Save or remortgage and extend

[glasshalfemp]

Hello. Would really appreciate advice on next steps to take (I am having sleepless nights). To set the scene we have three kids in a 3 bed semi in London with huge garden. Five minutes from transport good schools catchment And amenities so do not need to move. Children are 7/11/18 (won't be moving out anytime soon and not going to uni. The next two probably will). The problem is we have zero savings and 8 k each on zero interest credit cards (card tarts for years) which we are slowly paying off and having a break from long haul holidays. We really would like extra bedroom space. We have about 450k equity and pay £1400/ mth on mortgage (17 years left) with net take home of £5600. Sounds like we shouldn't have a problem but we have lots of outgoings (that we could slash if hard times came: car/tutor/clubs/cleaner etc). We are both early forties and one is a civil servant (don't know how BREXIT will affect us yet).
So my question is do we remortgage and extend loft. We have had quotes and we could get an extra 60k mortgage to cover this and could afford the extra payment but with our other financial commitments it would mean if one of us lost our jobs (we would both get about 60k redundancy before tax) we would have no fall back (apart from redundancy payment). Or should we start saving and continue to live in what is becoming quite cramped settings (two sharing a room with different bed and wake times etc one busy bathroom as we both work full time). Third scenario is remortgage and overpay the extra (could afford about £500/mth). I should add that we currently have a car that costs £300/mth and no travel costs other than this and the 60k remortgage would cover loft conversion and balloon payment due on car so that bill would be gone if we went his route. Hope this makes sense. I lived through my parents being repossessed (having moved from their council house) as a child and so very anxious about secured debt hence why we haven't made as much money on the London property market as many of our peers who flipped properties for years (we both grew up in council housing so did not have parents to advise us). We are just steady overly cautious working - now probably classed as middle class -people (with very little financial savvy). Thanks for reading.

Have you spoken to a financial advisor at all?

When we were in a similar position, we spoke to a FA, who outlined our options and sorted out the paperwork. Check, but ours didn't charge for their advice, they make their money from selling new products. Very helpful as it clarified our options and ended up costing less in the long run.

Thanks I'll book an appointment today. I hadn't thought of that. I thought they'd only deal with mortgages not a general overhaul

If you remortgage the bank will do an affordability assessment so I wouldn't worry about that as they will stress test your finances! Also remember it is very difficult these days for a bank to repossess your house, they have to offer things like temporary interest only mortgages and anything else possible. Plus if they actually did, you still get to keep the equity in your house after it's sold so you could easily afford somewhere else (not saying it wouldn't be hugely stressful but you wouldn't be out on the streets). In your situation I would absolutely remortgage now, do the loft extension (which will add value/equity to your house) and enjoy your home and family life in it. I would however sit down and see if I could save any more money in the month to overpay on credit cards. I've found it's always the little things that really add up without me realising and I don't actually miss like buying lunches and coffee every day. Agree a financial advisor would be a great place to start.

We are just steady overly cautious working

Not THAT cautious if you have £16k of credit card debt.

Anyway, I would remortgage now at 0.5% and do the loft. Practically free money. Tighten your belts somewhat and make over payments.

I would be tempted to remortgage but enough to pay off the credit cards too (the mortgage rate is likely to be less that the credit card interest) and the balloon payment so you have one payment to manage.

Yes I understand that we don't look that cautious. However as credit card debt isn't secured against the roof over our heads I think that's why It was viewed with less caution. I'm trying to turn that around now. The CC debt was largely for 'luxuries' which we enjoyed but can do without for the foreseeable future. I hadn't considered asking for 80k extra and clearing that too. I do feel really vulnerable not having a savings pot that I can access. Although it's largely from reading threads on mumsnet if I'm honest. Most people I know from my background don't have one either. Just wanted advice on whether that should outweigh everything else (rather than remortgage) at this stage of our lives really.