Would you move in this financial situation?

[Dizzymisslizz]

Due to circumstances I’ve been left in roughly this position:
Salary 190k
Mortgage £630k, currently fixed but expires at end of year so will go up. Likely to be £600k debt at remortgage point.
House value £1050,000
Childcare £1.4k pcm
Savings 10k
Age 47 and mortgage runs til 70
i love the house, the children love the house, they’re settled at school / nursery, friends nearby, great childcare set up. Area seems to be in high demand so house prices round here going up.
i can afford repayments but the whole thing feels very squeaky. Won’t be any breathing room or flex for disasters or chance to do work on the house etc.
SO - could sell but my life is v much here and selling is expensive. And so much upheaval after a rocky few years. Also feels impossible as would mean school places, losing childcare etc.
but is it worth it just to feel less stressed about it all?? WWYD?

It’s already a small house, just in an expensive place

Take in a lodger that’s what people in a 2 bed flat are advised to do.

Wow. So your cash after tax, potential new mortgage and childcare is nearly £5k a month?

Which will go up to over £6k a month in 2.5 years?

£72k per year?

You could really budget at that point and make huge overpayments to lower your mortgage balance (and length). That sort of 'spare' cash needs financial advice though, not mumsnet advice from folk earning a fraction of your salary who are secretly thinking bloody hell, that monthly figure is beyond my comprehension, op doesn't know she's born

Sorry

If your take home is £8.6k, £1.4k childcare and currently £2.8k mortgage, you have over £4k a month left over plus £1k child maintenance. How are your savings only £10k?

short answer - divorce!!

It’s what the mortgage will go up to when the fix ends that worries me. Will be likely 40% of take home (excl maintenance, as that might change) which I thought was higher than advised.

I earn a similar salary and would feel very stretched in your circumstances although I do make 60k pa pension contributions so that has to be accounted for.

At a marginal income tax rate of 45% you really should be making far higher pension contributions. Also worth noting if you start earning much more you’ll be hit with the pension taper which will restrict your future options regarding contributions so you might want to top up while you can.

Unlikely to start earning much more!! You sound like you’re doing brilliantly with pensions but something has to give for me and I feel like the projection at 10% still looks like it gets to a decent place. But yes…in an ideal world…

If the rules stay the same it’s only 10 years until you can withdraw from your pot with 25% of it tax free. It is a very tax efficient way to pay off a chunk of your mortgage if you’re paying 47% in tax + NI.

Definitely worth you doing some sums and giving it some thought.

@Noneed77 this is a v good point and worth thinking about. Thank you.

The percentage recommendation is only a rule of thumb that falls apart at both ends of the income spectrum (because a £500 mortgage on a £2k income is going to leave a lot less for other costs so be harder to manage, than a £3.5k mortgage on an £8.6k income, despite being a lower percentage).

I would stay - you've got a good set up that might be hugely disruptive if you move, plus it would be very expensive due to stamp duty. You're in the worst period re childcare costs, which have to reduce by something when they're at school?

You'd be best off looking at your income and expenditure and make sure you're making the best use of your money - if you aim to have the recommended 6 to 12 months in an emergency fund, obviously with your costs that's going to be a substantial amount, but worth bearing in mind - you could at least save the child maintenance if you say it's not reliable, so you don't get used to having it.

But definitely review your budget, and make building up your financial resilience a priority rather than 'lifestyle'. A couple of years of sensible budgeting should make it look a lot healthier. Play the long game, don't panic about a short term bump in the road (high childcare costs, fairly recent divorce?)

Have a look at the financial flow chart to get your thoughts in order:

ukpersonal.finance/flowchart/

Long term, you have a chance to reduce your mortgage with your pension lump sum and also your DC will become young adults and while you might end up supporting them through university, you might not, and when you can start taking your pensions, start to receive the state pension (which is another near £1k pm at today's prices) you'll have nearly or even actually paid off your mortgage and you won't need a family sized house and also not necessarily need to stay in an expensive area if you're not working/doing the school run, so then is probably the time to move to reduce costs and release capital.

You have loads of money left every month. I am totally perplexed as to what you are worried about.

I agree that the % of mortgage to income is high, and the (relatively) small amount you have in savings, should something go wrong, is a cause of concern - but concern only. Not panic.

The cost of moving would make me pause before making any big decisions, as others have pointed out, by selling and downsizing you would be outlaying more money in stamp duty and moving costs that would take you a few years to ‘recoup’ on lower mortgage payments. Especially as your family life is all built around this property.

I don’t think you need to regard this as a fixed decision. If I were in your shoes, I would defer the decision for 12 months, but in that time try to pay the expected, higher mortgage rate, firstly by putting that additional portion of money into your savings account to get this amount up to 3-6
months of living expenses, and once done, the additional portion into the mortgage if you can to reduce interest. Even if you only set aside half whatever the increase in payment will be, it’s a good start and boosts your savings.

But the overall exercise will give you a good idea on how you will go at paying the higher rates when they come in, and in 12 months you’ll be better placed to see what expenses you have (childcare may reduce etc) vs any extra income (payrises or maintenance might be regular by then).

Also, it sounds like the divorce was recent and I imagine the idea of anymore upheaval in your or your children’s lives is hard to consider. In 12 months you may feel more settled and the idea of moving less daunting. Or not! But I think 12 months of time and space and savings is a good plan.

Thanks for the good advice on here and being pretty gentle with me all things considered!