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.

UC on take home of £2,400?

When OP has a clear £1,000 left EVERY MONTH?

I hope they are not entitled to UC -
Single and your children live with you - £2,110.25 per month (£25,323 a year)

People on high incomes can sometimes claim UC if they have high childcare / rent

Only those on legacy benefits. The benefit cap means that is no longer possible for new claimants.

I’ve just ran it through entitled to making some assumptions but on take home pay of £2450 and childcare bill of £1k a month for a 3 year old and you would be entitled to UC (about £600 a month) you can claim help with childcare if you have a good income - lots of people don’t realise this

The benefit cap does not include childcare

At lot can happen in the next 36 years, I am really sure you do not need to be worrying about this right now or thinking it is a dire situation. (I have 30 years experience in financial services so am quite literate in a financial sense).

As to what to do, personally I would save up for another year as your £5k in savings could do with a boost, then I would go half and half for a while and then go for overpayments unless you need to use the savings and they could do with being topped up.

I’d get an emergency fund of 3 months expenses saved up, then start overpaying what you can. If you have other debts , though, get those paid off first.

See Dave Ramsey’s baby steps. Worked for millions because the debt snowball method works better psychologically than the debt avalanche.

Someone I know who is a single mother was given a section 21 last week and has just been housed by the council in a hotel. She doesn't work. I think that is a dire situation. At least having a mortgage gives you and your child stability.

OP should check if she is entitled to anything. With a mortgage you don't always get that much.

Definitely overpay anything that you can afford.
The interest rates on savings vs the compound interest on the mortgage makes it a no brainier

Definitely overpay

When we had spare cash the building society recommended saving for a few months then pay a lump sum eg £5000 and ask for the reduction in years. This way you'll have the cash in an emergency but also benefit from a reduced number of years to pay.

How much is it your pension? I would prioritise this over mortgage as investments grow a lot over time plus you get a 25% top up on contributions from the government.

Its easier to overpay mortgage later once your kids leave home.

You are actually in an ok situation. You have a home and a surplus to work with - yay! Step one - pay down any consumer debt you have as fast as you can using the surplus (eg credit cards and car loans). Focus only on highest interest debt. Once that is paid, put that payment plus any surplus into the next highest. Etc. Step two - build up to a bigger savings base - say 10k. Keep in cash (eg a cash ISA). Step three - throw every surplus pound at the mortgage - but also contribute to your pension pot.

The formula is actually quite easy so don't panic.

You could also watch some Dave Ramsey youtube videos. He has a similar plan. You do need to breathe through some of his red neck Tennessee views, but he is a great communicator at the basics and has a very simple formula for financial freedom - basically what I have said above (although we happened upon the same plan more or less).

1k a month spare is definitely not dire. I'm 50. Single parent to 15 year old and can't even get a mortgage as never able to save a deposit as renting:( I think a lot would love to be in your position
It is overwhelming to be newly single parent if never been one but it's good to have stability and your own house.
I'd save half and over pay the other half

Save a few quid first just in case of emergencies, then start paying off as much as you can possibly afford.

If your mortgage and bill costs are £1400pcm, your 5k savings would only cover 3 months of outgoings if you lost your job/became too ill to work (obviously you would get some benefits, so it would be slightly longer, but you see where I am going).

I'd probably aim to get up to 10K in savings as your emergency fund, so while, as others have said you could put away £1k per month, assuming that the interest rates were favourable, once a year/at remortgage/however often you are allowed to over pay, I would overpay, but keep yourself at that £10k, As others have said , if you are overpaying monthly, you could split the £1k between savings and overpayment.

Yes. This is the obvious solution. You have £1k to spare, put half in the mortgage, build up savings with the rest. You’re absolutely not in a dire financial situation at all. Lots of people don’t have anything left at the end of every month so actually you’re doing great.

You can probably get higher interest by saving and when the mortgage term/interest on it changes, make lump sum payment. This what we're planning to do when our fixed rate ends.

I would be contacting the mortgage provider to discuss the potential for an offset account &/or redraw facility. These can make huge differences in reducing interest paid.
your cash is then available if you do need it for emergencies.

Yes let's make it a race to the bottom

Contact a mortgage adviser. It is not always advisable to overpay, and
some mortgage companies don’t allow it.

Apologies if someone has already said this however there are too many posts to read them all. Overpaying a mortgage may not be the best thing to do. If you contribute to a company pension does your employer contribute? If so then that's free money plus tax relief so may be more advisable than paying off your mortgage. Of course if you have young children you may not want to tie up money in a pension until 55 however you should seriously consider if this is a better use of any "spare" money. Good luck.

Putting things into perspective. Funny that is your first reaction and not empathy. Realise you aren't too bad off and be glad about it.

If your mortgage rate is 3% I'd put as much as possible in a high interest rate and once you have a comfortable amount at the end of the year pay a lump some off within your mortgage terms.
When you fix in again, if lower than 3% reduce your years and keep your repayment the same.