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.

You are not in a dire financial situation. You are slaying it! Dire is a food bank and sleeping on a friend's floor.

My, I think of it as conservative view.

You have positive cash flow now, but very few people can guarantee income for decades, if you overpay you loose flexibility.

If there is an offset mechanism attached to the mortgage use that. Overwise some savings account (be that cash, shares etc. or a mix).

Should something happen to your income stream, and you have put lots into overpaying, then you will quickly be in trouble, even on a modest mortgage.

If you have the money under your control, ideally in an offset, you can use that money to keep things afloat, while you sort the income or downsize or do a moonlight flit, whatever it is, you get to do it on your terms.

To be fair, a "spare $1000/month" does not sound that dire.

all of this is fine - it is just dire is the wrong word and unkind to people who actually count piles of 20p pieces into one pound units

This is ages away. Stop worrying about this so much will change by then. Enjoy your life now and save what you can..

I’d open a cash ISA, before April, transfer the 5k and save the £1k monthly to the ISA. Savings interest rates are very good at the moment. It makes financial sense to save at present than overpay.
Unlike before, when mortgage interest rates were really low. It made sense then to overpay than to save.
You can revisit it later on.

What I do is every month what is left over in current account goes into my mortgage offset account and I don’t pay mortgage interest rate on that amount. Then just before end of the tax year I divide what’s in there by 4
A quarter stays there as rainy day fund
A quarter goes to overpay mortgage
A quarter goes to retirement savings - pension and ISA/LISA
A quarter goes to renovation loan repayment.

the loan repayment is higher interest than mortgage so I should put half there an wait until that on paid off until overpaying mortgage but i just need to see both numbers coming down.

I think what is "tone deaf" are the posts by those wedded to competitive poverty. Like, "If you have more money than me then no way am I gonna be anything but an arsehole". So bitter, so petty.

Anyone with so much as a shred of emotional intelligence can read the room here: OP is dealing with huge life changes and could do with a little encouragement.

And her situation is pretty dire. Anyone with a 36yr mortgage has a hell of a long road ahead to financial freedom.

Absolutely agree

Appreciate it's tough to be single parent, but 1K per month is a lot of money

I'd focus on building savings to around 15-20K, then overpay mortgage. Look out for early redemption penalties. A way round that might be to vary the term of the mortgage, but then you are committed to paying the higher amount

As an aside, I'm surprised you have a mortgage due to end when you're 72. Is that common now?

Thanks. The other option would be downsize now but I only have around 240 equity so I’d obviously still have a hefty mortgage

You're coping fine. Don't act rashly and regret it later, moving house would cost a lot. Your wages will rise, inflation erodes aspects of the debt, you can pay some off... in even just 5 years it'll look very much easier.

Dire is not having an extra £1,000 a month
Dire is not having 240,000 equity in a property

Dire is having to decide between heating and eating

Honestly, just overpay. You will be so pleased seeing the balance coming down.

Well said...

Also highlights to me again how glad I am to live where I do when I'm living in a beautiful 3 bed semi in a nice area with front and back garden plus a driveway currently valued at £165,000!

People saying my wages will rise. I had a 2 percent pay rise over the last 3 years so I am far from hopeful and in a very male dominated industry.

Yeah nothing about this is dire.

@Ratherstandonacliffandsetfiretomyself where is this please?!

I feel the same financial weight as you op. I understand it's not dire to some people but it's still not good.
Tbh, I'd split it in favour of the mortgage if that's your main stress. Maybe £400 mortgage, £400 savings, £200 instant access savings for things such as days out, holidays or unexpected household bills. Everyone goes on about savings being a higher rate than the mortgage - which is true, but 3% of £290k is a heck of a lot more than 5.5% of £3k.

North East. Don't want to out myself but a small market town - good areas and bad areas like everywhere else but even the most expensive houses in town are about £500k (and we're talking 5-6 bedroom detached in the nicest area)

Can't see if anyone's asked but are you getting any UC - you might qualify if nursery costs are high - in which case you don't want to have more than 6K savings.

If so I'd keep the 5k as an emergency fund and pay down the mortgage. If no UC - then they recommend at least 3/6 months expenses saved before paying down stuff. Once you've got that start chucking what you can at the mortgage. 36 years is a long long t8me away, the more you can pay down the better. How long is your fix for ?

I really dont consider a mortgage the same way you do. For us, its having the security to know we can always live in our house, we’ll never be ‘turfed out’ which renters often live with the fear of and we know whatever happens, we have our home. I don’t think many in their 30’s/40’s now expect to pay their mortgage off early on and our generation is most likely working till late 60’s/early 70’s anyway.

If I was the OP, i’d concentrate on building up savings in case something happened (illness etc) and she couldn’t work for a period of time. Get a nice big chunk of money and never touch it unless its an emergency.

Nothing in her situation is dire but I understand she must be feeling the pressure of now being on her own financially.

“For us, its having the security to know we can always live in our house, we’ll never be ‘turfed out’ which renters often live with the fear of and we know whatever happens, we have our home”

except - your home may be repossessed if you don’t keep up the repayments on your mortgage….

until age 72 in this case

We make sure we have savings, he has cover with his work so would be paid through illness and our mortgage is very manageable. We bought 10+ years ago and made sure we didn’t stretch ourselves to the limit to allow for me being a SAHM/part time hours through our kids younger years. DH is in a job that isn’t relient on the economy doing well/worked all through Covid so his job will always be in demand.

As long as OP hasn’t overstretched herself (which she hasn’t), she is more than likely to earn more in the future and she sounds like a sensible saver. No point overpaying her mortgage if a few major things go wrong at a similar time and she cant afford them (car/roof/boiler etc). If she needed a new car, her savings would be gone. At this present time, i’d be building up the emergency savings and look at overpaying when she has a couple more years of savings in the pot.

OP I wouldn’t downsize, as the house will further increase in value as you overpay and as prices generally go up….unless of course you and your child are living in a home which is vastly too big for the 2 of you.

a poster a live rightly pointed out 3% on hundreds of thousands is more than your savings will give you.

ensure you have a cushion for illness or major household problem or new car. Once that kind of bill could be taken care of overpay your £1000 and it will help you to relax about tha
t coming down rapidly

Check your mortgage.

If possible, overpay the maximum you can. Usually you can take a payment holiday up to the amount you've overpaid if a true emergency ever arose.

If you are in a fixed period, you may have a cap of say 10% of the loan value (29k per year). Not a problem now but as the overpayments make a dent you'll see your spare/non overpayment money increase