A mortgage one

[User415373]

Trying to find a way to free up some cash so that we can finish renovating our house and have a little breathing room financially.
We are aged 32 and 37.
Remaining mortgage £190k (Feb 2025)
Current interest rate 1.76%
House worth probably £450k, 3/4 renovated.
Current payment £950
2 kids in nursery costing over 1k month, and after 2 mat leaves and a career change to a job that pays less, combined with reducing my hours to pay for childcare, things have been pretty tight.
We have no other debt but also no savings.
When we remortgage in Feb, I want to extend our term to as long as they'll let us, in order to free up some cash to finish off our house. We originally used savings, then any monthly excess pay, but at the moment we have nothing left over. After the next mortgage term (say 5 years) we're looking to move (so need to get the works finished by then) and then reduce the term back down to where we would have been before. By then both our salaries will have increased, nursery fees will be gone and wraparound should be less, and I'll be back to working full time. We've been doing the house for 4 years so far with free cash flow but all work has stopped now we have no spare cash. My husband does all the reno, we need the cash for materials etc.
Is this a bad idea? Husband is reluctant to extend term and we've always kept it as low as possible. I've said that if we extend the term we can still overpay on months when we have less outgoings then reduce the term when we move/remortgage in future.
Obviously the interest rate increase in Feb is going to affect us and perhaps extending the term will be the only way to manage the payment increase and we still won't be able to finish the house.
Thoughts?

I have to day I’d probably side with your husband on this one, you are going to really feel the pinch anyway if your interest rate jumps from 1.76% to 4+% anyway and personally I would always want to avoid extending term if possible.

I’d rather do bits and pieces as and when you have the money, after all you have 5 years before you want to move so you do have time, rather than extend.

I'm currently organising a mortgage. If it helps, first direct don't set any limits or penalties to overpayment as long as you don't repay the mortgage completely during the deal period. So if you took a 5 year fixed term, there would be a penalty to fully repay before the 5 years is up. Otherwise, you could extend the term to reduce your payments in the early years and then ramp them up when you stop nursery fees and effectively your term is anything between the deal chosen and the maximum you've agreed.

Thanks @Mrsttcno1 . I guess I'm worried that bits and pieces as we have the money is our approach now and we've got nothing left over ever. Nursery fees will reduce in September but with the interest rate increase in Feb that money will be gone as well. I'm also selfishly worried that for the next 5 years we won't have any holidays (haven't for the previous 4 years either) or any spare cash for emergencies.
This is our second reno, we spent our 20s working crazy hours to save, spent all our evenings and weekends doing the first reno. We've never taken on any other debt, never overspend and now we're in our 30s and struggling to make ends meet in an unfinished house. We have friends in similar jobs in similar houses but with 30+ years mortgages, they go on holidays and get builders in for work and I just feel like we're in this never ending slog for nothing! My one friend has a brother who is a broker and he told her to borrow as much as you can for as long as you can, enjoy your life now and sort it out later when your salary increases.
Of course I'm incredibly grateful to not be in debt and to have a home with a beautiful family. But I'd just love some skirting boards and some spare cash for a cheap holiday.
I guess I feel like we're struggling now so we'll be in a better position when we're older when by the time that happens the kids will have left home and we'll hopefully have enough of an income increase to make up for it anyway.
@BigBoysDontCry thanks for that. Definitely wouldn't be paying off in that time so that's really helpful.
Think I need to just suck it up and accept it as realty and hope that we can manage it all before we want to move!

I'd extend as long as you can. What's the point in living in an unfinished house or not having spare money for enjoying life. In the future you'll hopefully have more money with pay rises/promotions and less childcare fees, then you can overpay or remortgage and shorten the term. We've bought recently, late 30s and took a 33 year term. Our payments are twice as much as yours!

I would always extend the term as much as possible - you will usually have the option to overpay but the payment is as low as necessary so you have ultimate flexibility.

We moved to our forever home and took the term as long as possible as we have young kids in nursery and need a lower payment now. Once they are both in school we will be able to pay more, plus our salaries have both also increased since then.

Extend the term! Especially while you have such high childcare costs- as long as you address it regularly, make overpayments when you can, I would absolutely extend the term.

Extend the term. You really need that cash now. In a few years you will have higher incomes and lower outgoings so you can reduce the term then.

I bought at 25 and spent the rest of my youth scrimping and saving to pay off the mortgage with very few holidays and no luxuries. Now I'm mortgage free but not as healthy and fit as I thought I would be, so not able to do all the things I'd dreamed of. All those years of (self-imposed) misery weren't worth it.

There's a balance to be struck and, given that you have a realistic plan to pay it off later, try to enjoy life a bit now.

I'm late 50s, paid of the mortgage when I was 50. Splitting up so need the money to buy out Ex. Can't really move as adult DC still need a home and slightly downsizing would be a waste of money and also I don't really know if i want to stay in this area long term.

I've been told that as long as I can evidence affordability they will allow me to take a term up until I'm 80. So i intend to take as long as I can to keep the payments as low as possible as I'd sell up after any guarantee period when y DC are settled themselves. I grew up very debt averse and had a max term of 25 years on any mortgage and always overpaid but I have a different attitude now. It'll get paid off when I sell and I'll buy something that is within my equity.

You need to do what suits you now as honestly you'll never get this time with young children back again. They really are children for such a short time. They don't need the earth, but less stressed parents and the ability to have a caravan holiday every so often would add much to their experiences. I had one real holiday in my childhood and I still have brilliant memories of it and we were literally about 10 miles from home!

Thanks all. We are both very debt averse for different reasons. I grew up with nothing, constantly moving between council houses while my single mum struggled and I made it my mission to get on the property ladder which I did at 20 (with my husband or else it would not have been possible). His parents live in an amazing house they bought in the 80s for 90k, paid off the mortgage and are now mortgage free and the house is worth £700k. They told me they think it's 'crazy' the size of people's mortgages these days and are proud of us for living within our means 🙈 They help us out hugely with childcare and we lived with them while we did our first reno, they are incredibly supportive and so my husband trusts in their advice. They talk about how they struggled with young kids when they bought their house and renovated it. But they did it on one salary with no nursery fees as she was a SAHM. They also had holidays etc (Florida, Italy etc) and as much as I love them I think their understanding of house price increases and cost of living is a bit in the past.

I've just done a few online calculators and it looks like we'd have to add 15 years to the mortgage just to keep the current monthly payment. So not really helping with renovating or just living life! That's based on 4.5%. Ergh.

Leverage your asset - extend your term, take out equity, do whatever while you're young as long as your LTV remains in a good place and you can afford repayments. We've 'played' with the mortgage a couple of times over the years to suit us and built an extension, new kitchen, garden office etc. At the moment we're hammering pensions rather than overpaying our mortgage with the plan to take out the 25% tax free lump sum to repay mortgage at 57. LTV never gone above 50%.

I thought this might be the case hence my initial reply, it’s the reality for so many people at the minute it’s crazy. My husband is a mortgage adviser and he just hates the job at the minute because every remortgage appointment he has he’s having to tell clients that their repayments are going up massively, sometimes by £1000 a month or more. It is grim!

Thanks @Mrsttcno1 . Working backwards we'd need our rate to be 3.1% in order to reduce mortgage to £700 which would give us the cash we need. How likely is that happen by Feb?! 🙈

I was going to say this too, I don't think re-mortgaging in 2025 and extending the term is going to give you enough £ to do a lot.

How much do you need to finish the house? We've just borrowed 12k across a few 0% credit cards to put in our dream kitchen (also added our savings). Our mortgage rate has just gone up from 1.69 to 4.75 so no way were we adding that to the mortgage.

Our actual interest on the mortgage has gone from 156pm to 350pm! That's just the interest not the repayment part. I just want rid of the mortgage now.

What term are you on now? (Sorry if I missed that bit!)

We're mid/late 30s and took out a 30 year term with plans to overpay once nursery fees are out the way. Might shorten the term when we remortgage in future, who knows. I think length of term is a bit arbitury as you can always change it in future. I'd go for it if you need the money now.

Thanks @Sunglassesweather
Our term is 21 years now. But sadly even if we extend to 35 that's only going to cover the increase in interest when out rate runs out 🙈
Hopefully within a few years things will be easier. Our own choice to have to kids close together but they nursery fees have absolutely wiped us out and we struggle to pay it every month. Looking forward to being out of this phase!