Financial difficulty do I act now or wait it out?

[SlayoTolstoy]

Found out on Friday I am being made redundant from a job I have been in for 5 years and is generally a dying industry. I'm unlikely to ever earn as much again, meaning my mortgage affordability will go something from £500k to £300k.

I bought my first house 3 years ago using money from my divorce settlement and a mortgage for £900k. I am now worried about the longer term struggle affording the mortgage on a reduced income. I am 37, single but dating and no children but I would one day like some.

I live in a tiny cottage style house in Chiswick. I'm keen to hold onto it, but wondering whether it is better to sell now before I'm under pressure? My likely new job and salary won't be enough to cover mortgage and bills. My mortgage is £2.8k, and my future salary is likely to be £3.5k per month.

Alternatively come to West Reading. Victorian 3 bed, 2 bath terrace for £350000. Reading has a lot going for it in terms of history, arts and culture and transport links (24 minutes to Paddington).

You are actually in a great position relative to most.

You don't need to live in a £900k + house.

You could absolutely sell it snd buy somewhere debt free.

I think these are big, life changing circumstances, and you only found out on Friday. What you need is time to process, and information to consider, then (slowly) make a decision.

Information to find out is:

1. in selling the house - house valued, names of good estate agents in your area, and conveyancing solicitors. Also find out rough costs involved in both selling and moving. Depending on how much this is, you might be better off staying put. Also house values in the area you might move too, and mortgage affordability (sounds like you have a rough idea of this).

2. in keeping the house - can you negotiate your current interest rate or the term length to reduce payments and/or move to an interest only rate for a brief time? (Not suggesting it - you just need the information). Can you pay a lump off from your redundancy and if so will that lower payments? On your predicted new salary, what do you need payments to be to keep the house? Can you take in a friend or lodger? How long left on your mortgage? Obviously once it is paid off, the payments will stop. Also, rents keep increasing but mortgage payments effects stay static (apart from interest rates). Meaning the payment might seem high now, but may end up being the same/higher as a rental payment.

3. your job - apply for everything you can at your current level. Look at the overseas EU jobs. If you got it could you work remotely from here? Would you consider moving to another country for the job?

4. another job - what kind of job would it be? Could you re-train to get yourself back to a higher paying job? If so, you might only have 3 yrs with a lodger and then be back at being able to afford the house yourself.

5. look at the house - do you love it? Could you be happy elsewhere? Would it be a financial millstone around your neck, or are you a home person and happy to forgo a few treats and holidays as the happiness your own home brings you is better than that?

6. dating and wanting a family - where does that fit into this? Do I want to meet someone here and therefore not move? Would this house be good for a partner and children or would it be sold eventually anyway? If that never happened, is this house a little sanctuary I want to stay in? Or not…

I think a few weeks of research and marinating in the information will help you see a clearer path forward. You have a financial buffer, don’t be afraid to use it and give yourself time to figure out your next move. This is exactly what a savings/Emergency fund is for.

Personally @SlayoTolstoy I would sell up, bank the cash rent something for a year using a bit of equity and then see what happens jobwise . If you want to then stay in London maybe look at buying a 3 bed shared ownership and buy 65% outright which will keep the rent element low and you won't need a mortgage at all

No need to sell straightaway as the Redundancy will cover the next 12-18 months whilst you work out what to do next.

Do you want to stay in London ? Do you have friends & family near by ? Do you have a idea of what your next employment will be ?

After the financial crisis in 2008 I went from being employed with a salary c£100k to being self employed earning c£30k first year. At the same time as getting divorced. Lost a 5 bed semi for a 2 bed terrace.

You have lots of options. First you need to secure a new job and then look to downsize with an affordable mortgage. But no need to panic at this time.

I wouldn’t do anything in a rush. Mull over all your options and consider everything. You have a financial cushion and what you decide today may well change in a couple of months.

It will definitely make sense to sell but the decisions of where to go and your future career will take time to determine.

Is anyone else reading this thinking, fuck me, I wish I had these sort of financial difficulties?!

OP I am sorry about your job but you have loads of equity and your likely new salary is really high. Don’t panic just think it all through slowly.

Ah. Given that you have an incredibly generous redundancy payment, you are in a much better position than I thought from the initial post. You have time to wait and consider your options. You have a lot of options, fortunately. Someone else suggested a stint abroad which could be an amazing option as you are single and have ££.

You've had lots of good ideas and advice (apart from going away for a year and renting the house out - as a former landlord, I really wouldn't advise it) so the only thing I can add is that perhaps your lender would allow you to move your mortgage to 50% interest only 50% repayment for a year or two while you process the change in your circumstances and think about what you want to do longer-term. In your place I wouldn't rush to sell the house now. You'll have your redundancy payment, you'll have a salary, you might have a tax rebate, you might have a lodger, you might be able to make arrangements with your lender so the monthly amount is less, and all of that will buy you time to reflect in a measured way about your options and choices.

Wait. Your redundancy is new. You have a cash buffer with the settlement and your savings. Look around for new jobs and, when you have one secured, weigh everything up. No need to make a panic decision.

£70k gross redundancy payment will leave you with about £52k net. That’s a large amount of money. I’d sit tight fur a couple of months whilst you look for another role with a view to moving to somewhere cheaper once you’re back in employment.

I think I would hold on to it for now, take a short break and then job hunt. Once you’ve searched for a job and hopefully got a few offers then you’ll be in a much better place to see what you can afford and you’ll also have a job to apply for a new mortgage with (or port part of your own).

Honestly though if you fancy kids I would start to plan that now by selling once you do have a new job and getting somewhere with a much smaller mortgage (or no mortgage at all) which will be affordable if you get minimal maternity pay and/ or want to go back to work part time. Kids are expensive (have you seen nursery fees lately) and holding down a full time job alongside a toddler is crucifying so start planning now to be able to give yourself a bit of financial headroom.

Have you spoken to your mortgage company about extending your term/reducing monthly payments?

Until i had done this, I wouldn't be making any decisions if I were in your place OP.

Use your redundancy to pay your mortgage for a year and post grad study fees while you retrain. Do a Masters in something up and coming, ideally related to what you currently do but with a future and lots of opportunities. Look at schools like LBS or Imperial for courses if you can, as their grads get excellent starting salaries.

Thank you to all who have replied, it's given me a lot to think about.

I have started the process of getting an idea of how much I could sell for and also speaking to my lender about changing the payment terms. I'm leaning towards selling as I'm not in love with my area and could do with a change.

My redundancy payout is generous, but every single person in the team who has been made redundant since they started transferring the roles to the EU in 2018 has had to retrain in something completely new which has taken a few years to then get to a reasonable salary, which I'm very mindful of.

My immediate plans are to understand what type of mortgage I can service on £45k salary in the medium term, with a large deposit, my budget could be £500k which would be a 2 bed flat in a nice area.

I think your priority at this stage needs to be getting lots and lots of advice on your career options. There are as many new jobs and careers out there as there are ones disappearing so don't assume this automatically means a big salary cut. You quite likely will be undervaluing or not even noticing some of the transferable skills you have and there may be industries out there that you haven't even heard of that would really benefit from someone like you. You're not redundant yet, and the redundancy payment gives you helpful time, so park the property worries temporarily. Even if you take a few weeks to just let yourself absorb your new situation and you decide that you WANT to take a lower paid job, at least you'll then be making property decisions based on what's right for you, rather than in a panic.

You need to give your head a wobble. If you want children, you need to start on that yesterday.

Sell your house ASAP, move out of London to somewhere like Southampton, Portsmouth, or even way up North, and get a 4 bed house with garden mortgage free.
You have a huge opportunity to break out of the debt slavery treadmill here.

Being mortgage free is like having an additional job with 0 hours that pays you £1.5k per month. You could take on two lodgers and never have to work again.

Or you could stack shelves in Tesco if you really can't find any other work.

But please, your no.1 priority needs to be getting knocked up by a decent bloke.

@Alex462 who are you to tell her where she needs to live - not everyone is obsessed by living just anywhere in order to buy a 4 bed box etc- as she is single, maybe she thinks the chances of netting a half decent solvent bloke are way better in London at some point than in Portsmouth?

OP, I would wait until you're actually in a job, and know what your exact salary is before moving. You could use your savings to supplement your mortgage (and it would take a long time before you run out, so you really won't face any sort of financial disaster).

However, you mention wanting a relationship and kids - 37 isn't old for kids, but it's not young either to get started. Anecdotally, we hear a lot about women who have kids over 40, but not about the (larger) proportion of women who aren't able to conceive at this age, or really struggle. If children are an essential rather than a nice to have, I would be making decisions based on this - in terms of property, job etc. If you're willing to go it alone, you need money for that too.