Mortgage and school fees

eggceptional

Hi all,

Looking for any insight into how banks might view our situation when looking for a mortgage in the near future.

My wife and I are currently in a 2 bed terrace in a very nice market town just outside London. We could sell this house for £500k and we have just £50k left on the mortgage.

We have 2 growing boys so we need a bigger house. We'd like to stay were we are but an upgrade to a 3/4 bed will cost us £1m.

With a deposit of £450k and high joint income we expect most banks will loan us the difference and we can comfortably cover the monthly repayments.

So far so good, but here's the catch. My 10 year old has been offered a place in the fantastic, academically-selective, independent school in town. At £18k/year. We have a second boy 3 years younger who would probably also qualify for a place.

We do have savings of approx £160k, mostly in ISAs. If I take £160k with 7% growth over the ten years of school that will just about cover their fees.

What would the banks make of that suggestion? Will they still loan us £500k if we have school fees commitments of upwards of £250k over 10 years? Will they let me ringfence the existing savings? Or am I better taking £150k off the mortgage?

Thanks for any help!

ACG

You have not said what your incomes are, so it is difficult to say what they will do. If your incomes are more than enough then it will not matter, if they are not then you will probably need a lender who will take a manual approach to underwriting.

They are not too fussed about how much you will pay out over the next 10 years or so, more what you will be paying on a monthly basis.

eggceptional

Thanks ACG,

Salaries are about £80k each so by my calculations we can afford both but it will be a big chunk of our disposable income.

Estimating £2500-3000/month for the mortgage and £1500/month for fees (double that for 4 years while the boys overlap)

eggceptional

Also, what do you mean by a manual approach to underwriting? Which lenders do that?

Thx

ACG

Probably borderline but potentially doable.

Manual approach underwriting is where banks will have their criteria and affordability rules which you either pass or fail, an underwriter will sit down take stock of everything that has been explained to them with any evidence needed and make a decision on your personal circumstances.

So an example being you have the exact same couple as yourselves, but instead of having enough money to fund the school fees, they do not. A bank would likely give the same outcome for both of you, where as a small manual lender may give different decisions based on the additional information.

Typically the lenders are small quirky building societies.

Thrugelmir

eggceptional wrote: »

We do have savings of approx £160k, mostly in ISAs. If I take £160k with 7% growth over the ten years of school that will just about cover their fees.

Tell us all where to find 7% growth which is guaranteed. Long term market indices only return 5% (average) with income reinvested and no management fees.

Personnally I'd be a lot more cautious. As could be financially damaging to be widely adrift.