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Parents Seek Mortgage Solutions as School Fees Rise

Ensuring your child gets a first-rate education will set them up for success for the rest of their lives. But private school education costs have been increasing for years, and if you have multiple children in the education system how do you combat the escalating expense?


This does not constitute advice and advice should be sought in all instances before acting on it.


School Costs on the Rise

The Treasury’s recent ruling on teacher pensions means that private school fees will undergo the largest increase in five years, even after last year’s 3.7% hike. This, of course, will cause schools to struggle to keep operation budgets under control with no choice but to pass the increased expense onto the pupils, or rather the pupil’s parents.

After an evaluation by the Treasury, as of September, teachers’ pensions will grow to 23.6% of their salary and will cost private schools an estimated £110 million during the 2019/20 school year and an additional £200 million in 2020/21.

Unlike state schools, who are receiving an estimated £940 million worth of funding from the Department for Education to offset this unexpected change, private schools will receive no such relief. It seems this puts administrators in between a rock and a hard place. They either need to pull out of the teachers’ pension scheme or raise fees, both unpopular moves and sure to anger at least one set of constituents no matter which decision they make.


Remortgaging to cover costs

Ideally, you should have been incorporating your child’s (or children’s) school costs at the start of your financial planning journey, but families grow, priorities shift, and fees rise, so you may need a little help covering costs.

One option to do this is to utilise an asset that holds value and where you can immediately access equity – your home. It’s common practice for parents to seek mortgage solutions as an alternative to paying for school fees.

With the Bank of England rate low, remortgaging is perhaps your best bet for seeking a loan. Don’t forget to incorporate interest costs into your financial plan as this option will undoubtedly mean you’ll be paying more in the long-term.


One way to counteract unnecessary interest payments and reduce monthly payments is to take out an offset mortgage.

This course of action puts the funds you’ve set aside for school into a specially designated savings account linked to your mortgage. Each month, the bank reduces the monthly payments in relation to the balance in the savings account, which means the only interest they’re paying is on the school fees as the pot dwindles.


Look for alternative solutions

It’s important to not see remortgaging or offset mortgages as a quick, easy solution to all your private school fee woes; it should really be the last step in your plan.

The best thing to do is to plan ahead and start saving before your children reach school age – or if you know you’ll want a private education for your offspring, before you even begin a family. Turning to your own parents or loved ones to support your children’s education is another option and the annual gift allowance makes this an attractive outlet for grandparents to contribute to their grandchildren’s future tax-free.


We can help you manage your financial portfolio

Working with a financial adviser will help you weave this goal into your overall financial plan and suggest other areas where you can save, and seek solutions to help you save tax and max out your allowances each year. They can also help with your investment portfolio and suggest ways to increase income from investments.

Whether you’re enticed by the option of using your home or wish to seek other ways to cover costs of private school education, Dental & Medical Financial Services offers expertise on mortgage solutions and financial planning so no matter which option you decide is right for you, we can help.


Considering remortgaging?
Mortgages | Buy to Let | Property | Mortgage Planning |

Dental & Medical Financial Services have been helping doctors and dentists with finding low-cost mortgages for your home and investment properties for over 25 years. Call Chris to discuss your options.

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