Over the past few years we have seen an increasing number of borrowers look to raise funds against their homes to pay school fees, as the cost of private education has continued to rise. Typically this is done by remortgaging to borrow a larger sum (although occasionally taking out a second mortgage may be appropriate). Often the amount raised can cover expected costs right up until the last child leaves higher education, providing a valuable revenue stream to cover fees.
Lender problems when remortgaging
In many cases lenders count the school fees cost as an additional financial commitment, on top of the cost of the increased mortgage. This may mean borrowers fail to meet the affordability criteria. A specialist broker can provide access to lenders who will waive the school fee commitment, in the knowledge that the capital raised is specifically for covering this expense.
Offset mortgages
Some schools may offer a discount on the total cost if you pay the whole sum upfront. If parents prefer to hold back the funds and pay school fees on a termly basis, remortgaging via an offset mortgage may be an appropriate solution. With an offset mortgage funds can be drawn as and when they are required. This provides flexibility and can be cost-effective, as interest is effectively only charged as and when the funds are spent.
While offset mortgages provide valuable flexibility, interest rates can often be higher than for traditional mortgages. A specialist broker can help you find the best deal for your specific circumstances.
Our mortgage partners, Davidson Deem, have access to exclusive lender deals and provide a ‘whole-of-market’ service covering all types of property finance, including offset mortgages. Find out more by calling 03300 564 446, or visit davidsondeem.co.uk.
This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Your home or property may be repossessed if you do not keep up repayments on your mortgage. Mortgage availability and terms depend on your individual circumstances and are subject to lender criteria.
