New free childcare scheme could improve parent’s mortgage affordability

31 Aug, 2017

Parents with preschool aged children looking to take a step on or up the property ladder could see a 17% increase in the amount they can borrow once the government’s new free childcare scheme comes into play, says Yorkshire Building Society.

From September parents with children aged three and four years old could be eligible for 30-hours free childcare a week, meaning they could potentially pocket more than £210 each month.

With the estimated average monthly cost of full-time childcare reaching a whopping £963.56, parents could see a dramatic increase in the amount they can borrow for a new home or additional loan.

For example, a typical couple both earning the national average salary of £26,156 with a youngster in full-time childcare receiving the universal free 15-hours childcare a month could borrow a maximum of £182,528 with the Yorkshire over a 25-year mortgage term.

However, if they receive 30-hours free childcare the couple could borrow up to £213,244, an increase of £30,716.

Charles Mungroo, Mortgage Manager at Yorkshire Building Society said: “An expanding family usually means there’s a need for more space, which can be a struggle for parents who are shelling out almost a £1,000 a month on childcare.

“The new government initiative is great news for parents’ ability to buy the home they want. The extra cash will really make a difference, particularly for those looking to move on to or up the property ladder.

“Parents who are happy in their current property could use the extra cash for home improvements or an extension. They may also consider making overpayments on their mortgage to pay it off quicker. A word of caution though, most lenders will charge borrowers if they overpay beyond a certain percentage of their home loan, so always check the small print first.”

Parents can refer to the criteria outlined on the government’s website to see if they are eligible for 30-hours free childcare.