Lots of equity but struggling on affordability

Margaretmae

I got a great tracker deal 15 years ago. 8 years ago I went interest only while waiting for my personal circumstances to improve. There is 275k of equity in the house. I have 75k left to pay which must be paid off in 10 years time. Due to high childcare costs I can't afford to go back to repayments. I would also like to get a loft conversion as well and would rent out one of the extra rooms. If there a way of using the equity in the property to be able to fund loft conversion and get myself onto affordable repayment schedule without losing original deal on existing borrowing? I am on a relatively good salary and have 20 more years before retirement but outgoing are high due to childcare. (Loft conversion would help me get cheaper childcare in form of au pair or rental from one of the rooms might help.) I don't want tone forced to sell up in 10 years as this would wreck kids schooling but I could downsize in 15 years time. My current lender doesn't deal with intermediaries so don't think my situation is of much interest to a broker.

betmunch

Two options, change lender. Or get a secured loan.

Whether or not either is acceptable/available is another matter.

Speak to a broker that deals in first and second charge lending for the best advice

Margaretmae

Thank you. I hadn't considered either as had the impression that it would be simpler to extend borrowing with existing provider

kingstreet

You mention affordability issues.

You need to check;-

if your existing lender will lend you what you need
at what rate your additional borrowing will be.

Then speak to a broker about remortgage and secured loan options and see what the overall picture might be.

cns06

What you are saying does not really stack up for me. Don't take this the wrong way but you don't meet affordability for a £75k mortgage but you want to spend probably a min of £30k (perhaps a lot more) on a loft conversion to get cheaper child care in the form of live in?

You have been on interest only for 8 years. I think you need to have a hard think about this because if you start lending more money I really doubt you will get it repaid if you already cant afford what you owe now but you want to lend more.

I think your best solution may be to sell the house and look for something around £200k. I think that will be better for you in the long run.

Either that or look at ways to increase your income or cut current costs - as I guess you work due to needing the child care. Again how old is the child(ren), generally children need childcare for the first few years only and what you are talking about is a very long term loan for perhaps a short term solution.

betmunch

Sorry, I assumed you were posting here as you had been turned down by your current lender for an extension.

If you hadn't already approached them then add that to the list of options

Margaretmae

Childcare costs should go down in five years. Now I am in the can't afford to go to work, can't afford not to trap. Am thinking about selling up but would have to move a long way from support networks and any house near a decent school carries a premium.

AnotherJoe

I'm with cns06, it would be interesting to see the financial comparison between savings for childcare with a live in au-pair, vs what you are paying now but not having to pay back perhaps £50k once you took interest over say 15 years into account.

You would be looking at increasing your mortgage by 50% for its lifetime (15 years?) in order to save on childcare costs for perhaps 5 years. I don't see that as viable. Have you done the sums?

The only upside I see is that your house would be worth more when you sold it, possibly by more than the amount you spent. But I'd be worried about the basic affordability right now rather than a theoretical gains in say 10-15 years.

amnblog

Your chances of a further advance with your current lender, or remortgage without using interest only status are slim.

You may be best served by a secured loan (second charge) for the extra, leave your current mortgage as is.

Be quick, affordability calculations on secured loans, which are generally more generous than on first mortgages, will tighten up next month.

Engage a broker.

property.advert

£75k left on even a high 4% interest only means payments of only £250 a month, which you deem too expensive.

Adding any additional borrowing is going to dramatically raise those costs and it will become even more unaffordable. Secondary borrowing will cost even more.

Moving would produce capital but affordability for a new mortgage is questionable. Costs associated with selling, buying and moving would reduce any capital available.

I would look at reducing costs elsewhere to improve affordability as a first option.

Floxxie

Why not forget renting out an extra room and having the loft converted, to just having an au pair in your spare room?

I have no idea how many bedrooms you have but if it is three, then it is not a problem.

I just wouldn't be borrowing more in the hope that you will make and save money with lodgers and an au pair.