Private tuition can be expensive and it’s not only for those with inherited wealth. Many dual income households can easily spend half the annual household income on a single term of private tuition. It’s a minority that has the funds already in the bank to fund private tuition term fees.
With fees ranging from £3,000 up the real high end of the scale of £16,000 per term, education costs will either be the highest expense or the second highest expense after your mortgage. The two costs can be put together with a remortgage to release some of the cash you’ve locked into your home to help you pay for school fees.
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It’s not uncommon for both parents and grandparents to contribute to education costs. It’s how the payments are made manageable. Should anyone contributing to the fees lose any of their income; it can make it difficult to continue to pay the fees.
Fluctuations to just the one household income can dramatically affect your personal finances. When there are two households contributing, there’s a more likely possibility of circumstantial changes making it more difficult to keep the payments going into the school. For situations when others have been contributing to the education costs, the other income cannot be considered in the remortgage application.
Only the household income of the applicant and one residential property can be used for a remortgage - per application. It doesn’t have to be the parent’s home either. Grandparents will be able to remortgage their property (subject to eligibility and affordability) to pay the school fees of their grandchildren. This can be an alternative to releasing pension funds early, which can be implemented from the age of 55.
All lenders assess remortgage applications differently and base their decisions on their own lending criteria. Many have upper age limits and those will be different with each lender. Some will allow borrowing with an upper age limit of 65 years of age, with others going up to 85 years old. For grandparents considering applying for a remortgage to pay for their grandkids tuition fees, part of your assessment will involve your retirement plans if you plan to retire before the mortgage is repaid in full.
For a lender with an upper age limit of 65, if you were to apply to remortgage with them, it would mean the maximum term you could take the loan over would be ten years. Remortgaging at 55 over a 20-year term, you would need to approach a lender that has either no upper age limit, which is rare, or at least 75 years of age.
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Whether it’s funding for early years education, secondary education or the A-Level years at college, or on into university, remortgages can be used to help pay the fees, or fund them entirely. What you’ve paid towards your home is yours and can be accessed through a remortgage. You choose the repayment period you want to repay it at, usually up to 25-years, so you can find that it’s far more affordable than you perhaps thought.
In terms of any other type of finance, when you have home equity, it’s nearly always in your best interest to borrow through a mortgage product as every other financing method has higher interest rates.
The majority of lenders have a minimum of £25,000 that can be released, so if you’re only looking to fund a one-year term, you may find the amount you want is lower than the minimum. Should that be the case, the remainder of the funds can still be released, however, you may need to inform the lender what you intend to do with the money that’s left over.
This could be the case if £25,000 was being released from your home equity and you only needed £8,000 of that. It is acceptable to put the money aside for future terms, such as funding for three full terms.
Another option to consider is to speak with the school’s finance department to find out if they have a Fees In Advance Scheme. Many independent schools have charitable status as they support state schools.
This provides them with a tax break of up to 80% in England and Wales. The more parents there are paying for terms in advance, lets the school put those funds into low risk investments, which is why the Fees in Advance Scheme is able to get parents discounted rates.
The scheme works similar to the School Fees Plan, only it’s managed by the school board instead of if you were to make the investment arrangements and choices yourself.
The charitable status of private schools has received some criticism and even discussions about it being scrapped. In September of 2017, it was confirmed by the Department of Education that charitable status will remain in place for schools that continue to collaborate and support state schools (that’s why they have charitable status).
Every parent wants the best possible start in life from their little ones. Sometimes though, life throws a curve ball and it’s only after a child starts school that it’s identified they have a type of learning difficulty.
Whilst all schools will have learning support available, there’s still going to be a large number of pupils in each class, which you may feel is too high for your child to receive the support they need to thrive.
A lot of areas have schools for Specific Learning Difficulties. These have more experienced and better trained teachers, and much smaller classroom sizes enabling the teachers to better support each child in the class. Some can have teacher to pupil ratios as low as 6:1, meaning six pupils per teacher. That’s a lot more support than a mainstream school could provide.
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State education is free up to the college years. When it comes around to studying for A-Levels, the bursaries available to students are based on the parent’s earnings combined. If that’s over a pre-set threshold it’ll reduce the amount of bursary your child/grandchild can receive.
Should you feel he/she isn’t getting enough funding to support themselves through their advanced education, or they’re considering taking on part-time work because of money worries when you’d rather they focused on their studies, an option open to all homeowners is to remortgage to release some capital and use that to help support their kids through college.
Provided you remortgage with a flexible lender, you can make overpayments towards your mortgage, and borrow-back the amount you’ve overpaid at the same rate, at any time throughout the term of your mortgage. Lenders have become a lot more flexible in recent years.
For a lot of the best deals, you need to specifically ask at the early stages of application for the ability to overpay towards your mortgage, without incurring a penalty.
If you plan on making overpayments towards your mortgage, you will need a fully flexible remortgage deal and let the lender know in advance that you intend to overpay on your capital repayments but you want a borrow-back facility whereby you can borrow back up to the total amount of overpayments you’ve made.
You will only be able to borrow back what you’ve overpaid and not your total amount because your capital and interest will continue to be paid to the lender. Only the extra you pay in will be allowed as an extension.
It’s similar to a Further Advance, but much easier to access the funds, and can be much more competitive if you get a good deal on a fixed rate as that can be applied to any amounts you borrow back from your over-payments throughout the term of loan.
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