The Edcawber Principle

Suffolk_lass

Don't you just hate it when you lose a post?

Remind me SL - was that always the plan - or did you fall into it? It was a bit of both with DH losing his job as the only employee in Europe with a US company. He decided to retrain as a teacher when I said I would support him and we went into three years of little or no income from him. I struggled for a year to pay from my income (at that stage about 35% of his former pay) and ran up huge CC debts, then switched to IO without changing the term. So then I started to calculate how much per month, where I could expect money to come in and so on. We moved to regain some mortgage sanity and so that he could teach seniors without living in the same district, and paid off the CC debt and 10% of the original borrowing (not the balance, after I produced documentary proof that I had asked which and been given the wrong answer), so no longer in danger of losing the house. More recently a breakthrough when we drew down DH’s DC 25% TFLS while he was still working, and paid off a big lump of the remainder, plus the endowment that so badly underperformed, and some of my TFLS from my DB (I did not take 25% as thought we needed more income to live on than we really do now). Less than £10k now.

My thinking at this point is that PCLS could potentially be huge vs the balance (if pensions are allowed as a repayment vehicle). Let’s assume that you can still take 25% of your pension pot as TFLS without penalty. Yes, using that is fine (we did in part). On the other hand, I think you should look at “What if” scenarios as the Government will want to be seen to be paying down the debt after this crisis and pensions are a target - taxing TFLS? removing, reducing or delaying SP? removing the drawdown of cash? - and so on.

Alternatively, if sale of property is allowed, I'd be more than happy to "rent" our house for the next 30 years at £2xx a month. In your position at this time I would be looking at a lifetime fixed rate mortgage (which could be changed to IO at some point at the moment) and I would be looking at mortgage neutrality rather than paying it off against that backdrop. BusyMee1 has nailed it and you could too. There is currently more to be made from cash investing returns compared to the best mortgage rates. I would not put it all in pensions in case the rules change. I would use both your full ISA allowances first, so you have that tax free portion. At the time you are looking to extend IO may be off the table so a second secured loan might be better for you. And lifetime fixes might be non-existent. That’s what I mean re what-if-planning.

I think a new diary might be in order - my ideas outgrow the virtual space! Please don’t wait for the extension loan to drive that - we all like to hear what your thinking is (and offer our two-pennyworth). Yours is always among my favourite diaries I look for.

edinburgher

Scunnered - two hours to go grocery shopping this evening and Sainsbury's charged me for somebody else's shopping! Last time I don't check the receipt. Furious - I even scanned all the shopping for them and they still messed it up

SL - I don't think they offer lifetime fixed mortgages unless you're an old dear - not aware of any bank offering a mortgage term of longer than 15 years? Point taken re. all eggs in pension basket, but not sure why you seem to think IO is a bad idea at this point? I saw it as a way to build cash quickly, which seems helpful as we can't remortgage to a large enough mortgage for the extension that we are planning.

Unless we up our cashflow soon, it is going to be a long time before we can do anything.

Suffolk_lass

Sorry, no, I don't think it is a bad thing now, I was alluding to the changes that might happen soon. I think IO may be withdrawn in light of the current crisis/impending recession because of the additional risk to lenders (just looked at HSBC and no BTL or 95% on offer now). A quick check suggests you must have LTV of 75% for IO from most lenders. But you could also consider the possibility of a second mortgage for the extension, depending on the state of things at that point. So I think the point I was alluding to was maybe remortgage as soon as possible to a long term fixed rate and then swap to IO (my BS lets you do that, according to their fees page - assuming that if they charge a fee they can still do it, although worth looking at small print, of course). I think the main point is to suggest there is a balance between certainty for a regular repayment (fixing the rate), and having the capital to do the work (IO). We extended the amount against the house when we remortgaged so that it funded the extension and re-set the term on a repayment basis, then changed to IO.

edinburgher

Ah, that further complicates matters as I'll need to find a lender that will allow us to switch to IO at some point? Along the lines of your dire prognostications for pensions and mortgage lending more generally, I'm not sure that the option to switch to IO will remain, IO is already a tricky beast to find compared to standard lending products.

I'm still inclined to think that short fixed rate IO, extend and then remortgage to part and part or standard fixed rate as an exit strategy would work best.

Finished buying DD's birthday presents and decorations today - just over one week until lockdown birthday!

A_Frayed_Knot

edinburgher said:

Finished buying DD's birthday presents and decorations today - just over one week until lockdown birthday!

Probably for the "older" ones having a lockdown birthday, but our wee local newspaper shop is very enterprising -

they are now selling Birthday Balloons which state;

Happy 

Self Isolated 

Birthday

At least you won't have to 

Share your Cake

We could have all been doing with these a lot sooner 

Hope DD has a great time when it comes round.

Suffolk_lass

I think it means do your research thoroughly (as if you would not!) and keep it up to date.

In a different but parallel scenario we usually get our heating oil as part of the Village syndicate in August and January (if needed) but oil has been under 20p a litre in the crisis. It has just popped up to 22.9p here so I contacted the syndicate man to suggest an earlier purchase might be in order to take advantage. No reply yet - I might have to go it alone - we paid nearly 60p last year. The point being I am keeping my eye on things and might jump early - you could do worse than that with your mortgage research and planning. Maybe remortgage a few months earlier than planned to take advantage of the IO option, even if the lender is not the optimum - if that lets you save more quickly. I am also thinking that with so many taking a mortgage holiday, IO might be welcomed by some lenders in preference to housing lending crisis.

edinburgher

@A_Frayed_Knot - I like it - unfortunately our local shop looks to be closing as soon as it can find a buyer. I doubt it can be very profitable - we have two mini Sainsbury's, a Morrison's, a Lidl and at least two other newsagents within a one mile radius!

@Suffolk_lass - I'm always planning and researching Like your example with the oil, it's nice to be able to make positive money saving decisions quickly, debt really puts a crimp on that. Today I have been researching "children's" savings (i.e. places mum and dad can eke out an extra few £ in income, all DD's money is invested). The best I could manage was a H@lifax regular saver offering 4.5% on up to £100/month. We'll get up to £1200 in there and up to £3,000 in our T5B accounts at 1.5%. That should keep us going for 3-4 months of saving, then I'll need to explore other options.

In unrelated news, I have my second bit of praise for S@insbury's in the last month. After their balls up of the other day (charging me £100 for someone else's shopping) I went back today and spoke to the manageress after a frustrating 10 minutes of politely butting heads with the customer services assistant who obviously had no idea what she was doing. I explained that my shopping would have been £20-25 less, she offered me £40 as a goodwill gesture on the spot. Job done, no more nonsense. It's nice when you speak to someone who just wants things resolved.

Currently sitting in bed reading the Saturday Times - the luxury!

Suffolk_lass

Not that many Sains in Scotland - it is one of the things my Mum missed when she moved there from the south. It's nice when something goes your way. enthusiasticsaver save put me on to Marcus too for savings - helpful for a lump sum when you have a bit more to reinvest. BusyMee1's savings of cash are worth a look too

beanielou

There Is a Sainsbury’s where I live funnily enough! I am still trying to identify the best time to go as to not stand in the queue with nothing to lean on for too long. 🤔🙁

LadyGnome

Well done on shifting the debts. 

We have extended the back and the loft (no space for a side extension) and was definitely worth it. There is always a balance with extending with getting the house you want versus the ceiling price for your area(we are in London so space is at a premium). If you are going to stay in the house long term, it is less important but if you plan to move to free up capital at some point you may not get full value for extensive works above and beyond what is usual for the area. 

I think you need to take a step back and breathe.
You have got you finances cleared and detangled but the fact you want to do so much to the house makes me wonder if it’s the right place for you. You have just cleared a huge burden and you are already looking for a new burden to replace it.   (Just idle thoughts that struck me reading your recent posts - feel free to ignore).