Moving nearer to school versus keeping mortgage debt down

Samsonite1

Hi,

This will be a lengthy one...

I am really looking for some points of view about borrowing more money and the cost of moving house for the benefit of being guaranteed a place at a good school.

We have fallen foul of the distance-based school catchment area system in that 3 years ago we bought a house well within the catchment area of a good school (it is only about 500 metres away) and now we are outside of it because many people have flocked to live even nearer to the schools. When we moved, there was only one year of this catchment area data so it all looked rosy and there was no trend to follow.

If we do not move house, we are pretty much guaranteed to be placed in one of the 4 undersubscribed schools which all get terrible results and ofsted ratings in addition to being in pretty rough neighbourhoods. Forgive me for not wanting to send my child to those schools!

In order to guarantee a good primary school we would have to increase our mortgage by about 40% and to guarantee both primary and secondary school we would have to increase it by about 80%.

From that you might think that it is not worth it, but it is worth pointing out that we always borrowed money based on one income being able to afford it so an 80% increase would be fine with two incomes and with low interest rates it would actually be ok for one income still.

This is where the risk side comes in as obviously interest rates can only go in one direction (from where they are now). If interest rates rose to 8-10% in 5 years then it would be a lot less comfortable for us and we would certainly want two incomes. This does not seem that likely, but you do have to at least consider the worst case scenarios when it comes to mortgages.

If we just moved for primary school, that might be a good compromise as there is a good secondary grammar school with no catchment area, but obviously you cannot bank on your child passing the entrance exam. We would have quite a few years to make a decision on secondary school. Primary school is our main concern. We actually have a couple of secondary school options where we are currently. What puts us off is all of the extra costs of moving - if we had to move twice, we would be spending all that extra stamp duty and moving costs that we could have invested in a different house.

House prices are clearly inflated at the moment where the houses are within a few hundred metres of a good school. This poses another long-term risk - some boroughs of London have changed the system because of this influx of house buyers near schools - changing to a lottery system where they increase the catchment and draw names at random. This would mean that many of the "overpriced" houses would drop in value potentially.

The other option is to rent our house out (rental value is about 70% more than mortgage payments) and rent a house to live in nearer to a primary school. The problem here of course is that if interest rates rise by much, then it will squeeze finances - but, we would have the option of moving back to the original house - the school is only 500 metres away so it would still be very convenient and we would already have a place. This is not quite cheating the system as it would not be intentional to move back and I think financial reasons would be morally ok!

Anyway, that was a lot of writing. I am sure others have faced or are facing the same situation?

Maybe there are many other factors to consider before deciding what is best? We have to do something though as I cannot really face sending my child to a horrible school just because it was financially better for us.

Thanks,
S