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?

Why did you use a broker given your husband is an expert? In fact I’m confused as to why he’s not the making decisions now?

It’s pretty difficult to offer advice as it’s a drip feed of financial details. You can’t make a sensible decision unless all outgoings are on the table.

Because he has the qualifications and same for an ifa but he’s not working as one and he’s not authorised and regulated by the fca to give advice, in fact he’s never worked as an advisor. he’s also not working in advice arena at all, and not affiliated to a bank or brokerage so can’t access rates above what you and I can google. He has what is a called level 4 and some way to level 6, it just means he knows the legislation and products

@jenandberrys HTB interest tracks inflation, but even with the current interest rate the payment on £70,000 is about £120 in year 7 so the OP doesn't need to panic.

Dh worked it out last night and it was sub£100 year 7, about y 9/10 got to £120, so you’re right it’s not the concern right now

It’s also not a drip feed because being qualified for soemthing and actually work at it and having experience are two different things.

That’s what I’m saying in that scenario it’s unlikely we’ll be left with anything to put away in savings and I’m not comfortable with that

I think you need to come down to earth a bit. How many people paying a mortgage and childcare are also able to save? The financial climate is very, very different now and adding to savings is a luxury.

Its really sad that savings have become a luxury and that these times are leading to low levels of financial resilience but truthfully that’s something I’d like to avoid for myself if I’m able, working where I’ve worked and in the industry dh and I do, I’ve seen how dangerous it can be

It may be sad - I think it’s always been pretty normal for young families in those mega expensive pre school years - but it’s unfortunately the current financial reality.

But I’m still keen to avoid it if I can hence why I don’t want to add the full htb to the mortgage rn

Mega expensive years and it's likely the parents are not at the top of their earnings potential at that age. In later years, costs go down and income goes up and you end up half wondering if you dreamt those leaner times.

Remember OP there are fees for paying HTB, it could get expensive doing it in stages, especially during a period of high interest rates and stagnating house prices when there is less financial benefit to getting it paid off.

I know there is the £1 monthly fee that we’ve been paying? I’ve been heavily reading up and I can’t see other hidden fees.. I could’ve missed something, what fees are you referring to?

I think everytime you pay HTB you have to gave a RICS survey on the value of the house so they can work out what your HTB loan value is
Then solicitors fees for you and I think the HTB has fees as well

That would be the case if you’re paying it off though, not paying the interest. But yeah that’s worth keeping in mind for option 2 as it’s double bubbling in terms of evaluations and solicitors fees

@Lalalawhitenoise yes as the PP says, I raised it because it sounded like you were going to pay the HTB off in parts (as you can stair case it) but given the fees and environment at the moment I don't (personally) think that would be a good approach.

Good point, that’s something worth keeping in mind for option 2. Option 1 looks more likely- I just hate borrowing but I guess needs must.

thanks guys, this has been really helpful!

Learning lots from this thread, so thanks OP. Our numbers and timeline are almost identical. I’m slightly confused that if HTB interest tracks inflation, why is it so low? If inflation is 8% currently then why is year 6 HTB interest between 1-2%? Probably a very silly question, but I’m no economist.

This is a few years old but it explains the charge in years 6+

https://www.moneysavingexpert.com/mortgages/help-to-buy-equity-loans/#:~:text=Remember%2C%20you%20pay%20interest%20on,to%201.97%25%20and%20so%20on.

‘Let's imagine CPI stands at a constant 1%, so when you add two percentage points to it, it means the underlying interest rate will climb by 3% each year. If the interest rate in year six is 1.75%, then based on the 3% increase your equity loan interest rate for year seven would be 1.8025%. Getting geeky, that's 3% of 1.75% which is 0.0525%. Added to 1.75% it gives you a new interest rate of 1.8025%’

So basically assuming CPI is 8.7% in January 2025 (which it won’t be- let’s all bloody hope, but let’s use it for now) that would be 8.7%+ 3% of the 1.75% which equals a new interest rate of 1.93%

Have you tried Spires? I got lots of work through them when I had to freelance tutor in 2021.

It's all hypothetical. I won't waste my time knowing that the only real solution will come from a mortgage broker.

Best thing to do is pay off the highest interest first, obviously that should be based on what your new mortgage will be… if family can wait I think they will understand it makes sense not to pay them back right now

You alls mortgages are confusing. I would say take whatever option has you with the lowest payment and then save the other money as if you chose the higher payment option. Put it in the lowest risk, highest return investment you can.

A broker won’t tell you what to do, especially in the case of borrowing money from family insurance or spending your savings.

dh has the quals jusf doesn’t work as one.

Not heard of them! Will look into it