Please can someone help, panicking so much about mortgage

I know you're stressed, but this doesn't seem too awful:

• Rates may have decreased a bit by then
• Your income may increase by £100 a month by then
• You're already saving £350 a month, so you're almost there
• The £50k can generate some interest for you too, which will help a bit
• If necessary you can use some of the £50k to supplement.

I wouldn't downsize unless you have more space than you need and it would massively decrease your mortgage, because of the costs associated with moving.

I think it will be ok

OP - I could have written this post six months ago. Very similar situation - single parent, mortgage rate about to expire, bank told me the monthly payment would go up by about £600, total fear. I went to a broker (I used Tembo) and have remortgaged with the monthly payment only about £150 higher. £150 is not nothing, obviously, but it’s a lot more palatable than £600! It’s also a five year fixed rate and I am hoping / planning for my income to increase over that period too so the hit will be less. Don’t give up.

Depends on your mortgage terms. I can overpay by 10% per year without penalties so you can make 28k payment now to reduce your compound interest and then the rest when you come to renew.
I also see you save £350 a month. Unless it is in high interest rate ISA or high performing investment account, you will probably be better off funneling it into your mortgage overpayments.

Where are you getting 6% from? I have a very high LTV (bought four years ago on a 5% deposit) but just fixed at 4.85%.

Why 6%? I just looked up on my lender website (HSBC) and the current rates are circa 5% for 85-90% % LTV and around 4.7- 4.8 for 60% LTV.
I don't think you should realistically be expecting the rates going down to around 2.7% in a years time. I would definitely use this 50K to pay of the chunk or your mortgage. This, and a potential of £100 extra from the promotion will make your future repayments easier. Shop around for the best lender, too.

@Pancis125 people have outlined things you can do. Speak to NatWest, they may be able to offer you interest only, which if you can be disciplined enough to save alongside means you will just pay off differently in the future.

Do not use the 50k now to pay off - you should have it somewhere where it’s earning you more than your current rate of interest. If you want to use it to pay down your capital you should be able to do this at mortgage expiry, although I would suggest you hold back 10-20k emergency fund.

are the rates you’re getting your renewal rates from your lender when you log in? Or just from what you hear in the news? With an LTV of 50% or less then you’ll be eligible for a better rate than the rates talked about in the news.

It’s a strict rule but lots of income sources can be considered. Salary and also any bonus, car allowance, child maintenance whether court mandated or not.

I'm so sorry OP, I totally understand why this is so stressful, and bearing the burden of that stress alone is very hard.

Speak to a broker sooner rather than later. They will be able to advise. Banks absolutely don't want people to default on their mortgages because they lose a lot of money in repossessing and selling properties, so with a broker on your side you have a good chance of securing a deal you can afford.

Before speaking to a broker do a really careful review of your finances to work out the absolute maximum of what you can afford (without risking what you require to provide for yourself and your child) and go from there.

You're in the most stressful part at the moment, with the most unknowns. When you start taking steps to find a solution, you will feel better.

I earn a similar amount. What else is your money going on? You must be able to cut back?

You have time though to prepare for this.

Reining in spending and making sure your budget is absolutely at the minimum for things that aren't necessary.

If you have access to 50K then lets say you have the ability to pay half of the discrepancy (which your savings indicate you do). So £300.

At that rate 50K would last you over 13 years of payments to say nothing of the interest it would earn.

On top of that you have the option to look at employment options, both pay rises and new jobs.

This. Time to start making plans.

One thing I wouldn't do is panic. No-one knows what will happen tomorrow let alone next year. Even just now the BofE have held interest rates, so that will help.

In the new year, go see a couple of brokers. It may help to get out of your existing mortgage early even if there is a small penalty.

And spend between now and then really looking at what you are spending and how you can trim it. I assume you aren't shopping in Harrods each week, but there are probably a few savings here and there.

And what is your equity/LTV? If that is good you may get a better rate

I would absolutely use at least some of your inheritance money to offset the capital while you are still on a lower rate. I know it feels soothing having liquid assets but it's of no help to you if you are struggling to afford your mortgage. I obviously don't know the terms of your mortgage but a quick run of basic calculations suggests that at hypothetical 6% you will be saving nearly 90k in interest over the lifetime of your mortgage if you overpay by 50k. Which is a very good deal.
Assuming you are somewhere in the region of 30y term, paying 50k now would reduce your monthly payments to 1,3k a month which, I appreciate, is still a lot but not as bad as 1,6k
You can then consider how you are going to make the shortfall either through extra hours at work or renting a room to a nice female mature student bringing you additional tax free £650 a month.

Maybe a side-income? Maybe you could compress your hours to work 4 days on full time salary, and on the fifth day try to bring in a bit extra?

This sort of arrangement could tide you over a sticky patch, but you also don’t want to exhaust yourself.

If the mortgage really is too much for you, speak to your lender to see what they can suggest, but long term I would look to move somewhere cheaper and more sustainable long-term. The stress of financial insecurity is horrible. I live on one income so I know it is difficult x You have time though - 11 months to figure this out, no need to despair.

This is a good point.
You have an extra £350 a month to play with. That plus popping some of your inheritance in to pay it down should get you where you need to be?

How about switching to interest only for a while but overpaying whenever you can?

Exactly, tell them that and they should be able to help you before it becomes a problem.

But you’re saving £350 a month now and will get a £100 pay rise, so that’s £450 a month to put towards the mortgage. Reducing it by £50k might meet that extra, or at least a bit then cut back on some extras.

Don't panic. You have nearly a year to work things out.

I think it is unlikely that rates will come down so it's sensible to plan for 5-6%.

If you can use the £50k to reduce the mortgage debt, that should bring payments at 6% to closer to £1200 which is more doable than £1600. You may also be able to access a better rate if you can improve your LTV.

You will also be able to improve your LTV (and so maybe get a better rate) if your home has increased in value since you last mortgaged it. What was it valued at then and how long ago was it? Might be worth getting an EA valuation done (this is obviously not the same as a valuation by your mortgage co but it's a starting point for you to consider asking them to revalue. It's also free.)

Any scope to save a bit now to use if needed next year?

£350 a month saving is great. That’s £4,200 a year.

i know it’s easy to say and hard to do but please don’t panic. As PP said, you can draw on the £50k to meet the extra mortgage payments when it comes around.