Refinancing to cover school fees

AnnatarsGift

Hi there. This is my first post on these forums so please excuse any faux pas that I may commit.

Right! So on to my query. To begin with let me explain our current situation.

First of all we have been wanting to move for a few years now or extend in order to accommodate our kids as they are growing older and provide more space for the family. Unfortunately any plans of moving died with the housing market and a severe lack of interest aside from idiotic offers from people looking to take advantage of those struggling in the financial climate. Renting doesn't appear to be an option as the going rate wouldn't cover our mortgage to allow us to then purchase a second property. So that just leaves us with the option of extending, which is likely to require funds of £20K-£30K.

Secondly, we need to fund our kids’ education as our second child will soon start in the same private school that our eldest is attending. We cannot afford these fees without assistance, despite our salaries excluding us from any bursary schemes. Our savings are now almost exhausted from paying the fees for the last two years for our eldest. Thankfully my parents are helping by footing half the bill. This still leaves us with a bill of £54K over the next 7 years (I’m not even considering university fees yet).

So in total we are looking to fund roughly £80K of spending and the obvious solution is to re-mortgage. We have roughly 4 years and £45K left on our repayment mortgage, so potentially we could re-mortgage for £125K over 15, 20 or 25 years (depending on which suits us best). The problem though is that we currently have a nice mortgage with excellent rates that suits us perfectly and any re-mortgage in the current climate will I assume not be as favourable.

If we were to re-mortgage I am also assuming an offset mortgage would be best as we could leave the £54K for school fees in the account to offset a large portion of the mortgage.

So what would I like to know?
Well primarily are there any glaring gaps in my reasoning? Is an offset mortgage the best option? Is there another option we should be considering?

Thanks for reading.

shortchanged_2

Send your kids to state school.

That will help a great deal with your financial problems.

PaulLuke

I'd agree with Shortchanged I'm afraid.

Our children went to a private school for the first few years (for specific reasons) but we've now taken the decision to send them to state schools due to the fees taking too large a proportion of our income. The problem with your plan is that if you are tight on money and go ahead with this you may find you have insufficient money to do all the things that kids like such as going away/holidays etc, which they will probably appreciate more than private schooling.

If you can't afford to pay the fees without re-mortgaging then I'd seriously consider looking around at your local state schools (yes there are some pretty poor schools but there are also some very good ones.)

Dave_Ham

Aside from the private vs state school debate, your remortgaging ability will depend upon a few variables further to the information provided.

Your current house valuation
Income
Other Financial Commitments
Credit Score
Ages

This will allow us to determine feasibility. Whilst your financial plan is robust on an offset and hold till needed, your rationale for remortgaging may not be - which is what was being said above.

Good luck

AnnatarsGift

Thank you all for your responses so far.

To answer some questions...

Yes the obvious solution is to scrap the private schooling. In 4 years time the mortgage will then be paid off and we will have an excess of spare income, roughly £800 extra per month. This would pretty much cover the school fees if we were in that position now. Unfortunately that is not the case.

We do currently have a nice lifestyle and the kids are well provided for. They are also pretty smart and despite our best efforts they both wanted to try out for the local private school which is highly regarded. Unfortunately without private tuition they also managed to pass the exams and interviews to be offered places. So long as they continue to achieve in this manner I think as parents we have an obligation to reward them with the education they desire.

We could cut spending in many areas as we are an active family. Gym membership costs the family £160 a month (and yes we do use it many times a week). My wife and daughter spend as much again horse riding each month. My son and I play golf and go climbing each week, yet more expense. The outgoings are considerable and we do still manage regular holidays, although the annual ski trip has been a casualty.

So in summary we feel that we should make the effort to provide for our kids and take the hit now. The alternative of stopping private schooling would be much more comfortable and we would then end up with spare income in a few years. However that cash would be of little use compared to now when it would be a sound investment in our kids futures.

On a final note...

The local state school is the one where both my wife and I went as kids. We were quite happy for them to go there until we had some disturbing reports from staff (current and retired), parents and other visitors to the school. So my wife and I then spent a year doing the hypocrite routine of attending church so the kids could get places in a Catholic school with a much better reputation. We got our just deserts when it turned out that time was wasted and the kids didn't need the places they were offered at the Catholic school.

Sorry for the long winded explanation, but I thought it necessary to answer your quite valid responses and explain in full our situation.

AnnatarsGift

Dave_Ham wrote: »

Aside from the private vs state school debate, your remortgaging ability will depend upon a few variables further to the information provided.

Your current house valuation
Income
Other Financial Commitments
Credit Score
Ages

This will allow us to determine feasibility. Whilst your financial plan is robust on an offset and hold till needed, your rationale for remortgaging may not be - which is what was being said above.

Good luck

Hi Dave,

Our remortgaging ability is fairly sound. The property is worth currently around £150K-£165K. Joint income is roughly £70K and we have a sound credit score. Age-wise we have both just reached the wrong side of 40. As for financial commitments there are none other than those previously mentioned (primarily the mortgage, our pensions. the kids & our existing lifestyles).

So the question is still whether remortgaging is the best way to refinance or if there is a better alternative. Some other form of secured loan or a second mortgage (if that's possible). The benefits being that we could keep the existing mortgage with its nice rate which will be fully paid in 4 years time.

Voyager2002

The fact that your children were offered places at a fee-paying school says nothing about their academic achievement, the kind of education they "deserve", and so forth! A fee-paying school is a business; the round of tests and interviews is part of the marketing process; in reality they are about as likely to turn away customers with money as are Tesco. The real test is whether the school is willing to offer them free places: children with real ability are subsidised by such schools since their academic achievements help with marketing.

So far as the state schools in your area are concerned: don't just be passive consumers. For a fraction of the money (and the time needed to earn that money) that you put into private education, you could make a real difference to your local school, improving things not only for your children but for the many others (like your younger selves) who have no choice but to go there.

The_J

Trust some morons to chip in with their private vs state argument. What an absolute disgrace those people are, what arrogance, what supreme !!!!ing arrogance to think that hasn't been considered. Does it say "State School vs Private School" on the forum header? No. Well done Dave for answering the question.

A second charge or loan will likely be a higher rate of interest over a short period of time and therefore cost more per month or less overall. If you do it on the mortgage but overpay when your situation is better it would be the best of both worlds.

DVardysShadow

List all the things you want to do. Private education. Horse riding, climbing, golf, extending the house, holidays.

Put them in priority order with an annual cost. Draw a line where you can fund them on current income. Only a whimp would not go out and remortgage for the rest of the list.

Dave_Ham

Whilst you will easily get a 2nd charge, this would overall cost you more (on my rough thinking so do check with a broker or alike with all of your information)

This will be at a much higher rate and given your borrowing more than your existing balance, you will have say 35% on a great rate and 65% on a rubbish rate. 100% on a very good rate would make more sense - if that makes any sense!!

First stop, speak to your current lender and see what they will offer you as a "further advance" as you then keep the first part on the great rate. Balance this against a better rate for 100% and see what is best.

If numbers and mortgages are not your game, would get a professional to do the hard work for you...

All the best..

DVardysShadow

The_J wrote: »

Trust some morons to chip in with their private vs state argument. What an absolute disgrace those people are, what arrogance, what supreme !!!!ing arrogance to think that hasn't been considered. Does it say "State School vs Private School" on the forum header? No. Well done Dave for answering the question.

A second charge or loan will likely be a higher rate of interest over a short period of time and therefore cost more per month or less overall. If you do it on the mortgage but overpay when your situation is better it would be the best of both worlds.

I am assuming you were privately educated and Dave was State educated. Thank you for illuminating the argument.