This is a dire financial situation isn’t it?

[Whataballsupp]

I’m recently a single parent. I own the home we were both in and now I’m obviously paying everything for it, mortgage and bills around 1,400 a month. The mortgage I owe is 290k, I’m 36 and it’s still got 36 years left to run on it.

At the moment I have a spare 1k a month. I am trying to save this as I am now a single parent and who knows what is going to happen. But I’ve just looked on an overpayment calculator and if I overpaid mortgage by 500 a month for example, it takes around 20 years off the mortgage. Even making that overpayment for a year would cut down a few years I have to pay it off.

Should I be saving or overpaying? I am panicking as it’s just me and I have only 5k savings overall at the moment. Don’t know what to do.

Instinctively, I would overpay - you don’t want to be paying your mortgage when you’re 72. When it’s time to remortgage, maybe look at offset mortgages where your mortgage is linked to your savings. I am no financial expert though, so hopefully someone who is will be along soon!

Panicking isn't going to help anything, and I see no need for you to be panicking now, anyway. Is that spare 1k totally extra money or is that needed for food, petrol, phone, etc?

Thanks @AgentProvocateur

@Aquamarine1029 its just what I would usually put in savings. I feel in such a scary situation as I am paying everything alone now

It's not dire no, but it's not great. 72 is insane. So just make the over payments on the months you can, you don't need to overpay every month.

I'd do half into mortgage and half into savings.

I would save for a year and build up a nice lump of savings for myself and then in a years time overpay.

You sound really sensible and it looks like you can do both. £500 saving and £500 onto the mortgage. Having the entire weight on your shoulders and it sounds like you’re panicking. It’s normal to feel overwhelmed, do you have someone you can speak to? Or consider down counselling. It can really help. Best of luck.

Have you checked if there is an annual limit as to how much you can overpay? If so, that might help your decision.

When are you due to remortgage?

Put the 1k a month into a savings account with an interest rate which is higher than the one the mortgage is on, Pay a chunk off at remortgage time - leaving some in savings.

Rinse and repeat, that way you have access to the savings if something happens but you're also reducing the interest paid on the mortgage too

This is what I would do, or even $700 into saving and $300 for overpayment.

I'm not understanding- you have a 'spare' 1k a month? With 5k savings? Unless we're talking Vietnamese Dong, that's the opposite of dire.

It depends on too many factors, eg. your potential pension, how many kids you have now, how old they are, whether you need to support them through uni, future earning potential/changes for anyone to advise.

But your situation sounds very much not dire.

I would save it and wait a few years until your dc are older to worry about mortgage. What if boiler goes etc? Also you'll want holidays while kids are young. At 36 you've got a few years until you need to worry. Get to 45 then try and knock 10 years off plus rates may have gone down by then too. Or wait until your fixed rate is up and see what you can do with your renewal

There are a few things here:

1. can you afford to overpay or would you be making sacrifices
2. can you afford not to overpay and continue running the mortgage til age 72
3. ALWAYS use an overpayment calculator, I bet you are better off at the moment putting the money into high interest savings then considering whether to overpay at your next renewal/ when they mature
4. can you even overpay on your current mortgage deal?

Depends what your mortgage interest rate is vs the best savings account rate.

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/

The above tells you what would be more financially astute.

Child is only 2.5.

I can see on an overpayment calculator that the sooner you do it the better (I suppose that was obvious but I hadn’t considered it until now).

I feel sick at the thought of never paying it off which is likely if it remains 36 year term

Mortgage rate is 3%

At this point in time, I would keep your payments as they are as at you have a child/children so it makes more sense to have that extra money now.
Don’t worry about how many years the mortgage is until they leave home and you then have more spare income. Also in ten years or so, the mortgage will feel easier to pay, as the amount owing will have gone down, so start paying more off it then.
I might not be explaining this too well as I’m just another parent but from experience, that’s what I would do.

I'd overpay 500 and save 500 personally

Conversely though, if you can afford to continue paying through til age 72 and enjoy your life now rather than scrimping and saving for something which may still never happen?

I suppose I’d feel more comfortable owing 200k rather than 290. Mentally that feels more manageable

Overpay the £500, plut the other £500 into an ISA. Or do a bit less on each if your spare £1k slso needs to pay for holidays and nice things.

Overpaying your mortgage saves a tonne in interest and, as you've seen, shortens the term significantly. An ISA is a tax efficient way of building up savings.

At the moment, this is below the cash return on investment. Overpaying the mortgage won't be rational in this case, not until the 3% fix is over.

I’d do what a PP said and save for a year (maybe 2) until you’ve got a nice big cushion. After that, start overpaying like mad.

In your position I would want an easily accessible safety net and would work on building a decent lot of savings first. Around £20k. Do you pay for childcare? If you do, could you plan to funnel some of that money into overpaying the mortgage once your dc starts school? I think if you have a plan and a growing pot in an ISA you’ll start to feel less panicky quite quickly.

That said, our mortgage provider allows payment holidays so we do overpay, knowing we could skip a month if we needed to for some reason.

Would you be willing to take in a lodger? You could overpay or save a lump and chuck that at the mortgage next time you re-mortgage to bring down the capital.