Remortgage panic!

[finleysmummy]

We are due to remortgage in the summer. Following an appointment with our mortgage advisor this week I am now panicking that we are not going yo be able to afford the new rate. We haven't had the exact figures back yet but are estimated to be going up by £500-600 a month.
My husband works full time self employed and I work full time school hours. My husband is on a reasonable income, mine is ok although will never be great being in education.
We don't have flash cars, no gym memberships or debts etc. Our children do have a tutor once a week and one does rugby and the other dance. Other than that we do not have any regular outgoings on top of mortgage, food and bills.
I really don't want to have to take away the kids extra curricular hobbies (and those don't come anywhere near to the additional £600 we would need to find.

The only way I can see us being able to do this is by me giving up my career in education and moving into something else better paid. I've spent the last few years developing my career and it's really not what I would want to do. Husband could work weekends but he has a physical job and runs a business so think this would eventually take its toll physically and mentally.

Does anyone have any miracle ideas? Or have been in this position themselves? I'm sure we are not alone with the current cost of living.

I am not sure what i am expecting from this post. We are not massively well off but have never struggled massively before either so this is new stress!

Downsize? With a 40:60 LTV you must have a decent amount of equity. Either that or extend your term or find a better deal. Did you stress test when you took out the mortgage?

We live in an expensive area, have with grown up here and have all our family here. Relocating really isn't an option, as we would then struggle to move back to the area in a few years. Our children are settled, my husband runs his business here and my job is here.

No “miracle ideas” but short term options:

• Increase mortgage term
• Go on to interest only for a few years

I don’t think we will see the return of interest rates to as low for a long time so I would be looking at increasing your income. You say you would full time school hours, do you work holidays? Could you do some tutoring yourself?

We have not struggled to pay the mortgage in 16 years of owning property and on paper our income shows the ability to afford it.
We will work it out as it isn't due to switch until the summer, it's nice to pick some brains of people outside of the family in case someone has an idea we hadn't already considered.

This is good advice - is it worth speaking to your current lender to see what they can offer?

Im not sure if you spend money on holidays, take always, convenience food, children’s lunches at school, spend lots of money on the food bill. Meals out. Perhaps you can shave some money off all these areas (and you might have to forgo a nice holiday if you take them) and extend the mortgage term and this might cover the difference. Also do you pay for Sky too, nice hair cuts, clothes, if you can extend the time between them, buy second hand etc lots of little savings add up. Maybe use the Money saving expert spending spreadsheet to detail EVERY spend to make sure you know what’s going out

Is there any scope to pay a chunk off? Ours is set to go up £600 a month in April. We are dipping in to savings to pay a chunk off in order to keep the monthly payments down.

OP you can also “lock” in a deal now and if rates drop swap. That’s what we did this year. Locked in deal October. Rate drop in Jan and we took that deal instead. Saved us £100 per month.

Go for an interest-only non-fixed mortgage, and save the difference. When fixed term rates settle down, switch to a repayment mortgage.

Go onto a mortgage broker site and play with the figures, the self employed bit will mean your mortgage rate would be slightly higher than the figures quoted (from experience) but you can see if extending your term would massively help. London and Country (LandC) are a good site and also should you decide to use them they are completely free probably unlike your independent one. London and Country were great and we used them when we were both employed, then when Dh went self employed etc.

https://www.landc.co.uk/best-mortgage-rates/

Extending the term doesn't mean you are stuck with that, you can change it again later when you can. We fixed ours for 5 years (a couple of years ago) because that will see us to the end of Ds2 at uni so our circumstances will change after that. Yours will too with the tutors who you won't have forever.

Don't go to a mortgage broker. They don't know their arse from their elbow (I'm a surveyor and buy and sell a lot of properties - I have yet to encounter a good broker over 20+ years). Current good deals are with Halifax, Nationwide, NatWest and Santander. Assuming you are ok for high street lending (ie no bad credit etc) and sounds like your LTV is very healthy these should be your best bet. What is your current interest rate? Bear in mind too as others have said you might be able to arrange interest only at such a low LTV and also banks do have to display forbearance much more than ever before so the chances of repossession are very low.

We don't have sky, I dye my own hair, maybe have a monthly takeaway, if we buy clothes it is usually vinted, have never had nails or beauty treatments (unless they are a birthday present). We do however, go on one holiday a year which is always expensive as it has to be taken in school holidays. This year's is already booked and we are paying off as we couple comfortably afford it previously. Mortgage switches after the holiday so I think next year that will have to go.
That's great I'll have a look for the MSE spending spreadsheet!

Exactly this. We could have managed with a 7-8% increase but its far more thab that.
Its all the additional costs aswell that have also spiralled on top of mortgage repayments that are impacting our general affordability.

Hi,
I think it might be a good idea for you to look for extra work - perhaps at the weekend.

If you can find something that pays OK and uses your specialist skills then fantastic. If not care and support (which will benefit from your safeguarding expertise), hospitality/retail etc. I would aim for one long day (either sat or sun) or 2 short shifts such as 2 evenings.

This probably won't make up your whole shortfall after deductions but might get you half way there.

I have said you rather than your husband because you mentioned you are school hours so I am assuming that he already works longer hours than you, and you said his role is physical too. If he works 7 days long hours in a physical role he might get injured/depression and be off work which would destroy your family finances.

Or if you found a better paying full time job that would be an alternative. Are your children old enough to get home from school alone etc.

If there is scope to re-mortgage extending the term that is sn option too.

There is speculation that the base rate might start being reduced as the UK risks recession so you might want to consider a tracker and hope your mortgage falls in the future. Not guaranteed though of course.

In that case, assuming he's gone 2-3 years without increasing, I think it is perfectly reasonable to up his prices by 7.5% as of the start of next financial year AND I BET THE COMPANIES HE WORKS FOR HAVE BUDGETED THIS. If the customers are happy with the level of service, they will not bat an eye, as likely THEIR prices have already increased, and if they love the service then likely they wish your DH to continue to do the work for them. This would reflect in profit levels of the biz and enable him to up his drawings from the biz by the £600 a month you need prior to re-mortgaging.
For future contracts it's worth building in an automatic 'cost of living increase' into the rates quoted - my DH does this along with 'parts at costs which may vary' . Currently my DH is trying to retire (haha can't se it happening anytime soon) so new customers get quoted stupidly high rates to put them off, and they just say yes!

This is where you will make up the shortfall, along with the likelihood that mortgage rates may drop in the summer.

As others have said, extend the term for as long as you can. You can always over pay (if the extension leaves any breathing space!) Or shorten it in the future.

@finleysmummy why are you remortgaging?

The PP didn’t mean the stress test should have been for mortgage payments going up by 7 - 8%, they meant the interest rates going up to 7 - 8%.

As others have said, without seeing your income and outgoings, no one can really advise but it’s definitely worth playing around with a mortgage calculator to see how changing the term might help.

Coming to the end if our fixed term.

Extend the term!!!

I have just remortgaged and my payments went up over £400 on a £140k ish mortgage. The mortgage advisor thinks that rates will be lower in 2 years (probably not loads lower but a bit) so she advised to fix for 2 years only. If I was in your position I would fix for 2 years with a longer term just to get you through the next 2 years. Then remortgage again, hopefully at a lower rate and bring the term back down at that point

Ah yes unfortunately it sounds like the holiday might need to be dropped or changed to something significantly cheaper, (glamping in the UK in May half term can be done cheaply!). It’s great that you usually have this holiday pot, if desperate that’s where the extra mortgage payments can come from and then maybe see how the budget is doing next year and if you’ve saved in other areas / earned more by increasing your husbands prices etc then you can rethink depending on how much is left. Or you could switch to going abroad every other year if that works.

Your DH should put up his fees from April - companies will be expecting it at the start of the financial year.

At the moment, you are not earning for 25% of the year. Nothing wrong with that, if you can afford it, of course but, at the moment, you can't. Is there anything you could do in the school holidays?

I think you'll have to take a mixed approach.

Go through your outgoings and see what can be shaved. Are there subscriptions you can cut? Are you getting a good deal on AA, sky, your broadband etc. If you are out of contact or nearing the end, ask to leave and keep repeating until you get to the cancellation department (you normally get a period to change your mind)

Can your husband bring in a little more through reasonable price increases?

Lock in an offer now but review it before it comes into effect to see if interest rates have changed.

Extend the term but look into how much you can overpay (usually 10% a year). That way you lower the regular monthly payment but can try where you can to overpay so that you are relatively close to finishing where you should have been.

I come to the end of my current deal tomorrow. I was pleasantly surprised that sticking with the same lender on a new fix has only seen my repayments go up £150pcm but I suspect my mortgage is a lot smaller than yours. My rate is going up from 1.49% to 4.75%

It's worth noting that with many lenders you can fix now, but then if rates come down between now and your term ending you can re-switch onto the new lower rate. Between October and now I have switched and re-fixed 5 times. In October my repayments were set to be £800pcm from 1st March and now it's down to £640. Don't despair yet; there's still time for things to improve for you.