Mortgage panic- what to do?

[lalalawhitenoise]

I’ll preface this by saying I will be seeing a mortgage broker to get advice. Please no, well you shouldn’t have got htb- I did so with mortgage advise. I’ve / we’ve done my best to save and have done so but a few things happened, mat and redundancy back to back (had been in role 2 years so didn’t get a lot)

My 2% fix is coming to an end (1st jan next yr). I have a htb equity loan on my house. House purchase price was 300k, houses selling lately for around 390k. I have 40k available cash (well technically 60k but I don’t think it’s wise to get rid of every penny I have, part of that is a ‘loan’ from family to be paid back later phrased as ‘whenever/ if you can’). At end of fix, outstanding loan will be 210k.
i have quite high childcare costs relative to income. Current mortgage is £750, childcare more than that.

so I’ve worked it out that I have a few options. All assuming a 6% interest rate which when I’ve been looking up seems to be ballpark where we’ll be looking.

option 1)-use £40k to bring down the outstanding balance to £170k and then pay interest on htb for 2 years until things calm down, property prices crash and then take some additional borrowing and port at a later date. So there is the money borrowed from family here too, it’s more additional borrowing at a later date? Monthly cost for this (roughly) £950

option 2). Use 40k to pay off half of htb then half of the that 20k to bring outstanding balance to 200k, pay interest on half ouf htb and take out additional borrowing on 10% of property value to pay off outstanding htb and a bit more to pay family member back. Monthly about £1050

option 3). Payback family member now, and switch deal for balance as is and then pay interest on htb. Monthly cost £1150/1200

option 4) add it as additional borrowing now and payback family member about £1500- this is double what we’re paying now so feels very tight for me- manageable but with very little contingency.

option 5) going on that 6 month payment holiday that’s apparently been introduced- but that seems like kicking the can down the road as I don’t imagine anything will have drastically changed by this time next year?

option 6) going interest only, but with house prices bound to slump won’t we risk losing equity as we won’t have been gaining a share of the house as you could in a capital repayment mortgage.

our term is already 35 years and we can’t extend it further i don’t think as it would be well into retirement age?

(the money as been lent for the sole purpose of helping housing wise not just as a gift in case of emergencies)

there’s limited options for savings to be made, we’re a one car household (really need a second tbh but won’t be getting) no cheaper childcare (oldest is in school but it’s the wrap around childcare still adds up which we need for work) no subscriptions aside from Netflix, already shop at lidl/ aldi/ asda, dh has a penchant for being lazy and outsourcing ‘blue’ tasks such as mowing lawn or building things - this will stop and obviously takeaways are an easy one to cut away- but it’s not £700 worth of savings.

we could switch to the new SO deal on energy? Anyone seen that we’re currently on the price cap tariff.

im trying to solutionize to stop myself freaking out. What does anyone think? are there other options that I’ve not thought about?

Sorry, no advice, but HTB really seems to have fucked some people over from what I'm reading on here.

Options 5 and 6 I would save for absolute crisis times.

I'd probably go for option 2 because I'd want family member paid back.

Pay family member back - why do you have so much cash and still borrow from them?

Then chuck as much as you can at it via option 1 but save a buffer of 6 months mortgage payments.

I agree with @BillyNoM8s Options 5 and 6 aren't options imo they are last ditch rescue attempts

I don’t technically ‘have’ the money from them Ie it’s in my physical possession now it was more to say use half of my savings and keep half rather than drain the whole thing down to pennies just in case. If that makes sense

I think if all of this didn’t happen, COL and mortgages going through the roof it would’ve been ok, the increase in borrowing would’ve been less than £200 on our monthly mortgage. Fine.

or if the mortgage fiasco didn’t occur at a COL crisis when our bills have doubled

Completely agree, a lot of draw backs on those

No sorry I'm confused. Have your family members already lent you money, or are they offering to lend you money.

I'd spend your savings to get it down. But keep enough for 6 months payments.

Unless family member needs to be repaid I'd forget that part for now as the imeadate issue is the interest rate rise.

I'm not sure how the htb part works but if its a fixed cost that's not increasing I would use the 40k to reduce my mortgage to reduce the impact of the higher interest rate.

How much a month does it come out is if you:

• pay half of family loan back and ask to keep second half until next remortgage date
• keep 10k of savings and pay the rest off htb
• remorgage for current amount plus any remaining htb balance

Then save with a view to paying off the second half of the family loan at the next remortgage stage.

The latter but with some added factors that it and (more) was going to be given In a will by a deceased parent but they died before that was all sorted. So the family member has said I can have it, no questions, no real payback but I don’t feel too comfortable with it given the way social care is in the country just in case they need it when they are old.

so that would be about 6k, that’s more likely option 2 then I’d say

about £1350, so skirting close to that not very comfortable place to be x

So the htb is 20% of the cash value of the house. The minimum payment you can make towards it is 10% (so 50% of the htb). But if you pay the interest you pay it on the intial sum the interest is 1.75% in the first year and like 1.89 in second year and to gradually increases until you pay the loan off

I'd speak to a broker and get all the facts. We were lucky that our fix comes to an end in September so we became eligible to lock in new rate 6 months before when rates dipped a bit and got 4.5%. We stuck with our current lender because our broker said it allowed us to lock in new rate, but had they dropped we could have cancelled and got new rate. Now the rate would be 5.33% so not quite the 6% but we get to keep our 4.5%. Perhaps you could do similar and lock in a rate soon that may be nearer 6% but should they drop before Jan get the lower one. Also look at the difference between remortgage rates, existing customer rates and new rates, they're often different so could have a big impact on the values you're looking at.

I think your product choices are limited when you have help to buy, I'd repay the htb loan as soon as you can afford to (usually when remortgaging you can absorb the loan because of equity gains but perhaps it doesn't work so well with current interest rates)

Thanks @lalalawhitenoise what % will you pay on the htb, 1.89% but moving from 2% to approx 6% on mortgage?

If so I still do my original suggestion until htb interest starts to match mortgage rate. I'd leave it and worry about repaying that closer to the time as hopefully mortgage rates would be lower. I'd also not fix longer than the htb deadline, so you can do another remortgage (hopefully) on a lower rate to borrow enough to repay it.

I'd be looking to reduce the highest interest loans as much as possible.

Yeah it doesn’t work well right now. And I’m wondering whether doing it In 2025/26 might be a better solution as we’re predicted a property slump so as the amount is 20% of the house value we’ll pay back closer to what we borrowed than what it would be now aka less

We’re close enough to 6 months to the end to start looking now I think and if we don’t add the htb we have 57% ltv we have ‘the best rates’

What's htb?

Help to buy loan.

I’m a bit confused on the % in the first part, right now we pay nothing on the htb (years 1-5) year 6 is 1.75% about £85 per month and then year 7 is about 1.88% so about £93 I think?

whereas the mortgage is the biggest jump… but if we borrow the money and reduce our outstanding balance the mortgage would only go up by about £150 a month.

the htb deadline is 25 years I think but by then the increase would’ve increased quite a bit. I’m hoping the cyclical nature of these things in the economy wil cause a house price slump and economy slump so then base rate will come down and then interest rates will do. I work in life insurance and 2024 is being branded as a right off really, or market shrinkage but 2025 an ‘opportunity for significant growth’ aka people have more money again for things seen a ‘luxury’

Yes, start looking with the broker. On a £200K mortgage getting a 5% deal is almost £150 a month cheaper than a 6% deal for 35 year mortgage. If you get the best rates it can make a big difference. If you can get one where if rates drop you can get new rate before Jan even better.

I could literally be with you with all your figures and dates... without the access to the savings or family loan.
I'm screwed when my mortgage deal ends.
Going to have to pay the htb interest and increased mortgage.
Basically going to end up selling up. Single parent and not enough buffer to swallow it up.
Shit times

I thought you were past the 5 years for the htb!

If you're not paying anything on that yet forget it. In the scheme of things it peanuts.

Also. The payments on the htb loan from year six don't take off capital. It's just interest.
And you probably won't be able to go interest only unless you can prove that you have means to pay back

If the HTB is less than 2%, why would you make a payment towards it?