Do we put everything into the house?

[Me2Me2]

(X posted in Money)

We're buying a house with a 90% mortgage. It's going to cost us an arm and a leg but it's not like we'd do much better renting, plus property in London just goes up and up so waiting won't help.

We've been putting money aside for our kids (presently under 2) education for the past 2 years and will continue to do so in the hope we can send them private for secondary.

The question is do we put the kids' money into the house so we can get an 85% mortgage instead?

Or is it better to keep the education pot and house pot separate?
Since we started saving for the kids we've regarded the education pot sacred, not to be dipped into for anything. But if we plough it into the house now we'd be save £400 a month. And if we put the money we save monthly for them into the house too we'd bring the mortgage down further.
As I write this, it seems to make financial sense to put everything into the house, and to use equity from the house to pay for the kids' education later, but I like things clear-cut and am worried that, if the house is worth nothing in 10 years time, the kids' education money would still be there.

I'd really appreciate advice on this

[PrimalLass]

Yes I would. For us, two kids in private secondary schools will be a minimum of 120k. You could make that in equity in 10 years.

[OnePlanOnHouzz]

I agree - using funds will save you paying interest ! Will be well worth it !

[RandomMess]

You'll save more on not paying interest than you will gain in interest keeping it in savings. YOu could always remortgage when the time comes to pay for their education.

[Clargo55]

Yes I would. You mortgage interest rate will be higher than any savings rate so you would be losing a lot of money.

[OnTheBottomWithAWomansWeekly]

Hmmm, I'd halve the savings for the children, but wouldn't stop them altogether (I kept the education pot for DD separate from the house, luckily, not through expertise) and as I have been in negative equity for the last 5 years I wouldn't have anything available to pay for her education if I'd put it in the house.

Can you get some sort of notice deposit account/investment with a capital guarantee and a fixed return - so long as the return is in excess of inflation you are making money.

Consider where you are buying, the forecast for the property market in general, what would happen if one/both of you lost your job etc.

Sorry to put a damper on it but I've seen so many situations go south among my friends who all believed that buying a house (at the top of the market/while the market was on the way up) was going to make them a fortune. They're now stuck in apartments, or locations with huge commutes, and are having to make the best of it.

[OnePlanOnHouzz]

Just another thought - more specific to us because of the great secondary school - but we put our eldest Daughter through prep school from nursery /year 1 to end of year 8 then at year 9 (13 years old) she went to our local and very highly rated local school . Prep school fees are less expensive for the younger child and then they sail very easily through secondary state school in top set for everything etc ! ( well our did ?! )

[struggling100]

OK, I hope I've understood you correctly!

If you don't put the money into the mortgage, you'll throw away £400 a month in additional interest, right? Assuming that things stay roughly the same for five years, that's £4800 a year, £25,000 in five years... maybe twice that in ten. Quite a lot of money to burn! It's a no brainer to put the cash into the house now and get a cheaper rate of interest on your mortgage.

However, I don't think you should continue to put everything into the house from here on out. It's best to spread your investments, because then you're more resilient to change. Why not start saving again for the kiddies? You could put aside the same sum each month, plus some of the £400/month you'll save from having a better rate of interest on the mortgage.

[Me2Me2]

OnePlan too risky for us I think. We will have decent primaries near us but I'm not confident about the secondaries

I know, you're all right. We should reduce interest as much as poss. It's just seeing the education pot disappear that I need to get over.

[PigletJohn]

you will have to try and force yourself to put all the money saved by lower mortgage repayments into an "education" account. Otherwise you are just stealing it and not paying it back.

Don't just spend it all on a more expensive house.

[Me2Me2]

We won't Piglet. We're not really getting a big mortgage by choice either and we'll keep paying into education pot. and release equity from the house when the time comes

[RedHelenB]

There may well be difficulties with releasing equity when the time comes though.

[Me2Me2]

RedH I'm concerned about that. I don't know how easy it is. Why do you say it might be difficult? i'm hoping that, if lenders will lend to us now, surely they will in the future?

[RCheshire]

If the value of the house had fallen significantly. Or if your incomes dropped. Etc

[RCheshire]

If the value of the house had fallen significantly. Or if your incomes dropped. Etc

[RCheshire]

If the value of the house had fallen significantly. Or if your incomes dropped. Etc

[Clargo55]

Me2 if you are in a good location in central London I really wouldn't worry about property value falling. London is in its own little bubble compared to the rest of the UK.

[RCheshire]

Apologies - phone!

[3boys3dogshelp]

I would put the education pot in now as your deposit as £400 a month is a huge amount to throw away. We have a mortgage offset account (Scottish widows) where we put our savings - it's still 'our' money and we can take it out at any time, but it effectively reduces the amount of the mortgage that we pay interest on. It would be perfect for your situation.

[Me2Me2]

Thanks. I'll look into offset mortgages. Does sound just the thing

[Me2Me2]

hmm might not be available on a 90 or 85% ltv

[Me2Me2]

well hopefully then!