Planning pregnancy and remortgage

[Cl4rkyPH]

Thought I would ask the PH masses for advice on this.

We sold our flat and bought a house in Dec 2019 (it’s not quite our forever home but we are content to stay here for at least around 10 years).

We (rightly or wrongly) chose a new build and have a HTB loan against the property. Our current mortgage is a 2yr fix. The equity is obviously quite small, it doesn’t bother us significantly, we planned to overpay the mortgage at some point during our ownership here.

We have reached the point now where we would love to start a family. However, I want to make sure we don’t get ourselves into a financial mess, particularly with the HTB loan.

My understanding is that the HTB loan is interest free for 5 years after which point it becomes relatively expensive, so our original plan was remortgage after 2 years to a 3yr fix, then remortgage again at the 5 year point and pay off the HTB loan with the equity.

The mortgage broker at the time said this is extremely easy to do, however it’s a sizeable amount of equity to gain to do so, so starting to wonder if he had the wool over our eyes.

I’m aware you must pay off the HTB loan in full and you can’t do it in chunks. We can’t pay it off with cash at the moment or for the foreseeable... the loan currently based on the property’s value is probably around £65,000.

However we’ve decided we don’t want to wait this long to have kids (I would be 32 years old) anyway.

I’m also wondering how my girlfriend’s loss of earnings will affect any application process. We do NOT want to cheat the system however we are aware timing is crucial to ensure she is back at work at the right time.

She has heard that if she is on maternity, that lenders will still take into account that she is still technically “employed” and her earnings after any maternity leave are guaranteed, but I’m not sure how true this is and to what extend they take this into account.

Our combined earnings are around £90,000 to £100,000 (including commission), with my girlfriend making up £35,000 of that.

We really don’t want to wait 5 years, but I acknowledge that we are kind of having our cake and eating it.

Essentially we want to make sure we’ll be eligible to remortgage and pay off the HTB loan comfortably even if my girlfriend is pregnant/on maternity.

I guess my question is how best to plan having children around remortgaging?

[i4got]

"I’m aware you must pay off the HTB loan in full and you can’t do it in chunks."

Pretty sure this is not the case and that you can pay off in chunks.They call it stair-casing. Are you able to check this?

[Sarnie]

Cl4rkyPH said:

Thought I would ask the PH masses for advice on this.

We sold our flat and bought a house in Dec 2019 (it’s not quite our forever home but we are content to stay here for at least around 10 years).

We (rightly or wrongly) chose a new build and have a HTB loan against the property. Our current mortgage is a 2yr fix. The equity is obviously quite small, it doesn’t bother us significantly, we planned to overpay the mortgage at some point during our ownership here.

We have reached the point now where we would love to start a family. However, I want to make sure we don’t get ourselves into a financial mess, particularly with the HTB loan.

My understanding is that the HTB loan is interest free for 5 years after which point it becomes relatively expensive, so our original plan was remortgage after 2 years to a 3yr fix, then remortgage again at the 5 year point and pay off the HTB loan with the equity.

The mortgage broker at the time said this is extremely easy to do, however it’s a sizeable amount of equity to gain to do so, so starting to wonder if he had the wool over our eyes.

I’m aware you must pay off the HTB loan in full and you can’t do it in chunks. We can’t pay it off with cash at the moment or for the foreseeable... the loan currently based on the property’s value is probably around £65,000.

However we’ve decided we don’t want to wait this long to have kids (I would be 32 years old) anyway.

I’m also wondering how my girlfriend’s loss of earnings will affect any application process. We do NOT want to cheat the system however we are aware timing is crucial to ensure she is back at work at the right time.

She has heard that if she is on maternity, that lenders will still take into account that she is still technically “employed” and her earnings after any maternity leave are guaranteed, but I’m not sure how true this is and to what extend they take this into account.

Our combined earnings are around £90,000 to £100,000 (including commission), with my girlfriend making up £35,000 of that.

We really don’t want to wait 5 years, but I acknowledge that we are kind of having our cake and eating it.

Essentially we want to make sure we’ll be eligible to remortgage and pay off the HTB loan comfortably even if my girlfriend is pregnant/on maternity.

I guess my question is how best to plan having children around remortgaging?

Don't wait to have kids, most lenders will lend against the pre-maternity income.....they will ask a few question like what date will she return? Do you have savings to cover the maternity leave? Will there be childcare costs when she returns to work?

Lenders couldn't be seen to be penalising women for having babies

[Cl4rkyPH]

i4got said:

"I’m aware you must pay off the HTB loan in full and you can’t do it in chunks."

Pretty sure this is not the case and that you can pay off in chunks.They call it stair-casing. Are you able to check this?

Thank you... after a bit of Googling it seems you’re right, however it appears that each payment has to be at least 10% of the property value, which would be approx £33,000 in our case. So still significant, but I suppose it’s better than I thought.

[Cl4rkyPH]

Sarnie said:

Don't wait to have kids, most lenders will lend against the pre-maternity income.....they will ask a few question like what date will she return? Do you have savings to cover the maternity leave? Will there be childcare costs when she returns to work?

Lenders couldn't be seen to be penalising women for having babies

This is reassuring, thank you.

So basically we shouldn’t worry and just look at it when the time comes?

[gangzoom]

Aside from keeping banks happy just don't forget to factor in child care costs longterm into any future planning.

Statutory maternity pay is almost nothing, and depending on where you live how picky you are about childcare you are potential looking at 3 years of pretty high nursery bills till the free 30hrs kick in.

At one point we were paying £1100/month for child care with post tax salary for 1 kid. If you than decide to have 2 kids the financial numbers might mean your wife going back to work becomes almost pointless.

Things get better after 3 and ours are about to start school in a few months which will have a noticeable impact on child care costs......though you trade that for having to sort stuff out for holiday periods and after school clubs.

[Douglas Quaid]

My mates bird is up the duff with twins and their childcare is going to be £1500 a month. Don’t worry about 32 being too old to have kids. It’s not that old.

[2 GKC]

£100k joint income and on the help to buy scheme?

[Cl4rkyPH]

gangzoom said:

Aside from keeping banks happy just don't forget to factor in child care costs longterm into any future planning.

Statutory maternity pay is almost nothing, and depending on where you live how picky you are about childcare you are potential looking at 3 years of pretty high nursery bills till the free 30hrs kick in.

At one point we were paying £1100/month for child care with post tax salary for 1 kid. If you then decide to have 2 kids the financial numbers might mean your wife going back to work becomes almost pointless.

Things get better after 3 and ours are about to start school in a few months which will have a noticeable impact on child care costs......though you trade that for having to sort stuff out for holiday periods and after school clubs.

Cheers, this is something we were thinking about too.

Would you mind explaining your comment “if you then decide to have 2 kids the financial numbers might mean your wife going back to work becomes almost pointless.”

Not sure I fully understand what you mean.

Thanks for the help!

[Cl4rkyPH]

Douglas Quaid said:

My mates bird is up the duff with twins and their childcare is going to be £1500 a month. Don’t worry about 32 being too old to have kids. It’s not that old.

Yikes!

I mean to be honest the ideal situation is that she doesn’t go back to work, but then the remortgaging becomes a problem, so it’s all a bit of a vicious circle.

But it’s good to know the costs involved if she chooses to so thanks, much appreciated.

[Cl4rkyPH]

2 GKC said:

£100k joint income and on the help to buy scheme?

We looked around at “second hand” houses within our budget for several months and none of them ticked all the boxes, we then found a new build which was actually already built (so we didn’t buy off plan), had a large garden and good size rooms etc.

We didn’t have enough for the deposit on this place so we used the HTB scheme.

My understanding is that the scheme is to help people buy a house which they could otherwise not afford, which is what we did.

Thanks for your input nonetheless.

[Cl4rkyPH]

anonymous said:

[redacted]

Can I just remind you that we’ve already bought it and moved in 6 months ago so none of this is relevant.

Explained in the post above. We had a deposit for a smaller house but chose to buy a bigger, more expensive house, and utilised HTB to do so.

In hindsight we are VERY happy we moved in Dec and didn’t wait longer because coping in lockdown and working from home in our tiny little flat with no garden would have been a bloody nightmare.

[gangzoom]

Cl4rkyPH said:

Would you mind explaining your comment “if you then decide to have 2 kids the financial numbers might mean your wife going back to work becomes almost pointless.”

Not sure I fully understand what you mean.

Simply childcare costs, a second kid isnt quite double but not far off. Depending on where you are and which nursey you pick two kids nursery fees can easily be £1800/month+. Which means someone on £35k is essentially having most of their post tax salary going on child care.

If you earn over £100k you will also not qualify for 30hrs 'free' funding when they turn 3, its worth about £500/month post tax each kid so you need to manage your income carefully if you are close to the £100k mark.

Kids are not cheap, certainly makes cars look cheap and even houses look fairly manageable.

Edited by gangzoom on Saturday 13th June 11:17

[Smurfsarepeopletoo]

If it was me, I would live off your income for the next few years, put your wifes income into a savings account and dont touch it, then pay the HTB loan off, remortgage for a lower amount reducing your monthly payments and then put the amount you save on the mortgage, plus your wifes wages away for children.

[Stevil]

gangzoom said:

Simply childcare costs, a second kid isnt quite double but not far off. Depending on where you are and which nursey you pick two kids nursery fees can easily be £1800/month+. Which means someone on £35k is essentially having most of their post tax salary going on child care.

If you earn over £100k you will also not qualify for 30hrs 'free' funding when they turn 3, its worth about £500/month post tax each kid so you need to manage your income carefully if you are close to the £100k mark.

Kids are not cheap, certainly makes cars look cheap and even houses look fairly manageable.

Edited by gangzoom on Saturday 13th June 11:17

Just to clarify it's 100k as an individual, not a couple, so the OP will still get it unless he gets a 35k pay rise himself between now and then.

[Cl4rkyPH]

Guys, thank you very much for all this advice it’s much appreciated.

[2 GKC]

Cl4rkyPH said:

We looked around at “second hand” houses within our budget for several months and none of them ticked all the boxes, we then found a new build which was actually already built (so we didn’t buy off plan), had a large garden and good size rooms etc.

We didn’t have enough for the deposit on this place so we used the HTB scheme.

My understanding is that the scheme is to help people buy a house which they could otherwise not afford, which is what we did.

Thanks for your input nonetheless.

My understanding is that the scheme is not available to households with an income over £60k so just wondered how you were eligible.

[Cl4rkyPH]

2 GKC said:

Cl4rkyPH said:

We looked around at “second hand” houses within our budget for several months and none of them ticked all the boxes, we then found a new build which was actually already built (so we didn’t buy off plan), had a large garden and good size rooms etc.

We didn’t have enough for the deposit on this place so we used the HTB scheme.

My understanding is that the scheme is to help people buy a house which they could otherwise not afford, which is what we did.

Thanks for your input nonetheless.

My understanding is that the scheme is not available to households with an income over £60k so just wondered how you were eligible.

No that’s not correct, not on the Equity Loan scheme anyway. There might be a maximum income cap on some of the other HTB schemes, but not on the Equity Loan.

[OscarJ]

If you have combined earnings touching £100k and you want to have a kid: have a kid. If you can’t make that income support it then I would be amazed. You never know what might happen in your lives and you could miss the family boat.

[Pit Pony]

Douglas Quaid said:

My mates bird is up the duff with twins and their childcare is going to be £1500 a month. Don’t worry about 32 being too old to have kids. It’s not that old.

Yeah, but have them at 16 and you could be a grandparent by 32.