Am I being foolish? Buy new home or remodel old home.
Context. We (Two adults, One 14 year old girl, 2 dogs) live in a smallish house. 1100 sq feet, 2BD, 1BA. We could use more space for sure. I am 53 years old with a decent, but not spectacular, retirement plan and would like to retire in my mid 60s.
The home we live in is scheduled to be paid off in under 4 years, so we have quite a bit of equity and a ~$1000 mortgage. I usually pay a bit more than the minimum so at my current rate, I would likely have it paid off in around 3 years or less.
So here is where we are at.
Option 1: We can sell this house, and buy a larger one (3br, 2ba, more living space) with a large down payment to keep the new mortgage manageable. That would put me in another 30 year mortgage (I would be 83 when paid off assuming we stay there) that would be a bit more expensive (estimating 500-600/month more), but still affordable at our current salaries. A new home with everything we want would be faster and less complicated logistically
Option 2: We could take out a home equity loan and build an add on to our current home. This would allow me to own my home outright (I would pay it of way early) and would give us more space in this home, but still not quite as much as we would want. The lot size just isn't large enough for that. It would give us a 2nd bathroom and more living space, but would still only be a 2br home. This would still likely be a 30 year loan but would also likely be less expensive than my current mortgage.
A main goal I have had with my current house is that I would have it paid off with no mortgage when I retire to make life easier. That still seems very attractive to me. If we went with option 2, I would technically "own" the home, but would still have a 30 year payment, though it wouldn't be as much as a new home would be.
Am I being silly to want to pay this house off to legally own this home outright even if I'm still paying for the remodel for the next 30 years? Would it make more financial sense to buy a new larger home with everything we want that would be worth even more in 30 years, even if I were to sell it to live off the profits in say 20 years when we want to downsize again?