Although the couple had a manageable mortgage and a combined monthly net income of £4,700, they had not been managing their finances efficiently and didn’t consider they had enough disposable income to fund the school fees.
The capital for their mortgage of £120,000 was to be paid by endowments which were performing badly. The couple also had credit card and car loans in excess of £22,000.
1. Restructure finances to allow school fees to be affordable
2. Create an emergency access fund for fees
3. Arrange a suitable and comprehensive school fees insurance protection plan
We recommended they surrender the endowment policies to repay their loans and fund the first two years of school fees. A repayment mortgage would replace the endowment mortgage and alternative (cheaper) arrangements made to protect the mortgage and (additionally) the school fees.
Removing the credit card debt and taking out a secured loan for school fees also made a significant saving as the interest rate was low and the cost could be spread over a longer period.
By restructuring the client’s financing, school fees could be funded and guaranteed via a protection scheme and the shortfall in their mortgage addressed without having to allocate any new funds. The savings predicted would leave the couple £60 per month better off.
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Disclaimer
The information within this article was correct at the time of publishing, but laws and tax rules are subject to change. Your circumstances and where you live in the UK may also have an impact on your tax treatment.
To learn about the government’s most recently-announced changes, please read our latest budget roundup: 2024 Autumn Budget Update
