We all want the best for our little ones, and where they go to school is a huge decision. Private schools are an exciting prospect for parents who wish to give their children the best possible education. However, the rising costs of school fees can be a significant financial challenge. The good news? Remortgaging might offer some relief.
Remortgaging or taking out an offset mortgage can allow parents or grandparents to release equity from their property to pay for private school fees. This increases the mortgage balance but spreads the cost of tuition over a longer time, making payments more manageable
If you’re wondering whether this approach is right for you, please read on for The Mortgage Pod’s helpful guide.
For more personalised advice, please do not hesitate to contact the friendly team at The Mortgage Pod. We help all types of families find the best remortgage deals to fulfil their dream of giving their children a private education.
Can you remortgage to pay for private school fees?
Remortgaging is a real option for covering private school fees. As long as you meet the lender’s criteria—like having enough equity in your home, a solid income, and a decent credit profile—you can remortgage to raise funds to cover school fees.
In simple terms, when you remortgage, you borrow additional money based on the equity you’ve built up in your property. This money can then be used to pay private school fees outright or over time.
It’s a flexible way to get more money at often lower interest rates than personal loans. But keep in mind that this option will add to your overall mortgage balance, which will increase your monthly mortgage payments.
It’s always best to seek professional advice to ensure that this approach is right for your circumstances and goals. At The Mortgage Pod, we can help you understand if remortgaging is the right step for you and your family.
Are grandparents able to remortgage to pay private school fees?
Another option is for grandparents to remortgage and release funds to pay for their grandchildren’s education. Later-life lending options, such as equity release, are available for older homeowners who wish to raise funds for school fees. Some equity release products come with flexible repayment options or allow funds to be released as a lump sum or in smaller amounts based on school term dates.
This option is ideal for grandparents wanting to help their grandchildren afford private education without disrupting their own lives and financial stability; it allows them to tap into their property’s value without needing to sell or move.
Before going ahead, it’s important to understand how school fees affect the borrower’s inheritance plans. Again, it’s important to get professional mortgage advice.
How does remortgaging work to pay for school fees?
When you remortgage to pay private school fees, the basic process involves increasing your mortgage by borrowing against your equity. A lender will assess your property’s value and your income to determine how much you can borrow. You can then decide whether you prefer to borrow a lump sum or use an “offset mortgage” (see below).
If you are considering remortgaging to cover the costs of private education, be sure to check the early repayment charges on your current mortgage, as switching to a new mortgage product could be costly. Check with your lender or consult your mortgage broker to find out.
What are offset mortgages?
An offset mortgage involves linking an offset savings account to your mortgage. The money in this account doesn’t earn interest; instead, it reduces the amount of your mortgage that’s subject to interest. For example, if you owe £200,000 and have £20,000 in savings, you only pay interest on £180,000.
You can dip into the offset account to pay school fees as needed, giving you more flexibility than simply remortgaging.
Since you don’t earn interest on savings (which could be taxed), this method can be tax-efficient, especially for higher-rate taxpayers.
Will equity release increase monthly mortgage payments?
Remortgaging to cover school fees will likely result in higher monthly payments as you increase your mortgage balance. The size of the increase depends on several things, like the interest rate and the amount of equity you release.
An offset mortgage may help manage these increases, but you still need to meet lenders’ affordability criteria to ensure you can handle the higher fixed outgoing costs.
Should I take out a second mortgage instead of remortgaging?
Taking out a second mortgage is an alternative to remortgaging for school fees. Second mortgages, also known as second charge mortgages, allow you to borrow against your home’s value without making changes to your existing mortgage. This could be an attractive option if your current mortgage has particularly favourable terms or if there are high early repayment charges.
Second charge mortgages often have higher interest rates than traditional mortgages, so it’s important to ensure you are comfortable with the repayments, especially if you need to cover fees for more than one child over several years.
Looking to remortgage to pay school fees? Speak to The Mortgage Pod today
If you have your heart set on sending your children to a privately run school and are considering remortgaging, The Mortgage Pod is here to help. Our experienced brokers will provide professional advice and guide you through your options to help you make an informed decision.
We offer independent, whole-of-market mortgage advice, so you can be confident that our only motivation is to find the best remortgage deal to meet your needs. Whether you’re a parent or grandparent looking to raise extra money for school fees, our team can help you remortgage with confidence.
GET STARTED with The Mortgage Pod today – we look forward to hearing from you.
