Advice re current mortgage and having a family.

matt1987 · 17 May 2017 at 9:18AM

Hi All

Me and my partner have been discussing about starting to try for a family pretty soon (we get married in a couple of months so feel as though its the right time).

I worry so much about money, will we be able to afford it etc etc.

We have a mortgage of around £730 a month. My partner is the main earner. We have a combined income of around £60k.

Now, our house is currently valued at around £270,000 and as it stand we currently have around a £190,000 mortgage. The mortgage deal ends in October this year. It is a capital and interest mortgage.

Obviously if we do have a child, our finances will be pretty stretched for the first 3 years (buying things ready for arrival, then maternity leave for my OH and then child care fees until we get help from the government at the age of 3).

I have been seriously considering the use of an interest only mortgage for 3 years from October when we renew. I did a small comparison and on HSBC it would be around £280 a month.

Is this something that people would recommend doing on here? I know interest only mortgages got a lot of bad press a while ago and banks dont really like doing this? Do you think we have enough capital in the house for the bank to say yes? Is this advised? I just think it would be a good chunk of money where we could use to save initially before a baby arrived, then use it for childcare fees until the age of 3.

I just thought I would add that i am in a very stable job and my wage goes up by a fair chunk every year for the next 4 years until I reach £38k. Me and my partner are 29 years old.

Thanks for your advice!

LottieLou · 17 May 2017 at 9:56AM

We are in very similar situations, although I'm the woman and currently 38 weeks pregnant :eek:

Our numbers are also quite similar - I'm 30/ OH 29, mortgage of £806 on a repayment basis. House value based on recent sales 240k with a mortgage of 160ish. Combined income of slightly less than yours, but my job is stable with no possibility of an increase (NHS) OH has more scope for increase but this is unpredictable.

We are due to remortgage soon and switching to interest only payments has never crossed my mind I have to say. For pre, during or post pregnancy.

Are you able to save any money with your incomings/outgoings as they are now?

I would start by doing a very detailed budget of your current, and looking at how much that leaves you/how much you could cut back or adjust so it increases your ability to save.

With interest rates as they are, my head could never tell you I agree with doing interest only. Even if it is a large difference in monthly cost because children get more expensive.

Babies do not need to cost much, and unless you want the lastest 'bugaboo' and all singing all dancing Moses basket, you can do the first year on a relatively conservative budget. It is the impact on mat leave and childcare I would focus upon. And do a budget for this also alongside your current. Look at how much childcare you will actually need and if there is any scope for 'flexible working'.

Given that you say your wage will be going up a fair amount the next 4 years, could this increase cover a chunk of the childcare outgoings you will have? Also if you are a worrier, it might be worth considering looking at mortgage products that allow a payment holiday? if you would like that added security to fall back on.

serko · 17 May 2017 at 10:11AM

We were in the same situation when we bought our house about 7 years ago. We took out an interest only offset mortgage. We did this as it gave us maximum flexibility. We overpaid as much as we could into the offset account pre-children. Then once our first daughter arrived we reverted to just paying the interest. My wife is the main earner, but luckily between her maternity pay and my wages we were okay. Once our daughter was one my wife went back to work and I stayed at home to become a stay at home dad.

It was a lot more difficult when our second daughter was born. As my wife was on maternity pay and I was still at home. From a financial point of view it was difficult, but having a savings pot in the offset account meant we could pay the mortgage from that and with some tight budgeting we coped. In fact it was great having a year together as a whole family.

matt1987 · 17 May 2017 at 1:15PM

LottieLou wrote: »

We are in very similar situations, although I'm the woman and currently 38 weeks pregnant :eek:

Our numbers are also quite similar - I'm 30/ OH 29, mortgage of £806 on a repayment basis. House value based on recent sales 240k with a mortgage of 160ish. Combined income of slightly less than yours, but my job is stable with no possibility of an increase (NHS) OH has more scope for increase but this is unpredictable.

We are due to remortgage soon and switching to interest only payments has never crossed my mind I have to say. For pre, during or post pregnancy.

Are you able to save any money with your incomings/outgoings as they are now?

I would start by doing a very detailed budget of your current, and looking at how much that leaves you/how much you could cut back or adjust so it increases your ability to save.

With interest rates as they are, my head could never tell you I agree with doing interest only. Even if it is a large difference in monthly cost because children get more expensive.

Babies do not need to cost much, and unless you want the lastest 'bugaboo' and all singing all dancing Moses basket, you can do the first year on a relatively conservative budget. It is the impact on mat leave and childcare I would focus upon. And do a budget for this also alongside your current. Look at how much childcare you will actually need and if there is any scope for 'flexible working'.

Given that you say your wage will be going up a fair amount the next 4 years, could this increase cover a chunk of the childcare outgoings you will have? Also if you are a worrier, it might be worth considering looking at mortgage products that allow a payment holiday? if you would like that added security to fall back on.

Well I am on a Police pay scale - currently on around £25k. My salary goes up the next 2 years by around £1100 a year, then the last two increases are £4.5k each roughly so it would only be a massive jump in the last two years.

I think our main concern would be the maternity side of things. We are not eligible for any benefits what so ever. The only thing we could probably get is childcare vouchers through our employer, but even then, that will be changing shortly!

This is why I considered an Interest only mortgage temporarily until i get those big jumps in salary, but wasnt sure if it was the clever "thing" to do.

matt1987 · 17 May 2017 at 1:18PM

serko wrote: »

We were in the same situation when we bought our house about 7 years ago. We took out an interest only offset mortgage. We did this as it gave us maximum flexibility. We overpaid as much as we could into the offset account pre-children. Then once our first daughter arrived we reverted to just paying the interest. My wife is the main earner, but luckily between her maternity pay and my wages we were okay. Once our daughter was one my wife went back to work and I stayed at home to become a stay at home dad.

It was a lot more difficult when our second daughter was born. As my wife was on maternity pay and I was still at home. From a financial point of view it was difficult, but having a savings pot in the offset account meant we could pay the mortgage from that and with some tight budgeting we coped. In fact it was great having a year together as a whole family.

This sounds interesting and not something I have heard of to be honest. I think some months we would be able to pay some of the capital off the mortgage, which is what we would plan to do to be honest. I will have a look into this offset mortgage.

I dont want to give up my job to be honest, however sharing the maternity leave is something to consider.

serko · 17 May 2017 at 1:26PM

I wouldn't have given up my job if it was somewhere with growth prospects. If I'd stayed at work we would have been about £200 a month better off, but I'd be at work from 5.30 till 17.00 and would then have to pick my daughter up prepare dinner etc. Mt wife would have had to drop our daughter off in the morning so would be gone from 7.00 till 19.00. We decided in our situation it was better for me to stop working. Now with two I wouldn't be able to afford childcare if I was still working.

matt1987 · 17 May 2017 at 1:45PM

serko wrote: »

I wouldn't have given up my job if it was somewhere with growth prospects. If I'd stayed at work we would have been about £200 a month better off, but I'd be at work from 5.30 till 17.00 and would then have to pick my daughter up prepare dinner etc. Mt wife would have had to drop our daughter off in the morning so would be gone from 7.00 till 19.00. We decided in our situation it was better for me to stop working. Now with two I wouldn't be able to afford childcare if I was still working.

Thats shocking, and thats where this country goes badly wrong!

Chloe_L · 17 May 2017 at 2:55PM

The problem is it is unlikely you will meet the criteria for an interest only mortgage.

HSBC who you mentioned have a minimum income criteria of £100,000 (at least one individual party to the mortgage), and you need to have a repayment strategy in place. Converting it to repayment in future is not going to be a suitable repayment strategy.

Other banks who still do interest only have comparable criteria to this.

matt1987 · 17 May 2017 at 3:42PM

Chloe_L wrote: »

The problem is it is unlikely you will meet the criteria for an interest only mortgage.

HSBC who you mentioned have a minimum income criteria of £100,000 (at least one individual party to the mortgage), and you need to have a repayment strategy in place. Converting it to repayment in future is not going to be a suitable repayment strategy.

Other banks who still do interest only have comparable criteria to this.

Thanks Chloe, it appears that I would be looking at around £650 a month on a capital payment when it comes to renewing so around £80 saving a month.

I suppose this will have to do, and if I do get into a but of trouble I could always ask for a payment holiday.

Working families seem to always get penalised.

Advice re current mortgage and having a family.

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