Oh how I laughed when they slapped vat on private schools, not laughing now it looks like Mrs anagallis is getting made redundant ?.
Anyway our mortgage is down to 7 years remaining, the plan had been to pay it off asap but we may need to row back. Just playing with the calculators online and if we use her redundancy paying to pay off a chunk whilst extending back to 10 years we can lower payments by a significant amount... obviously I reckon this will have a net cost but we can then over pay when/if mrs anagallis gets back on track.
I am a financial lightweight, I pay mortgage, don't borrow money and pay into my pension and that's it......what am I missing? Thought?
Sounds about right. With the caveat that they would be assessing the affordability on only one income, did you check that with the calculators or just the repayments Vs term?
When I got made redundant we renewed it via the original lender as they didn't ask awkward questions or proof of earnings, they were happy to just roll it over.
Ive always been of the school of thought that says get your debts down. So if you can pay off a chunk then that would be great. A lot of this will depend on how confident you are she will get back into employment AND how much you can both live off your sole income if she doesnt.
I’d have thought (but not calculated anything) that you’d be better off keeping the mortgage you have and putting her redundancy in an ISA and drawing down that to meet any short fall? Organising a new 10 year mortgage must come with quite large set up fees?
With the caveat that they would be assessing the affordability on only one income
Good point, although I would imagine it would be fine anyway, we got the original mortgage on just my income.
If we completely emptied all our savings we could drastically reduce the repayments but that feels far scarier at 51 than it did at 31!!!
I’d have thought (but not calculated anything) that you’d be better off keeping the mortgage you have and putting her redundancy in an ISA and drawing down that to meet any short fall? Organising a new 10 year mortgage must come with quite large set up fees?
This might be a better strategy to start with, using the redundancy money straight away to pay off the mortgage may be a permanent solution to a temporary problem.
your ability to overpay is normally 10% of outstanding balance per year - when you've 25 years left that's often a significant amount of cash, but if you're towards the end of the mortgage its normally not enough to make much of a difference to the amount owed (ie with 3 years left, its something like 3 months payments). Towards the end I found it worth having a variable rate mortgage which I could pay off as much as I wanted valuable, as it gave me the flexibility I wanted.
We’d do a 2 year fixed but extend term to 10 years, I would imagine staying with Nationwide we won’t pay a fee.
check that - i tried to do this with RBS a few years ago . Any material change like that required a new application.
I just rolled it over in the end on the original term . Wasn't worth the grief of having the cushion of the potential lower repayment.
your ability to overpay is normally 10% of outstanding balance per year – when you’ve 25 years left that’s often a significant amount of cash, but if you’re towards the end of the mortgage its normally not enough to make much of a difference to the amount owed (ie with 3 years left, its something like 3 months payments)
again check your own mortgage - mines 10% of the original mortgage value - and as I've stayed with the same (competitive) provider - that's 10% of the price i paid for the house .... i was curious as i'm inside the example window above - but can still make substantial overpayments.
How confident are you of her getting another job? This for me would change what I do with the cash.
We are similar position - 8 years left to pay, about to be a one income household permanently. We have savings of about 15-20% of what is left to pay, and a (depreciating) van worth 30% of the mortgage - so in total, if needed, we can reduce mortgage by nearly 50% in outstanding amount as we stand today, more as we wait until we are out of penalty clauses.
The savings have been paying 5% or 6.5% compared to our mortgage at 1.19% - so long term we gain more. We are currently locked in until August 2026, so the decisions we need to make will be early 2026 when hopefully we know where we stand financially.
Looks like we may choose, even with a big pay down, to extend mortgage to create a lower monthly payment at some point so that we maintain a better lifestyle.
How confident are you of her getting another job? This for me would change what I do with the cash.
Not very, she is pretty niche! Her job is part time anyway so the redundancy pay out wouldn't be that much.
We can afford to get by on my wage and she will undoubtedly do something to bring in some money so playing with the mortgage would enable us to do a bit more than get by.
If I was in this situation I would stick the redundancy payment into a savings account to earn a bit of interest, and then use a little each month to act as wifes half of the mortgage payment, leaving the mortgage on the same 7 year schedule it is currently on. This would give you access to the money should you need it for anything unexpected while you are running the house on a single income.
If your wife is out of work for a while this should hopefully keep your head above water, and then at whatever point she gets a new job you make a decision on what to do with the remainder of the lump sum, holidays, new car, or pay down the mortgage.
Not knowing your situation, mortgage etc id say bank the redundancy, you can always repurpose it later on.
She may have a niche job but needs must sometimes and hopefully she could find something temporarily until she returns to the niche role.
An "offset mortgage" may be a useful alternative? These can work well if you have savings but do not want to tie them all into the house.
You have an account that's part of the mortgage the funds in this account do not generate any interest. However, the funds "offset" the remaining mortgage amount so the interest on the mortgage is much reduced. You can overpay or extract funds which will influence the time to pay off
We got ours from Coventry building society when the interest rates went a little scary and had to remortgage.
Not very, she is pretty niche! Her job is part time anyway so the redundancy pay out wouldn’t be that much.
Sorry to hear that AA. Is she "music" niche? Any chance of working for herself evenings/weekends to help with money?
Nationwide might be open to lowering or pausing your repayments for a while, giving you some time to see what's what without having to extend (yet).
+1 to leaving the mortgage as is until the work situation clarifies. Most mortgage lenders are open to payment holidays- IIRC, I could do with the Nationwide mortgage I had.
That mortgage allowed overpayments but if needed the cash, you could get them back so could be worth checking the Ts & Cs
Another thought . Pay redundancy into pension fund. Get the tax back on the lump sum, ie its grossed back up and the reduncancy money is tax free iircn . Hopefully pension goes up in value as well.
Use her 25% tax fee lump sum to pay off mortgage in a few years time , and revert to interest only in the interim period.
Obviuosly there are specifics that only you know , but as with everything you will never know the best or right thing to do. Just pick one and crack on with living
I was with nationwide when I got made redundant. I had a chat with them and Without asking they offered to push back my payment date from start of month to end, which gave a four week breather and I found work in that time.
Pretty sure a payment holiday was possible, based on previous overpayments, which I had been doing. In the end I didn't need to take it
. Is she “music” niche? Any chance of working for herself evenings/weekends to help with money
No drama niche, she has other income as this was a part time job but it did pay pretty well.
+1 to leaving the mortgage as is until the work situation clarifies.
Yep, just thinking through ideas, she will have her job till August anyway.
Use money to pay off your highest costing debt unless the cost of servicing that debt is less than you could make from putting it in savings etc
im currently facing debt and our mortgage rate is very low so not worth paying off
Don’t forget her redundancy is taxed
Depends on age, likelihood of finding other work, tax, attitude to risk, etc so there isn't one best solution. Mortgage debt is pretty cheap so there is usually a better option financially than paying it off. There is however a big psychological benefit. I think I'd rather have the flexibility of having the money elsewhere but YMMV. Maybe time for a spreadsheet, work out which option is best financially then see how that makes you feel.
Don’t forget her redundancy is taxed
It isn't
We will just need lower monthly payments to keep head above water, savings this and that etc are not really relevant.
Redundancy isn't taxed up to a threshold, if it's statutory it won't be. Other payments like pay in lieu of notice or very high redundancy will be.
When in this situation (I've been there a few times) we've used the redundancy as a buffer and used the reserve account that cane with mortage as a source of cheap credit. Personally I wouldn't extend the mortage, especially not at 51 with 7 years to go, you don't want that hanging around when you start eyeing retirement. You've also got savings, you're in a better position than most.
What sort of rate are you paying in the mortage, another reason for us not messing with it was we had a tracker linked to the BONE so it really wasn't worth risking losing that rate. Most mortage companies will help if you are strugglin at some later point. At this stage see how it goes, you can return to extending the mortage later.
Redundancy over £30k is taxed + it could take you over a threshold for the year ie 40% in a tax year.
Use money to pay off your highest costing debt unless the cost of servicing that debt is less than you could make from putting it in savings etc
Pay attention to the compounding period. Flat %age rate isn't the be all and end all.
interest on (my) mortgage is compounded monthly.
Interest on (my) savings is compounded yearly.
I have not been made redundant for a couple of years. If I remember correctly - redundancy was untaxed below £40k. Pay in lieu of notice (PILON) is.
IME, as I've been laid off 7 times in my life, never once did I consider using pay-offs to reduce my mortgage - use it for what it's intended for, to get you through until she earns again.
The best thing to do for now is sit on the cash for a bit and get some professional advice. If you're both confident she can get a new job quickly, then it may also be worth waiting to see if that happens - you'll be able to make unforced decisions at that point, which tend to be better long term decisions.
One thing to ask yourself: Can you cover the bills with just your job?
Lots of good advice, but I think putting the payment into a savings account, just in case. Hopefully she will find something else - even minimum wage isn't that low these days.
We're mortgage free, but MrsF left her employer 12 months ago (settlement agreement due to them being arses). She's not gone back into full time, and now works a day a week in a fabric shop - she loves it as it's in line with her hobbies, but the pay is just minimum wage. We manage, but of course no big mortgage. She shoved the payment away.
Like others have said, you may, or may not get a better mortgage deal with the change of circumstances, and keeping the 'term' means you are that much closer. Going back in time, I previously used redundancy to reduce the capital sum, but that was early on in my mortgage.
Redundancy over £30k is taxed + it could take you over a threshold for the year ie 40% in a tax year.
Indeed but if we were getting over 30k we would be less concerned.
use it for what it’s intended for, to get you through until she earns again.
Therein lies the problem
One thing to ask yourself: Can you cover the bills with just your job?
Not really hence the need to lower payments
I’d have thought (but not calculated anything) that you’d be better off keeping the mortgage you have and putting her redundancy in an ISA and drawing down that to meet any short fall?
I'd do this
I'm assuming the outstanding balance on your mortgage is now small?
Take your mortgage rate (say 5%) and minus your savings rate (say 4%), which would be 1%
Multiply that by your outstanding mortgage (lets say thats £20k), which would be £200 saving per year.
Is that £200 worth more to you than having the redundancy accessible?
(aware thats over simplistic but it gives you a way of assessing the financial options)
I’d do this
Doesn't really help if we can't pay the bills each month. Or am I missing something? I mean obviously paying more on the mortgage and having savings would be great but....
I'm saying that its probably best to keep/extend your mortgage as it is.
Probably have a fixed deal for 2 years
Have the redundancy in a savings account.
If you need the cash its available.
Mathematically there might be better options, but this is the one with the lowest risk.
Hopefully everything goes well, new job and then pay off the mortgage in 2 years time.
Have to say I'd struggle to do anything other than draw down from the redundancy in savings in this scenario.
The downside of doing so are minimal and it's the most flexible/least risk.
Ok so, redundancy is about 12k. A two year fixed staying on same terms will cost around 20k. Hopefully this stays the same till march/April when current fixed ends. Put 20k to one side now, use it to pay mortgage each month and live on my wage.....like I said I am captain cautious and like to have my ducks in rows.....
You know under the mortgage charter you can go interest only for 6months? You do it online or over the phone, probably best to do that once you go onto the new deal as it’s a higher rate.
we have done it with 2 mortgages in separate names, complex situation while we lived in one property and had to wait to sell another so had 2 mortgages to pay along with an unforeseen redundancy, coming off older cheaper deals etc (thanks Lizz you muppet. it served its purpose while waiting to pay a big chunk of mortgage off after selling one property.
