Mortgage increasing by £250p/m wiping out savings

[oddexperience]

@bluehere Not sure anyone would want to rent a room next to a 2 year old and a newborn...

 

[rhodesponting]

@oddexperience Honestly there's such a shortage of housing someone probably would

 

[resjudicata]

@oddexperience If you've been saving £300 per month, how much have you now saved?

You could use those savings to reduce the mortgage before renewing (there shouldn't be any early repayment charges when you finish your fix), which would either drop the monthly payment or the length of the mortgage depending on what you choose.

Into the future, it's debatable whether you should be saving instead of overpaying with that money. Having some accessible money is a good idea, but you don't need much - overpaying the debt at 5.9% is still a good idea, given you could just borrow money at that % (or lower) in the future as required.

 

[oddexperience]

@resjudicata We have a £10k savings pot.
Also have £7k put aside to live off while I'm on Mat leave.
L

 

[resjudicata]

@oddexperience That 10k could reduce your payments by about £50 a month, but for flexibility could be better to just keep in a savings account. You'd probably be losing the equivalent of 1% (5.9% debt- 5% savings) of it per year doing that, but it atleast it would be readily available.

Mess around with this to see what might be worth doing.

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/

 

[oddexperience]

@resjudicata Yeah I think we'd rather have that emergency fund there for the time being, at least til the kids are out of childcare and we don't have the £1k monthly nursery fees.

 

[kim4faith]

@oddexperience £1k a month nursery fees, holy moly

 

[seekandfind]

@oddexperience Have you considered / are you able to overpay your mortgage with your existing savings before you fix it at 5.9%?

This help to reduce your monthly payment and allow you to build up the savings again.

 

[wells14]

@oddexperience NatWest are doing a 5.9 % Fixed Rate 2 year Isa if you put in 20k ; you get 2.5k tax free interest at the end of the 2 years , I’ve done this to help offset my mortgage cost increases , quite small in comparison to the increase but every little helps

 

[whitj77]

@oddexperience You can earn £7500 a year tax free from a lodger not sure if this is each or per house/household. You can earn up to £1000 a year each from things like selling on eBay. You'd also get £500+ a month for hosting Ukrainian refugees the amount goes up the longer you host.

 

[whitj77]

@oddexperience If you are struggling now how will you cope on one income? You need to work out where every penny goes, cut out everything that isn't an essential and find a cheaper alternative for essentials you need to save as much as possible while you still have 2 incomes.