Childcare costs and a mortgage 😑

Mar 2025

Background

Sarah and Rob, aged 37 and 31, are busy professionals living in SW London with a household income of £200,000. They bought their home two years ago with a 2-year fixed rate mortgage.

Since then, life has changed. Their careers have progressed, and they now have two young children in nursery. Childcare costs are nearly £3,000 a month. While their mortgage repayments are affordable, they wanted to see if they could reduce their monthly outgoings to give themselves more breathing room.

Their priorities were making sure they could still enjoy family holidays, eating out, and other activities.

Main Issue - Managing Cash Flow Comfortably

Despite strong earnings, the high cost of nursery fees meant Sarah and Rob were looking for ways to reduce their fixed monthly expenses. They wanted to explore mortgage options that would allow them to lower their monthly payments.

The MUVADO method

We undertook the following steps to help Sarah and Rob adjust their mortgage to better suit their current financial needs.

Current Mortgage

Understand their current position first.

• Balance: £630,000 at LTV of 60%

• Monthly Payment: £2,980

Exploring the Options

We discussed several solutions:

• Extending the mortgage term: While this would have reduced payments slightly, the savings weren’t significant enough to make a real difference.

• Offset mortgage: The clients did not have enough savings to justify the higher interest rate of an offset mortgage.

• Interest-only mortgage: Stopping capital repayments and only paying the interest provided the most flexibility and immediate financial relief.

  
  

We discussed the pros and cons of an interest-only mortgage, including the fact that they’d pay more interest in the long run on interest only and potentially increase their mortgage spend over the long term. Sarah and Rob felt comfortable to temporarily switch to interest only.

They agreed to save towards overpayments and would look to switch back to repayment in the future when childcare costs reduced.

New Mortgage Offer

• New Monthly Payment (Interest-Only): £2,325

• If kept on full repayment: £3,030

  
  

By moving to an interest-only mortgage, Sarah and Rob reduced their monthly payments straight away, which gave them the flexibility they were looking for.

The lower monthly commitment of c.£700 on the interest only mortgage can be used flexibly to build cash savings for overpayments and ensure they can still go on a family holiday each year.

Summary

This case shows how making small changes to your mortgage can make a big difference to day-to-day finances.

Sarah and Rob were able to free up some extra money each month at a time when costs were high, without making any long-term commitments.

If you’re in a similar situation and want to see what options are available, book a call below to get started.

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Risk warnings

Your home maybe repossessed if you do not keep up repayments on you mortgage.