property owner in the UK do it this way.

[GreenerGrass]

The big pro of buying a big house is that any gains are tax free when you come to cash in. You are also leveraging the gains if you are taking out a mortgage. In the long term I think you'll struggle to beat it as an investment when factoring in tax. It can be argued that by investing fully in ISAs each year you may give it a run for its money but you won't have the same leverage.

If you know you will be defo happy in the 250K house and aren't looking to trade back up again then selling up now ( at a time of high house prices ) and removing the worries of a mortgage could be a good idea. However if you are trying to time the market and eventually buy back in again then I reckon its not worth the hastle on what is a gamble. You might make a killing but the odds are that you won't !

Agree with these points, you'd have to be confident you wouldn't want to upsize again and face a whacking great stamp duty bill.
Other factors to consider, if you stay put once your place reaches 500k (if we don't have a crash ) it may struggle to go higher for some time after that due to breaching the 4% stamp duty limit. Maybe a good time to exit then.
In the event of a slowdown higher value properties may be hit much harder in % drops than sub 300k houses.
If rates in your line of work look like taking a tumble, or you see work drying up, or you fancy trying out a Plan B, or just working less then its a no brainer. Downsize, and pick up a positive cashflow BTL if you're worried about missing out on property gains. Have a repayment mortgage on that if possible.

[gables]

It's great to see these different views, each offering a different perspective. Just got to decide which is appropriate for us.

Cheers,