morgage and redundancy help

hheadcase

Help! What should I do?

I will be redundant in August and will be recieving about £50,000 in redundancy pay-off, I have a £140,000 mortgage. I am going to uni so will have a small income from a bursary except from OH who earns £7,000pa. What do I do - pay a lump sum off mortgage, put in savings? Please help!!!!

hheadcase

Ian&Kel

Hiya,

Thats a nice payout isn't it! I'm sorry to hear you have lost your job.

I'm not the best person to help as I'm a newbie myself. However for others to help you I think you need to add more information set out better. For example incomings and outgoings complete. Also will your mortgage plan allow for such a huge payoff without incurring fees?

It all depends really on can you still make your outgoings on present incomings should the mortgage payoff happen?

If not then 50k is going to keep you going a long time going on your present outgoings.

hheadcase

Many thanks for that, I took voluntary redundancy to change my career (my own fault) I have no debts and will have the usual outgoings gas, elecy, water, TV lic, council tax etc. Will not know how much incomings will be really until nearer starting uni, my bursary will be around £8,500 including the extras for mature student, 2 kids under 11 etc. and my husband earns £7,000pa approx. The redundancy pay will be taxed free for the first £30,000 and the rest at 22.5% (I think).

hheadcase

Any advice would be welcome - can only pay off approx £9,000 pa without getting penalised. HH

UK007BullDog

How long are you going to Uni for?

hheadcase

I am going to uni for 3 years - can't wait :T

Louise1521

Just wanted to say good luck. I'm in a similar situation, leaving work at the end of March after 18 years in the CS. Scary but exciting at the same time.

hheadcase

Thanks for that Louise, it's very scary but exciting as well - good luck yourself!

UK007BullDog

Well, this is not easy to answer without knowing your full budget figure etc.

I would not use the money to pay off the mortgage. You are going to University for 3 full years and have 2 smallish kids.

I would split the £50,000 in 3 equal shares and then each share into 12. Put all the money in a savings account and pay yourself a wage every month of £1300. If there is anything left over use that to overpay the mortgage.

Believe me I retrained myself and it was tough as I had no income coming in for 2 years. I am still paying off a card now to get rid of the debts.

If you remortgage or pay all this money into the mortgage and you need the money later on with you in Uni (no income), partners low income and 2 kids, no lender will give you an advance due to income/affordability. You said you get a bursary but its not a lot and University is quite expensive (fees, books, travel costs, food, stationary etc.). Or just overpay the max you can but it might not impact your repayments, i.e. make them lower. Are you on a daily, monthly or yearly interest rate calculation?

Cayote

Can you change your mortgage?

If yes have you considered an offset mortgage? The rule of thumb I have heard on here and other places is that if you have more than 10% of your mortgage capital in savings then it's worth while checking out.

This way you'll reduce your monthly payment but still have access to the capital.

But remember if your savings dip lower than £14'000 then you'll be at a loss.

I don't know the tax status of students so can't comment on the tax liability of your redundancy package over the £30k limit you stated.

Cayote.

UK007BullDog

If he/she changes the mortgage he/she has to do it before redundancy. There is no way with that low income to get a mortgage or remortgage after the redundancy has started. Most lenders do not count the bursary as an income. So only self cert is a way to go, however they are much more expensive.