Pay off mortgage and start having fun!

newgirly

I’ve spent way too many hours watching various Boris speeches, reactions to it and debates the last day or so. I think to be honest the Matt Lucas parody was probably more useful in some respects 😆  No idea what will happen at work still re returning. One thing that has happened is we have lost a large client, the biggest in their sector and  a massive loss of revenue. As it’s a movement to more modern online way of doing things it’s not work we can maintain, the virus has just sped up the inevitable. Other similar places will do the same too I’m sure unfortunately. Dh has since last year been trying to diversify, with some success but not enough I think. 

So we are back to where we have been many times over the last few years, wondering if we are about to go under, this time with a lot more company due to the many others now in the same position. Each time it gets close to happening gets a bit easier actually, especially in the midst of everything happening now. I’m not sure dh is as relaxed as me about it, but there’s only so much you can control and weirdly something usually pops up in the last minute to buy us more time, and if it doesn’t we will have to work around it.

Jessy103

Sorry to hear this NG and I hope everything turns out alright for you x

themadvix

That’s rubbish news NG, but I can see how it’s inevitable in the current situation. 😔 You sound philosophical about it though. I hope you can think of some solutions/ways forward.

newgirly

Thanks guys, current times puts things into perspective really, I’m pretty worried about ds2 losing his job as it’s such a good fit for him and he went through a few jobs before we caved in and took him on, he has always wanted to work there!

It’s remortgage time soon, I think we will be sticking with the current plan but I am wondering if there is an element I have missed, so unusually I did ring my dad a few days ago for a chat as he has a lot of knowledge about commercial mortgages and rents similar units to ours. Just to see if I have overlooked an idea that would be better for us in the current situation of jobs being very at risk and my wages potential reducing to zero after furlough. He hasn’t suggested anything. So I shall list the basic facts and if anyone is reading then please feel free to make suggestions! 

Home mortgage £72,261

Factory mortgage £56,477 

Offset £7,458 

Total owed net £121,280 

Current factory mortgage monthly payment £1482 

Rental income after tax and minor expenses estimated approx £1800 (£2500 incl vat) 

Term factory mortgage 3 years 6 months 

Term home mortgage 2 years 

Interest only payment on home pm £133

Interest rate factory  loan 4.25% with 10% op limit 

Home unlimited ops 2.19% (deal ending and equivalent 2.09%) 

Home value £450k ish 

Factory value £450K ish 

Max borrowing on current wages of both of us combined  (if allowable on furlough) £114k-£156 (mse calculator) 

Borrowing on just dhs wages only £105-140K 

You are not allowed to add to a home mortgage to invest in a business, so that’s a big barrier! You can borrow for many other reasons, but not that.

My aim was to clear the factory mortgage ASAP therefore freeing up the rent (oping wages now to end the term at the same time the home mortgage ends, then remortgaging the home and using the rent as a wage as well)
At a push we could survive off the rent with no or a low mortgage but we may not have time to do that now. 

So have I missed a great option that I should be doing? If our jobs go we have problem re financing the home mortgage which has only two years left!  But currently I was happy leaving it like that as I can be IO and op the factory instead. 

The business mortgage is actually a loan not a mortgage officially as the bank insisted. I should also add there are unsecured loans available at a lower rate than he factory mortgage for smaller amounts from the high street. 

Phew, apologies for the in depth post and please feel free to help 😬

Moneyfordreams

I don't know NG , best wishes whatever you decide. 
If it is relevant, when my husband and his brother sold off their equity (2 shops 4 flats), the bank then decided to recall all of their borrowing. Then big bills arrived coupled with loss of work led to their downfall. It took a few years of struggling before the eventual loss. I had to buy him out of our home to pay his debts. With hindsight keeping the equity is what he should've done.    

themadvix

I think you need to consider the likelihood and ease of being able to find a new tenant for the factory should the company go under. Is it likely to be easy - flexible space, good location, parking etc? Would/could you sell it if the company went under? That would give you enough to pay off both mortgages and then some, wouldn't it? (Assuming easily saleable at the price estimate you've given - if we have a recession, I guess that's unlikely). Am I right in thinking that apart from being employed and owning the factory, you and DH are no longer entangled in the financials of the business itself?

I think I'd be more concerned at this point (where you could potentially lose three incomes) with ensuring the security of your home - that may or may not be through OPing or being prepared to sell the factory. 

I'm slightly confused by 'interest rate home loan' - do you actually mean factory? Otherwise what's the 2.19% (I may be being stupid here - I'm no expert)?

Just a few thoughts - like I said, I'm no expert and don't always entirely understand your complicated finances!

newgirly

Hi Vix and mfd’s , thanks so much for the comments. I’m so sorry it didn’t work out well for you mfd’s , it’s so hard to know what to do and you can only make the best decision you are able to at the time. It’s not always just about the money either, the stress plays a big part too.

The home loan interest rate is in fact  the factory loan interest rate sorry! We are not worried about renting out in the future  (we assume a void period of 6 months a a usual worst case scenario) as it’s a new build “green” industrial unit in an area that’s now very built up with limited commercial premises due to everyone basically converting everything to flats. We have been approached by neighbours there that if we ever want to sell they will buy at a good price. So I want to hang on to our home , but also if we can hang on to it we could have an asset that creates enough income pm to come close to dhs take home wage. 

I think if the loan on the factory was higher I might want to give up and sell up , but it’s at £56.5K which although is a lot, it’s also not in the long term scheme of things. But it feels it now! 

XSpender

While things are uncertain I would OP neither and save up the surplus. After you are more certain about the future I would want the security of knowing my home was paid off and would prioritise the home mortgage over the factory mortgage.   The factory is a business and I would want to keep it’s finances separate and let it keep ticking over while you have a tenant.  You can sell the factory if you needed to later on but you wouldn’t want to sell your home to save the factory and you need somewhere to live.

newgirly

Hi Xspender, thanks for posting 🙂 That’s what I’ve been doing the last few moths just incase, except for smaller tidies really.  I guess we are way more limited about what we can do with the factory mortgage, but as the deal is ending Imminently on the home mortgage, do I move to a very long term normal repayment mortgage (incase I can’t remortgage if we lose our jobs) currently we are IO and everything is going to factory mortgage, but with a 2 year term left it’s a gamble...

South_coast

Hi NG, what a pickle 😦 Do you need to get a new deal on the home mortgage? I know you can, but do you have to (ie is the interest rate going to shoot up if you don't)? I think if it wasn't an absolute necessity then I'd keep everything exactly as it is, no new borrowing, no credit/affordability checks, stick to interest-only, stash all the money in your offset and don't OP either of them for now, and sit it out. In 2 years when you need to clear the home mortgage things will hopefully be a lot different and you can assess your options again closer to the time