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?

That’s the only thing I was a bit worried about, backing out but I guess it’s a fee free mortgage or taking the hit and losing the £1k that’s normally the arrangement fee.

DH is qualified as a mortgage advisor and a financial advisor but tbh they don’t have crystals balls, it’s just the rates we need.

im wondering about a tracker, nationwide has one .14% above the BR but obviously if that keeps rising then it’s a bit shit but if it comes down then much better. And then the term, not sure either

Will be at the end of the year, jan will be year 6

If you want to keep those “savings” available to you, get an offset mortgage

Because the interest rate rises and you have only 25 years to pay it back then they force you to sell to reclaim the cash and in theory before all of this prices were on the up so it made sense to ‘get rid’ as soon as you could as you’d have either savings or equity to bring it down

That’s the one product I really don’t get plus my savings is the rainy day fund like the boiler carks it or the car does or something, could potentially be all gone in an instant

But in the meantime, you’re reducing the amount of interest you’re paying (and increasing the capital you’re repaying) each month. It sounded like you had about 20k you were unsure whether to use or payback to family - that 20k can sit in a savings account, be available if family member requires repaying, but will be reducing the interest you’re paying.

Yeah that’s correct re money. I don’t know much about the products

I would pay it off your mortgage and so you had lower monthly outgoings.
If you’ve got decent credit rating there’s always a credit card for boilers and hire purchase or similar for a new vehicle.
if you have the lowest monthly outgoings possible there’s the greatest scope for saving to pay off htb and for a rainy day fund.

Okay going forward I do not believe we’re going to have both high inflation, cost of living and high rates, one or the other is going to subside. Try not to panic is all I can say.
Is there any option of getting a pay rise? For me that was the most logical way forward and I moved companies to do so but I got a £10 K pay rise literally only a few weeks ago. The employment market is still very hot.

I’ve been in my job less than a 8 months, if i moved I might get 2k uplift (which I’ll likely get at the annual pay rise time anyway and I’ll lose out on my bonus around 10-15%) I think I need to have done 18 months before I can leverage a decent pay rise.

dh maybe, but he’s at that level (55k+) that the next jump tends to be a big one and he’s still early 30s, not sure if he’s got the experience. He is looking.

i agree on the first part, I read that the predictions are inflation will be around 3% mid point 2025 so there will be no need to keep the base rate that high then, I imagine it would start coming down before that

It is more challenging in general to save what we once did and will be more so with an increase in mortgage but easier of course if the mortgage is as low as can be.

incomings are about 5.3/4 after deductions

In your shoes I think I'd use the savings to absorb the increase in the monthly mortgage, keeping the payment from your wages at the same level. I'd do this for a few years while the childcare costs are so high then look to chuck the lump sum in when I had more slack in the budget.
"Premium for liquidity" I think it's called. Paying more interest in the short term to grease the wheels and make sure you have room for manoeuvre.

So you’d do option 4? Add the htb to the borrowing and then pay the £750 from salary and then £750 from savings each month? Whilst saving where we can?

For me really my options are 1 and 2? And then the different product types and durations of fixes

It’s so shit isn’t it! You do everything ‘right’ take advice, get the promotions to move up the ladder and then all of this stuff happens at once

As you can lock a new rate in 6 months before you should be contacting London and country who have access to a huge range of lenders and some preferential rates

Id be paying that 60k off your mortgage without a doubt.

It doesn’t make sense to pay it off htb when they are only charging you 2% interest

No that doesn’t make sense.

I wouldn't pay back your family at the moment. This is a pretty unprecedented crisis for mortgage holders at the moment and they will understand. Just ignore the I Paid 16% Interest Rates crowd.

I would pay down your mortgage as much as possible. Keep some back for emergencies. If this isn't enough you will have the option of interest only later.

Good luck, I really feel for you.

Get mortgage advise from a few not just one! they will all differ.
I would forget family loan for now. 40k to lower mortgage and change to interest only.
Many are waiting to see if Fishy Rishi is going help, I think there will be something such as longer payment breaks, more interest only terms etc we can only wait and see.

yeah I will, we’re now in 6 months and tbh I was really surprised the BR went up again. It’s my first thing Monday morning to do. I’m not sure if they gave me bad advice before though. We had an offer in erc (4k erc) and the offer was 3.5% from lloyds and they said it didn’t really make sense to take it, as it was 18 months before the end of the mortgage.

i can’t use every single penny I have for the mortgage, I’ll need to keep some buffer but I can Chuck like 50k at it but that will be 20k borrowed from family

We are in the exact same situation.

Im throwing what i can at mortgage and just paying the interest on the help to buy. My interest is about £90 a month.
It will mean my mortgage payments next year wont double. Im then going to build up savings again to get rid of help to buy.

Sorry OP I didn't read that in detail, but why so stressed about HTB? There is no rush to pay it off, right now is actually quite a good time to have HTB because the cost of interest on HTB is much less than the what it would be on a mortgage, so it might be best to just pay the interest (assuming you are beyond the 5 year point) and see what happens with interest rates at your next fix deadline, no point rushing to pay it off in the throes of the childcare years?

The money is in an account in essence ‘waiting for me’ it was (and more) earmarked for me by deceased parent so still living parent says it’s your take it if you need it, which sadly we might, they’ve said oh don’t worry don’t pay back only if I desperately need it (which they shouldn’t as they are pretty well off) but I don’t feel too comfortable just taking it given the direction of social care in this country. I’d want to be paying them back at some point.

Almost identical in terms of htb amounts mines around £85 year 6, £93 7 etc x

Can anyone recommend a good brokerage, ive got mortgages first and L and C, any one know of any more good ones?