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Mortgage ponderings - how to reduce monthly payment for a few years(10 Posts)
We have a DD nearly 3yo and I'm currently pg with twins, due January. I'll be on mat leave for 10 months and the twins will start nursery Jan 2019. Then until April 2021 our childcare outgoings will be very high and we are going to struggle a bit with cash compared to normal even once we pare down our spending (it's difficult though when you know it's only temporary - eg cancelling pet insurance will be a false economy with 2 middle aged cats). I'm just wondering the best way to get through these two and a bit years (and worst case, 4 years if the free nursery hours scheme totally implodes before the twins reach 3!).
Our mortgage is high, we bought this house and fixed just before DD was born, 5 year fix, with a high early repayment charge of 5%. It's painful to see the low rates that would be available now if only we'd gone for a 3 year fix, as we're now below a 60% LTV. Our other related worry is that as things stand, we will be looking at remortgaging over summer 2019 when we will be paying out for 3 children in childcare so our affordability will look really poor to banks. I'm worried this will end up with us on SVR - or a higher fixed rate if rates do start to head up fast - which will then put us in an even worse position.
i was just wondering if anyone had been in this position and what you did? We don't have much savings. The way I see the options are:
1. Keep mortgage as it is, pare spending down sensibly and beyond this, balance spending our meagre savings and putting things on a CC with interest free purchases (thankfully have good credit rating, usually get a new CC every 12-18m and usually get a limit of 5-10k). Remortgage as planned in 2019, hoping for the best...
2. Remortgage with a 3yr fix at least to last until twins get free hours at nursery, add ERC to new mortgage. We can probably shave about £300 off monthly payments which will really help, but obviously will pay more overall (difficult to calculate how much more as don't know what interest rates will be doing in 2 years time).
3. Extend term on current mortgage - not even sure they'll let us do this - we are 36 years old and current term is 27 years. We would plan to reduce it back down /overpay a bit once all the DC are at school.
I don't know what other info to give without making this an essay so... DH works full time, me part time, both civil servants so salaries not skyhigh and little scope for increases in next few years, but pension, sickness pay taken care of and good job security. I have relatively well off parents which obviously makes things a lot easier as we do have that fallback there (it was my dad who suggested getting a 30 year mortgage). Our house is big enough for 5 of us even once kids are grown so we won't need to move for space reasons and I can't imagine for job reasons either. We already have a lodger.
If it helps, I am 37 and have just got a 30 year mortgage so it probably is possible to extend the term.
Have you done a ditch the fix calculation to work out if it's worthwhile?
have you tried calling up your lender and discussing it with them? i'm sure they will have a couple reasonable options for you.
Extending the term might help a little bit. You could also see if the lender might agree to interest-only payments for 3 years. I'd also look at childcare options - if you're going to have 3 children in childcare, it might be cheaper to get a nanny. Combine that with being extra frugal and you could be a few hundred pounds better off.
I have twins - congrats!
I think you need a broker to properly work out the cost benefits - you may find a remortgage beats your fix over a given period even with penalties. PM for a recommendation but a proper financial adviser registered with the FSA should help you work this out
Twins in childcare is reaaalllly expensive so have a proper think about the cheapest way to do this in the long run, I've found it v difficult - and would advise my younger self to get professional advice for a five year plan (mine are nine now)
shamoo- thanks! Unfortunately I've worked out that adding 5 years saves less than £200 pm so not sure it's worth it :-(
Candy - it definitely won't save us money (need 0.45% rate for that apparently - useful calculator thanks!) but it's whether the extra cash for the next few years is worth it despite additional cost long term.
outpasture they haven't been very helpful, but then we aren't in financial hardship and hopefully won't get to that point. My cousin is a mortgage broker so he's going to do some investigating for me.
Jojo- thanks I hadn't thought of going interest free for a period. One to add to the list. There are only 8m when all three kids are in nursery together, then DD will start school. I have looked in a preliminary way at nanny option and it doesn't quite seem worth it, esp since our nursery is offering the 30 free hours from 3 to existing customers only. Childminder would be cheaper but I do love DDs nursery. May be something we have to look at though. It's hard knowing what's a false economy and what's not. You've reminded me I need to research cost of after school clubs too, thanks. And your username has reminded me I have a few bits of very girly Jojo clothes that I should sell now we know our twins are both boys!
Thanks girl. I keep naively thinking everything will be fine once everyone's in school but I guess there's just a whole new raft of things to pay for!!
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