time to really tighten our belts

[electonic]

So today we had confirmation that our mortgage is increasing quite significantly to £1898 per month. We knew this was coming but we did that very sensible thing of trying to ignore it and hoping something would happen and that it would all rectfify itself......It hasn't

We do have the option of going onto interest only or extending the term, however we are quite keen to avoid either of those options. Our plan is to ride the storm for a few years and hope that rates settle down eventually.

We both work full time and DH already works a million hours a week, so it's not feasible for him to take on any additional work. I have been offered some freelance work that I can do in the evenings and weekends that will net me an additional £200-£300 per month so this will cover a large chunk of the mortgage increase.

With my additional work, we will take home a combined net pay of about £5000 which doesn't look too bad written down! We also a largeish unsecured personal loan that we used to convert our loft a couple of years ago. This costs us £407 a month with about 3 years left to run. This will make a big difference so my thoughts are, ride the mortgage storm for 3 years and even if it doesn't improve, the £407 will be available to make things more manageable.

I have been through our outgoings in detail and with the new mortgage payment we need 4k a month to survive. This means that we will have 1k left for any discretionary spending, or £500 each. This money would be used for anything that is non-essential such as a holiday, or meal out etc.

Are we doing the right thing by not extending the mortgage or going interest only? I think that £500 each 'spare' should be fine but this is first time that I have ever really had to budget to this extent

A spare 1k after everything (including food? Rainy day savings etc?) doesn't sound all that bad.

It includes food and pet food but not savings. We do both controbute a fair bit into our employers pensions though. We have a little bit of money saved so my focus will be to retain this, even if I can't add to it for a few years.

@electonic no advice but this will be us next month… our new mortgage will be pretty much exact same as yours 😭 and our household income the same.

£5,000 in.
£2,000 mortgage
£2,000 essential spending (inc £400 debt repayment)

What else apart from regular household bills does the £2,000 essential spending cover? In detail? Because £1,000 a month could be loads left if you’ve genuinely covered all eventualities over a year, or it could be very little if you’ve forgotten to budget for clothes, hair, Christmas & birthdays, car maintenance, house maintenance, etc etc

If you’ve not had to watch what you spend before, you may not be aware of how much the ‘other stuff’ genuinely adds up to.

I think it's ok as long as you make sure you budget for the whole year and not month to month, ie are you including things like Christmas, birthdays, clothes etc? If not, you need to be saving a portion of that £1k for them.

Also emergencies - boiler? Washing machine? Make sure you've got a fund going for that sort of thing.

Can you add the loan to the mortgage and spread it out?

If you went interest only surely you ll have the option to make overpayments during the year if your finances can handle it?

Do you have (or planning) kids? How old are you both and what's the current term?

If you have £1,000 left each month then this sounds fine. As others have mentioned, have you taken into account Christmas, birthdays, boiler/fridge replacement etc?

£500 a month each every month is a lot of spending money. Can you reduce this amount?

How disciplined are you with money? I'd be tempted to go part interest-only and overpay to give you flexibility if you need it. Especially if you don't have much of a savings cushion (you don't say if you do or don't).

You can then throw the money you are paying for the loan at the mortgage when that finishes.

Like everyone else said, £1k could be loads, could be just about enough if you haven’t accounted for all the random things. Though it’s fairly easy to not buy any clothes, not cut your hair, and go easy on Christmas. Harder to suddenly account for the car insurance or the roof caving in.

I'm surprised in this climate you are even thinking about how much to spend on holidays meals out etc . Keep your money for meantime .

You will be very glad in five or ten year's time that you didn't extend or increase your mortgage.
Pain now for a better future.

You can do this! - it isn't forever, and you can reassess the situation in two or three years.

You can do it OP.. it's very grown up to ride the storm. It's not easy but doable and better sooner rather than later. You'll thank yourselves later 👍🏻

I freelance alongside my full time job OP. It's knackering but doable. The thing to bear in mind is that once you pass £1k earnings you will need to register as a sole trader and start filing tax returns. You will be taxed on your aggregate income so be sure to add your projected annual freelance income to your main salary and work out a ball park for the extra tax you will need to pay. Otherwise you might end up spending all your extra money on stuff and then find yourself with a tax bill you hadn't budgeted for.

Well we will have to cut out cloth as we adjust to the new budget, however I have no plans to live a miserable life and if i can afford a (cheap) holiday then I will be taking one.

I would cut my costs down to bare minimum for the next 12 months. £10 phone sim only. Only one tv option. No Spotify. No luxuries. Cut food shop etc. walk rather than drive. Minimal days out etc. I would use the money saved plus a significant amount of the £1000 to ensure I cleared that loan as soon as possible.

I presume you owe about 14.5k so with the 407 a month plus another 800 approx you will be loan free in a year. If you can cut all unnecessary costs you may clear sooner by upping it further. Also you may end up paying back less than 14.5 in total.

but in 12 months this plan will give you more disposable and after the frugal 12 months make you feel rich rather than skint!

Just read your update and you may hate my idea! 😂But I’d prefer 12 very skint months and then be loan free and have more disposable for the following 2 years.

Mortgage payments of over 50% of joint household take home pay is actually historically normal, you are in a better position than this so you will be fine.

Just make sure you have accounted for true expenses, the non-monthly stuff that has to some from somewhere.

For example, Christmas gifts, food, events; birthdays; haircuts and dental treatment; car maintenance; house repairs; boiler service; replacing phones/laptops; etc.

Those things add a few hundred pounds a month at least to my budget as I save for them every month but it means the money is waiting when they roll around.

If you don't account for those then you'll end up having feast and famine months.

You haven't said if you have dc or if you're budget includes all the one off things like car insurance so it's hard to say if you're budget is ok or not. We have extended our term but make overpayments every month, it means in real terms the time until the mortgage is cleared hasn't changed but it does give us some more wiggle room should we need it in future

Why? Lots of people are still going on holiday and going out - and if you can, you should - it contributes to the economy and keeps other people in work.