Who has downsized/downgraded PPOR to reduce/eliminate poor mortgage?

I have been throwing some ideas round in my head. I am considering downsizing or downgrading where I live.
Basically if I downsized or moved into an area slightly less desirable than where I live, I could reduce my mortgage quite a bit, however by doing this I will be able to reduce my mortgage to a low amount, but I will be kissing goodbye any future gains on my PPOR by selling out..
Also seriously considering doing both, keeping my poor, renting out the future poor and moving into it when my home has further growth to make it more attractive.

Would like to know if those on here with low/no mortgages ever did this to get ahead?
We currently have a largish house, huge backyard, looking to downgrade to a mid sized house (would be losing 1 living room and perhaps a bedroom), on a block with no yard (we are sick of maintaining an 800m2 block).
The savings to be had could reduce my mortgage to under 200k, or 275k if we ended up going a bit crazy and getting a massive double storey house.
Mortgage currently at 320k.
All in all, mortgage is low to begin with, but I love the thought of having a lower mortgage.

 

Interesting, I was reading something the other day about the benefits of being a home owner in retirement, tax and social security benefits, etc. But the article didn't mention the biggest benefit - owning an appreciating asset. I would consider the future capital growth potential of the more desirable PPOR, carefully.

 

I'd try not to sell assets close to the centre of the city. Long term, I think the closer your properties are to the city, (or to beaches and other rare features), the better.

 

Agree with this too. I'm assuming OP might be in their 30's though, so they have time to upgrade again.
Personally I think a mortgage in the low 300k range is ok, but then again, I'm on a good income and I'm in Sydney.

Problem with buying and selling is the stamp duty, it is a real impediment to upgrading or downgrading a PPOR.
So I'd try to keep property #1.

 

funny that, currently considering the same thing. The missus can take time off work to have kids and I should only need to work 30 hours a week if we move a few suburbs back as it would clear our mortgage..

 

Make sure you factor in the selling & buying coats when assessing the worthiness of such a plan.

 

Hmm, good points. We are out in the suburbs, so not near the city, however I do think I may regret selling where we are as it is in the most desirable part of our suburb, and none of the new estates have the big blocks etc.
I think I may just stick to original plan and just buy another IP. Problem with my IPs is that they are in suburbs I could never live in..
We are in our 30s, so plenty of time to do anything really. Im also tossing up the idea of buying land in our suburb (in a new estate), putting a house I would be happy to live in down the track on it, and just tenanting it for 5 years+, then if we want to sell and move in we could, and if house prices keep on the upward trend we would almost be mortgage free probably. I like the idea of no PPOR mortgage so that we can keep investing and not hit the ceiling. After our next IP purchase I've been told we are pretty much done due to servicing. That will leave us with the PPOR and two IPS in Melb. I really don't want to stop at 2!

 

I like the idea of not having any major financial commitments. IPS pretty much pay for themselves, then we just have school fees, the rest would be play money.

 

I've done it. But not to a different area, to the same area. Sold a main residence with very low original debt and bought another one cheaper.

 

Sold, moved to next suburb out but bought something we could knock down and build 3 x townhouses on. Living in one, renting one and sold one. Glad we did it.

 

320k loan is pretty good. Not sure if this will help your deliberations but I am on the other side of the coin. I love where I live, its paid off, but small with little land and very little CG over 10 years. Lately I have been deliberating (because my dad has been pro this) whether I should upgrade PPOR and take on another PPOR mortgage because as mentioned its generally your single biggest asset with no CG to be paid when you sell. I just dont fancy the maintenance that comes with a bigger house/land and i wont pay people to maintain my house.
Smash down that 320k.

 

do the numbers work to be rentvesting? Rent in a cheaper area and let the rents pay off your properties

 

That is what I plan to do long term in the short term we would be renting a similar property to ours for around the same price we are paying in mortgage repayments. We are out in the suburbs, where rental yields are quite high so it doesn't make sense yet. When the kids finish school the plan is to rent around the city and rent out whatever PPOR we have at the time so that we can be close to work, and spending less money on travel to work etc.

 

Yes, that is actually my fear. Having said that I do think the CG won't be really bad, but definitely not as good where we are. Where we live currently has no dev potential due to the original developer restrictions anyway, these are probably in place for another 20 years or so, but the thing is its one of the only estates in the suburb with the big blocks that can fit the big single storey houses.
I am really considering putting 10% down on a new land release, buying a 400m2 block with titles atleast a year off, then putting a large double on it so that house wise we won't be downsizing, we will just be losing the yard and the big open space feel that our current estate has. I think if we did this, and rented the new build out for 4-5 years, we could be mortgage free by the time we ended up moving in anyway (just with organic growth in our current PPOR), and if not we could always sell ours and move in to the new build and reduce our mortgage by atleast half at a minimum, or tenant both properties and rent ourselves by then. I think it would leave us with a lot of good options.

The only reason to purchase new land or not has been a bit of a dilemma for me is that I am getting some cash out at the moment which I was planning to buy an IP in the western suburbs on a 600m block. If I put down the 10% on this land, I will only be able to buy a house in Melton or possibly werribee for around 300-350k, instead of the 400-420k i had originally planned.
If buying someitin in the 300-350k it will be a fixer upper on a 550-600m2 block which I would hope to be able to manufacture some good equity out of and possibly sell it in 2 years or so and reinvest in something better, or take the cash and run (put in the PPOR)..

Im a but of a risk taker so think Im ok with taking a bit of a gamble. I have done really well out of the first IP I bought so I do have a little bit of room for error anyway, not that I want to lose money of course!

 

We were/are also thinking about cashing in the gains we've had on our PPOR and downsizing to be mortgage free (leaving the mortgages on our investment properties). I'm not sure it's such a great idea if your mortgage would still be $275k. It doesn't seem like such a big pay off to me. Good luck with your decision!

 

Yes, I completely agree, hence why I would like to tenant it for a few years to allow our equity to grow more. 275k would be only if we ended up building something the same size as what we had. If we truly downsized it would be 225k, and that would be if we moved in straight away and didn't tenant it. Good thing is titles are 15 months away, build would take 6 months at a minimum, so that is almost 2 years of time for us to have our ppor increase in value too. I would like to wait a further 3 years after its built and then move in and sell up

 

I'm only 30, so not planning to retire yet but still like the idea of it

 

Just went to a meetup tonight. Saw a lady (probably no more than 5 years older than me or even the same age, i'm not sure) who I hadn't seen in a few months. She told me they sold the house they were living in in our suburb and she's now retired and doing Developments. They moved to a smaller house that they also own in the suburb. I think they must have freed up a lot of capital.

Anyway, I think that's truly worth doing if the move means you no longer have to work! So easy to just sell the PPOR and live in another cheaper place you own. She says her kids don't like the downsize though because there are 3 of them and only 3 bedrooms!

 

When you're talking PPOR its not always about the loan....if you sell up and ditch the mortgage....Will you need another car?(+$100pwk) can you go down to one car? (-$100pwk)
What about maintenance? Commuting? How much does that cost you in time and money now, and what will the new place cost you?

All these costs add up over time.

You'll need to factor them into the equation.

For me....Taking a 320k mortgage to a 200k mortgage isnt quite enough benefit for me to lose an 800m2 block in Melbourne.

I'd be staying.