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.

Are you getting any CMS?

Just seen mortage rate is low. 100% agree with this

With 1k spare id do £500 into savings, £250 on the mortgage and £250 as an emergency fund.

Our mortgage allows a lump sum overpayment, so currently we are putting any extra into a savings account with a decent interest rate, then will make an overpayment. Is this something you could do? There are usually limits to how much you can overpay so if you were above that you could keep the savings.

Or I'd save it all for a year and make a large overpayment at the end of each year.

Are you completely financially separated from your ex? You own the property wholly in your name? (Well, yours and the bank!)

What are your pension/future plans? Do you envision being elderly in this current home?

Mathematically it makes more sense to save in an account earning more than your mortgage rate. You could keep it in one account that you consider your mortgage overpayment and then you know that you have ot covered.

Also if the mortgage is all on you consider do you have critical illness and life cover etc. you need to look at the whole picture over the next 20-30 years and what might happen.

You might be able to downsize in 20 years time and buy outright with the equity of the sale. I would put the spare money into savings at the minute you can always pay off a lump sum when you feel more comfortable that you have enough savings to cover any unforeseen events. Having the money available if you need it is probably more important while you are young. We used to pay off a lump sum once a year with excess savings if we could afford it, not sure what the rules are these days there can be penalties so you need to plan when is the best time.

Overpay, you can actually take money back out if you need it I discovered! The other reason to overpay is that if it's there, you tend to spend, it's hard not to!

How is this dire?

I'm all for holidays. But OP needs to have a house to live in that's her priority right now. Does your ex pay CMS OP?

For every pound you pay off the mortgage it will save you 3p (3%)per year in interest. Whereas easy access savings accounts at the moment gain you 5p (5%) per year in interest. So I'd put the money into a savings account for now and only pay off the mortgage when the rate is higher than you can get from savings.

I would also save for two years, then when you have £25k stashed away I’d start overpaying the mortgage.

and no I do not think this is at all a dire financial situation. I think you are in quite a good situation tbh especially for a single parent

I would save all of it into a high interest account for X amount of time and then stick a lump in when you’re term is up.

Overpay a bit and think about downsizing when your DC is older, don’t panic.

This is the most sensible advice.

Spread your risk.

£500 off the mortgage and £500 in the highest interest rate account you can find.

Using the word 'dire' is insulting. Some people scrape by paying for food, bills etc with no savings whatsoever.

Or put more money into your pension and use some of the 25% tax free lump sum to pay off a chunk of the mortgage.

My DH did this instead of overpaying the mortgage.

Being a single parent with all the financial responsibility is daunting whether you have 5p in the bank or £50k - obviousy not the same situation but feels similar to the individual

OP you are in a good situation, you have savings, spare cash and own your own home on a low interest rate. Your current financial situation will not stay stagnant IE I a few years nursery fees will disappear etc

Do you want to stay in your house? There is potential to downsize if you no longer need that size house decreasing utilities as you go.

Personally I would put it in a high interest account and transfer half over when it came time to remortgage at a higher rate. Leaving some for easy access, emergencys or treats. If you are young enough it's hard to beat a LISA with the 25% bonus for up to £4000 a year although as a home owner you won't get access to it until you retire.

I'm one of the hated 'boomers' on MN, but we overpaid our mortgages wherever possible. We had massive negative equity in the late '80s (house dropped 40% in value) and we got out of it by paying off an extra £500 a month too.
In your position I'd overpay while you can.

What's the dire bit?

Save for a year or 2. Get yourself a stable emergency back up fund. Then start overpaying £500 a month and save the rest. It's not dire at all. If you didn't have £1K to save a month, that would be dire!