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?

Option 1 for reals. You’ll pay less interest overall in this scenario, assuming Mortgage is circa 6% and HTB is circa 2%. Always pay down the debt with the highest interest first. HTB has actually helped you out as you’ve now got a chunk of your mortgage that is a) interest only b) low interest. And you’re wise to hold on to cash savings buffer. Be brave and good luck. Once it’s done you’ll feel better.

If thats inheritance money, it is yours, not your living relative.
Honestly, I would take the money and pay down the mortgage.
Then, when things settle, maybe start thinking about paying the family member back, if you really want to, though, since the money is yours, I dont see why you should.

I have a mortgage and also owe a family friend some money. Im repaying them (it was a loan), but, since it is interest free, I am throwing all my savings at the mortgage, not at the family friend.

I would advise keeping some money, for a rainy day, but throw whatever you can into the mortage, to lower your outstanding balance, which will then affect your interest on it.

Reduce the loan as much as possible to mitigate the interest costs. You can remortgage in 5 years when you have lower childcare costs and the economic situation is less hot.

Look to the long term, minimise overall interest payments to as far as possible. Meanwhile take out critical Ill health cover so if the shit really hits the fan your bases are covered. If your family member develops care needs, they can be offset against their assets.

It was what they had verbally stated in front of myself and living relative but never put it in writing so by default went to the surviving spouse, so it’s a tricky one. But I think you’re right reduce balance to as much as low as we can.

I’m stuck though on, should we go a fix or tracker and if fix how long for, 2 years with the assumption things will have improved by 2026? Or longer for the security?

Luckily we have all really stellar cover through work as part of a salary sacrifice, i work in LI so it’s heavily discounted for the level of cover I get x

Im not expert, but have been keeping up with it, as I also have a mortgage, though mine is fixed on Euribor, not BoE.

Current predictions for Euribor are to peak in the fall, and then start falling, though slowly, and there is no expectaction of it going to negative values ever again.

I would say a 2/3 year fixed rate will probably be fine.
Inflation is going down already (which is the reason interest rates are rising, to stop it), and should be at normal-ish levels by 2024.
So by then we should be seeing a decrese in interest rates.

Personally, at your life stage, I'd fix for two to three years for the certainty. If your earnings increase/promotion, etc., then you can look to pay down more interest to consolidate your position. At this time you need certainty and to shore up security.

i was thinking the same thing but I feel like I’ve made some dumbass choices so my confidence is In the ground. When we first took our mortgage 2 year fix was 1.89% and 650 a month and the advisor cautioned against that for brexit so we did the 5 year. Kicking myself should’ve done 2 and then when rates were in the toilet done 5. Coulda woulda shoulda

Sorry OP I don't know the answer but hope you don't mind me asking everyone a Q on your thread.

I thought HTB has to be paid off if and when you remortgaged? Is that not the case?

So our fix comes to an end next year and house has gone from £140k to £200k, we took out a £20k HTB loan which would now be £40k to pay back, when we remortgage next year when the fix comes to an end so we not have to also pay back the HTB at the same time? I thought we would have to add the HTb into the new mortgage?

No go for it, so the htb equity loan doesn’t have to be paid back if and when you remortgage. It must be paid back by 25 years or else you face repossession.

when you took out your mortgage is probably made sense for at the 5 year mark to add it all together due to what rates were like, sadly things have changed.

i personally wouldn’t look at any additional borrowing right now, kick that can down the road. For year 6 on your htb you’ll pay 1.75% of that intial 20k

How many bedrooms and how many kids do you have? Any chance of cramming in tighter and taking a lodger? We had our firstborn in our bedroom with us for the 4.5 years so we could have a lodger. That covered a good chunk of our mortgage payments. I imagine many people who previously would have preferred to rent their own place now cannot afford that and will be looking for lodgings.

Disagree with this advice. Best to reduce the capital owing, thereby making the repayment manageable.

In your scenario she would deplete her savings on interest, and when the savings are gone she’d be stuck without them to pay a higher monthly amount that she couldn’t afford with it the savings, and she’d be screwed.

Paying back capital makes her outstanding amount less, meaning less in interest, and increases her equity.

The less she owes the more options she has.

What is your salary, because if your husband is on 55k plus and you are on something halfway decent, then you really shouldn’t be panicking. 210 is not a big mortgage. Do you have a lot of other loans or expensive subscriptions etc?

I have 4 beds and 2 kids (desperately would love a 3rd but there’s a massive pin in that right now). The safety aspect, security/ safeguarding of a lodger would really put me off.

weve got 2 doubles and 2 singles, kids are in the singles and the spare double is an office/ spare. Would there even be much of a market for a single bedroom?

But she will pay down fuck all capital in the next couple of years on. 35 year loan

40k. We have no debts or loans or crazy subscriptions. We could absolutely rein it in more. Our childcare is about 1k per month with no way of really bringing it down too much more until the subsidised wrap around care comes in, it’s about £30 a day and we need it 5 days a week x

^dh has also just got up to that much last few months thanks to pay rise, and I’m around 40k (few Bob short)

Not only was I not surprised that rates went up, I predicted that it would be another 0.5%.

And I don't think it will stop there for a while: I think we will see at least a couple more rises and, if inflation doesn't start to slow, I wouldn't rule out a slow climb up to 8%. All of which is why I would ignore the HTB for now (because the interest rate is so low) and get the best possible fix currently available, but not for a long period, definitely not more than 3 years. If inflation is still rising in 3 years time, we're all fucked.

And bear in mind that we're likely to have a Tchange of government next year, or Jan 25 at the latest. They may well do things very differently.

Then really stop panicking. You have a small mortgage for that salary level. You have substantial savings, and childcare is a relatively short term cost. I am struggling to see why 1500 would be so panic inducing. Yes it might be tighter than before but it’s not exactly breadline

I agree 210 isn’t a huge mortgage but 6% of 210 is a lot higher than it would’ve been and we often have stupid adhoc expenses just pop up out of nowhere. Burst pipe, all tyres slashed, bed broke.., it’s uncanny

Youd be surprised of how much market single rooms do have, particularly if the price is right.

However, having a lodger is lovely, in terms of income, but it is draining.

I have a lodger, who will move out by the time I have a child (which Im working towards).

Were friends and get on well, but shes a bit of a slob, which drives me up the wall. Ive asked her to do certain things time and again, and more often than not, she still doesnt do them.

Plus you need to give them cupboards and fridge space, which, as a family of 4, might be a bit tight!

It is this type of thinking lands so many people in a mess.

No one said it’s breadline, BUT it’s a lot tighter than it was before and how we factored things In. We’ve booked and paid for a big once in a lifetime hols (partly to honour decease parent long story to explain the how) but we can’t really cancel as will lose it and TI won’t cover it (checked) but need to save for spending out there too, hence would like to keep mortgage as low as can

No it really isn’t. The OP is not in a precarious position and there is no need for her to give up the flexibility that savings can offer her. Over 25 years yes it wouldn’t make sense but over 2 or 3 years with children in childcare, it’s absolutely fine

OP I know it's scary right now but I really wouldn't panic, you're in quite a strong position. I wouldn't mortgage out the HTB right now, wait for the childcare and/or interest rates to come down a bit, maybe fix for 2 years and see how you go from there?