Weddings can be resoundingly expensive, so much so that the average cost of throwing an ultimate not-to-be forgotten wedding day can take a steep budget of £30,111, according to the Brides Magazine. Money Supermarket put estimates a little lower with averages for wedding loans being between £18,000 and £22,000. Either way you look at it, you’re likely to need financing.
Of all the options there are available to finance your wedding, homeowners are able to lower the cost of finance by integrating the wedding budget into their home by remortgaging to raise the money to pay for their wedding.
A Money Saving Option by Remortgaging
…The offset Remortgage
For those who have already been saving to pay for some of the wedding expenses, you may already have cash savings to leverage by offsetting what you’ve managed to save against what you pay in interest to your mortgage provider.
With interest rates being low, it is possible to sacrifice the low interest payments on savings accounts by linking them to your current account and mortgage, which will get you a lower interest deal.
What’s more offset remortgages can have more than one savings account linked to them and it can be a family member savings account, too. This can be an ideal way for parents who want to contribute to their son/daughter’s wedding day, but don’t have cash available directly. With savings, those can be linked to the mortgage. Instead of paying the cash as a gift towards the wedding, the linked savings would stop earning interest in favour of lowering the interest paid on the remortgage deal.
Essentially, instead of being gifted the cash once, by linking the savings to the mortgage deal, you’d be saving more for the repayment duration or as long as the savings remain linked.
With interest rates favouring borrowers rather than savers, it can make financial sense to sacrifice savings interest in favour of reduced secured finance.
Managing Credit for a Wedding
A marriage and remortgages are both long term commitments, not to be taken lightly. When planning your wedding, you’re going to have multiple bookings, including photographers, wedding venues, videographers, florists, transport arrangements, caterers and many more things. The vast majority of service providers will require a booking fee in advance, if not the full amount paid at the time of booking.
For any bookings requiring a deposit, it’s mostly either paid in cash or put on a credit card, preferably interest free.
When you’re spending on credit, it lowers the amount you can borrow later, the reason being that part of any loan application assessment looks at your current debt levels. Lenders like to see that the total amount of debt you have outstanding is less than 45% of your total income. In the case of joint remortgage applications, that will be based on the total household income and overall debt levels.
If you accumulate debts to more than 45% of your income, it becomes problematic to get finance approved. For that reason, it would be wise to work out what 45% of your income is and use that as a maximum budget for things you buy on credit. It is beneficial to aim for no higher than 35% of a debt-to-income ratio to stand the best chance of approval.
As a working example, if you’re earning £32,000, 45% of that is £14,400. The closer you are to that benchmark figure, the higher the perceived risk is to lenders as you may begin to struggle to afford the repayments. To stay within a comfortable bracket, 35% would be £11,200. So earning £32,000 with debts under £11,200 would be considered a low and therefore manageable debt level.
When you’re planning your wedding if your projected costs are going to be higher than 45% of your income, it may be best to make early financing arrangements.
Find out how much you can borrow and the best deals that are available right now – for free.
Secured or Unsecured Borrowing: Which Makes Sense for You?
Raising wedding finance can be done in two ways, provided you are an existing homeowner. Unsecured loans have an upper cap, around £35,000 but they need repaying over a maximum term of 7-years. That brings with it a higher monthly repayment. However, it can enable you to pay the loan off faster.
Secured finance leverages your home as your asset and because that’s used as security you get access to lower interest rates. That doesn’t mean you’ll pay less interest though because this is a long-term finance agreement, which can be stretched up to 25-year terms.
The choice you have is whether you want to repay your wedding costs over a longer-term, making your monthly repayments lower for longer, or borrow at a higher headline rate and repay it faster.
A remortgage is the key for those who want the most manageable monthly repayments.
Flexible Remortgages to Pay More without Being Penalised
The vast majority of lenders are strict with their terms and conditions and will issue financial penalties where applicable. If you want to combine the options of repaying your loan faster, while benefiting from the fixed lower minimum repayments, you will need a flexible lender who allows for over-payments.
There are lenders who will allow you to overpay by up to £500 per month without a penalty for overpaying. With the right planning, you could use your remortgage to work out how you could secure a wedding with long-term finance and pay it off in the short-term. As an example, borrowing an additional £20,000 from your home’s equity – theoretically could be repaid over a 5-year term by overpaying £333.33 plus interest per month.
If you were to take out an unsecured loan for £20,000 over 60-months with an interest rate of 5%, it would cost £376.41 per month. If you were to remortgage and repay faster, for that same amount, you’d repay the capital of the loan (£333.33 per month for 60-months) plus whatever interest rate you’re able to secure. A 2.75% remortgage deal would save you £20 per month on the loan repayments and lower the amount of interest repaid, provided you stuck to the schedule of overpaying, all the while, not actually being locked into making those additional payments.
If this sounds like something you would want, most lenders will provide that option, provided you ask for it to be included in your deal.
Prior to taking out a remortgage with the option of repaying more, it’ll be beneficial to work out how much you may be able to repay on any given month so you can get your product tailored to your needs. This can be achieved by working directly with an independent mortgage broker who has access to the underwriters of the lender. At Jubilee Finance, all of our advisors are experienced and work closely with our entire lending panel and can get your remortgage tailored to your exact requirements. Contact us today.
Give Your Married Life a Blissful Start with All Debts under Control
Depending on the total amount of equity you have in your home, you could borrow more to combine multiple debt streams into the one manageable monthly repayment. It may be that you’re already paying down credit card balances, perhaps finance agreements for household items such as white goods or your sofas. These smaller repayments can add up to a significant amount that eats into your monthly disposable income.
You could increase the amount of disposable income you have by releasing more of your home equity to pay down existing balances and roll everything into the one repayment.
This is known as debt consolidation and isn’t suitable for everyone. It is something worth considering though, especially at such an important life stage as entering into married life.
The majority of marital problems stem from money. In that respect, it makes sense to have a conversation focused on future financial planning. Who owes what, how much, how long’s left to repay the account, and what’s the overall cost of the credit?
Bear in mind that if you’re remortgaging jointly, any debts moved from a sole account holder and rolled into a joint mortgage, creates a joint and several liability, meaning both people will be responsible for the repayments at any point during the term of the remortgage. This can be a financial commitment running as long as 25-years dependent on the term you take the remortgage over.
As part of planning your finances for the wedding day, you can also take the opportunity to review all your existing outgoings. It could see you save on your monthly repayments as you go into married life, leaving you more disposable income each month.
Obtain free and impartial advice from experts in the remortgage field. Contact us today for a free quotation and find out how we can help you.