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.

Agree--with this pp. Just save the 1000 monthly until the 3% rate is over and you have to remortgage into a higher rate. You should take the benefits of the low 3% rate for as long as you can.

I agree and immediately thought the same. Then after a year review the situation.

'Dire financial situation?' Really??!

1k a month spare is not dire FFS.

This is great advice. 36 is relatively young and with your good approach and attitude you will clear the mortgage eventually. Plenty of time when you are over the shock of your split to reassess the situation. Give yourself a breather for now and just let the mortgage tick over while you build up a saving cushion to give peace of mind.

Check out Rebel Finance School on You Tube. Watch the first 10 videos and it will help you decide what to do.

Due to divorce I am 53 and have a mortgage until I’m 73. I don’t have much excess money each month but have been overpaying by £100 a month and have managed to knock 3 years off already. I try split whatever I have left each month into my savings, keep 3 months salary in there then pay any excess off my mortgage in lump sums. Slow and steady wins the race x

I'd save until you have at least 3 months, ideally 6 months salary in the bank. Use regular savings accounts currently at 6-8% and anything else at over 5%.

Once you have 6 months salary you have a safety net for most eventualities. Then I would hammer that mortgage. But don't forget life is for living, and life as a single parent to a toddler can be tough,don't make things harder for yourself, things will get better as your child gets older and with less nursery fees.

I'd save for 1 year. £12k+ £5k is a nice cushion to have. Then I'd start overpaying.

I'm a single parent, lower mortgage than you, OP, have income from a lodger on top of salary, and I very rarely finish the month with anything to put into savings. I think you are panicking because your situation has changed, but I struggle to sympathise with your 'dire' situation because a spare £1k at the end of the month sounds like sheer luxury to me. I'm also aware that lots of people have it even harder than I do.

Your DC is young. Teenagers are expensive. I would also save up until the end of the year until you have a bigger cushion (frankly, would love to have £5k in savings but also see that more is probably better). This will also give you a chance to see what you're actually spending. Are you already putting money aside to cover a holiday, car costs, home insurance etc.? If not, you don't actually have a spare £1k a month and should allow for those things.

My house just eats money - boiler problem, broken gutter, something breaking down... I am constantly robbing Peter to pay Paul for things I have to sort out.

Once you have a bigger savings pot and also an idea of what you're spending on upkeep of your house etc., I would split the £1k (if that is in fact what you have after you account for literally everything else) between savings for DC, instant access for ongoing home maintenance, savings, and mortgage. Maybe in a ratio of 100/200/300/400. Once you reach a certain level of savings, you could put more into the overpayments.

So... If you save 500 pm for the next 16 years, you will have £96,000 plus interest.

But you could have paid off your mortgage instead (age 52) AND save yourself 20 years of paying a mortgage (which would have been to age 72.)

It's a no brainer. Overpay on the mortgage.

This - once you have a decent buffer overpay the whole lots.

eh? not really!

I’d definitely be looking to overpay. 72 is a crazy age to still have a mortgage

By 70 a lot of people are not able to work or only part time.

I would be putting £300 a month into my LISA to save towards a pension, and get the government top up. Then £350 savings and £350 over payment. All basis covered.

But whilst it’s scary, I’ve you’ve got a grand you can save/over pay a month, then no. You are absolutely not in a dire situation.

I think people should give OP a break. You do feel financially vulnerable when you are recently on your own, particularly if a former partner had a much higher income, and I'm sure she knows there are people worse off than her.

That said OP does not have a lot of savings and is vulnerable from that pov. £5k could easily get wiped out by illness, an accident or something going wrong with the house. She really needs to prioritise building up a buffer.

There is a lot of bad advice on this thread about overpaying. Even if OP just put her surplus in the current highest paying instant access cash ISA (an unimpressive 5.09%), she will be better off by £45k in the long run than if she overpaid £500/month. If she saves on overrepayment fees she will be even better off.

OP, take your time - don't rush to overpay. And make sure that whatever you do, you are happy that you understand the benefits/risks.

1.4K for mortgage plus all bills is really low, the mortgage alone is over 1k. Does that definitely include everything? Insurance, travel/car, maintenance and repairs?
it is a long mortgage but you could consider just downsizing after kids leave home and being mortgage free at that point?

We can overpay 10% so we save in a high interest account then review every Jan and often pay off 10%. The rates for savings are currently higher than mortgage so some years we haven't paid over but on balance prefer to be reducing the mortgage. I think this option allows you flex, if you suddenly need cash you've got it to hand. Our mortgage doesn't allow holidays so that's a factor and we also then have to ring and ask to reduce the term rather than reduce monthly payments and doing that monthly is a pain, for some mortgages that's easier. I like to have the safety of the cushion through the year rather than sinking it into mortgage each month but you need to judge on your own situation

I speak as a single parent now in my early 60s with adult children now in their 30s (can't believe where the time has gone). I wouldn't worry too much about the mortgage. I don't know how old your children are, but in, say, twenty years' time, they'll be independent of you, and that's the time to make serious overpayments on your mortgage. For now, make sure you have that savings safety net as it will give you peace of mind, and spend some of the extra on doing nice things with your children. They won't be young for long. If you have £1000 margin every month, you're in a very good financial position.

I was comparatively late getting a mortgage, and when I took it out, I was due to pay it off at age 65. Once I hit my mid-50s and my daughters were financially independent, I massively increased my mortgage payments and paid the whole thing off quite painlessly by age 60. It's likely that you'll be in a similar position.

Honestly you are not in a dire financial situation if you have spare money each month and savings. Believe me I work with lots of people who barely earn what they need each month and have no savings. I would be overpaying the £500 a month. You will still be building up savings and you will have got rid of the mortgage by the time you retire. If something changed and you thought you might need bigger savings, say you got diagnosed with a disease that meant you would probably end up taking retirement on health grounds, you could stop the over payments to build up your savings more, but at the moment I would say to get to retirement with no mortgage would be the best thing to do.

You’re on a 3% mortgage at the moment which lots of people would give their right arm for.
First check how much you can repay without hitting penalties and then also what those penalties are.
Discount the idea of a lodger if you have a 2.5 year old.
On the face of it, save the money into a high interest or fixed rate bond at 4.5% + and then, assuming you don’t need to dip into it before, take a chunk off when your remortgage rolls around and go for a more favourable term. Then overpay month by month by whatever you feel comfortable with and squirrel the rest away.

Not a dire situation but 36 year mortgage is less than desirable.

There’s definitely nothing dire about having 1k spare every month or the luxury of being able to save/overpay the mortgage 🙄

Could you not just sell up and buy a cheaper house with a smaller mortgage, you don't have much of a safety net at present

I think people are right to highlight that the “dire” language she used during a time when many are struggling even to pay bills, is offensive to a lot of people. Not to say she shouldn’t worry about her situation, get advice or try and plan. But it’s a bit tone deaf to say she is in a dire situation isn’t it?