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.

There will be a limit. It’s usually around £10,000 a year so I’d be careful or you will end up paying a redemption penalty.

Another vote to stash the cash.
I think you'd feel better emotionally if you saved the £1k pcm until the end of the year, now you've got a tidy 17k to bounce between the highest interest easy access accounts you find each year .
Then, in January 2025, all guns blazing to the mortgage not worrying that actually you might need that money if the shit hits the fan. Happy New Year to you!

You really don't need to panic.
You can afford to overpay AND to save.
I would upweight saving until you have an emergency fund of 6 months' living expenses.
Then, slightly upweight your overpayments.

Your wages will increase even if only with inflation, meaning it will get easier and easier to overpay. Yes overpaying earlier on reduces your interest payments the most, but even small overpayments make a big difference.

Based on the stats you've given, if you overpay by £200 a month you will pay your mortgage off 8 years and 8 months earlier.

By £300 a month and you'll be paid off 11 months and 7 years earlier.

So I think...you'll be fine.

Don't worry about your debt. It's an efficient debt, and you are usually better off using money now (to invest etc), where it will work harder for you, than putting it into your mortgage. It's a "good use of balance sheet" to have a decently priced mortgage.

Save half, pay half off the mortgage. Once you get a years bills in the bank continue to pay chunks off your mortgage.

This definitely if you can

I'd do this. The x12 months savings added to your current £5k pot would give you a decent safety net. Then I would look into making overpayments on your mortgage.

I don’t think your situation is dire and tbh, the state pension will be that age by the time you retire. Im older than you and its currently 68 and expected to go up. So realistically, a large proportion of people will be working till at least 70 from our generation.

Personally, I would save some more money (you sound like you are a sensible saver who isn’t going to splurge it) as you have so many years left of work and you are more than likely to meet someone else and circumstances change. I would say with only 5k of saving, what if you had a year of needing a new car/something big with the house?

This is a good plan. Do both. Breathe deep. You can do this.

I agree with others - you can get more in interest on your savings than you are paying on your mortgage. So I would save it. However, when your mortgage fix ends and the interest rate becomes higher than the best savings rate you can get, then is the time to put it on your mortgage?

Mmm in your position I personally wouldn’t over pay. Just pay the bills and save what you can for a rainy day and get through the next couple of years and see where it takes you.

If you can save a little it’s probably more advantageous to have some money in the bank for if you need it quickly rather than overpaying the mortgage.

Just because your term is 36 years doesn’t mean that’s what it will end up being. You could downsize, sell, rent etc in the future. Who is to say you won’t go on to meet somebody new in a few years and set up home together?

Id just focus on maintaining stability for now.

2.5 year olds are really cheap to run......tbh these are the years I'd be ploughing the money into my mortgage. Its a no brained to me, when she's a teenager is when you'll need to fund a lot more so may be less able. I'd build my savings up to 10k then put the 1k a month into the mortgage, you can always adjust it for the months you need more cash.

This.

Fuck me, if your situation is dire then I may as well give up.

By all means ask for advice but please try and limit your anxiety, £1k per month to play with is not dire. I’d also do a combo of overpaying as much as you can without penalty and building up savings.

I scrimped and saved to pay off my mortgage. In hindsight, I should have travelled more when I was young and fit, and let the mortgage run longer. I now have the money to do things but not the health.

You're actually in a very fortunate situation compared to many. It's a nice choice to be able to make.

I would keep saving until you have six months full expenses in savings. Then put that somewhere you can't spend it.
Then I would make a regular overpayment. The sooner you start paying it down the better. But don't be a slave to it. Start off with something you comfortably afford and notch it up as you get payrises.

This is exactly what I would do. You don't have to commit to overpaying on the mortgage so if one month you need to boost the savings more then do that.

How much total savings do you have now? I would recommend holding at least 6 months' salary worth. If you earn 2400/month then build up £14k in a high interest ISA account (this means stocks not a cash ISA at the moment) because that will protect the interest from tax.

Then before overpaying I would consider fixing any of the following if they are issues:

Do you have an occupational pension?

What tax bracket are you in? You may be able to reduce your tax liability by paying more into a pension.

Do you have any years missing from National Insurance contributions? For some people, it is worth it to fill in missing years. Martin Lewis has a guide to estimating whether it makes sense for you, although you have enough of your working life ahead that you might be on track for a full state pension anyway.

Only then would I look at whether it makes sense to overpay - I think it is more likely you will be better off if you save into a high interest ISA than if you repay although it depends if you need to change your mortgage deal in future and what the rate would be. Your savings won't exceed the annual ISA allowance so you will be able to protect all the interest from tax. If you did an index tracker fund ISA that just tracks the whole stock market that might well be better than repayment - over a long period that usually gives the best returns (on a short term basis it will be volatile though), and you would be able to take money out if you needed to in an emergency.

Your situation is not dire by any means! you sound like a grafter so keep going!

Only on mumsnet is being a single parent, having 1k spare a month and being able to pay your mortgage off alone in 16 years considered ‘dire’ 😂

Can you actually overpay though? Some mortgages don't allow it. 50:50 if you can. Try and lock into a regular saver, rates are quite good at the moment. Aim for six months living expenses minimum.

@Whataballsupp There are bank accounts paying 5% interest at the moment. If your interest is less than that, it makes no odds as to whether you overpay on your mortgage or save it up in a bank account paying interest (bar tax on interest made).

I'd therefore save it up, and give myself financial flexibility personally.

Op, your situation is not ‘dire’ on any planet, and frankly to many on here could easily be seen as a stealth boast. Think about that..

How much equity do you have?

A single-parent relative was advised that when she got a pay rise to pay the extra every month off the mortgage rather than spend it. She did this and said she didn’t ever miss the money as she’d never had it and paid off her mortgage around a decade early - on what had been a 25 year mortgage. Worth a go - if you can make a limited number of extra payments a year save it in a separate account and pay it off once a year. Good luck whatever you do x

I suggest you do some reading around personal finances. The Rebel Finance School is a great place to start.

Do you have an emergency fund of 3-6m expenses readily available? If so, you can start to think about other uses. Do you have expensive debt? If so, pay that off. At 3% you could outearn that either in savings or investing, if you don’t need the funds soon. You could save at 5-6% until your mortgage deal expires, in which case bring the capital down from the saved balance before remortgaging (if it gets your LTV down to a better rate.) Are you paying enough into your pension? Remember it comes with a tax benefit.

Lots of things to do before I’d pay off a mortgage at 3%.

I have 4p in my bank account...and I estimate I will run out of food in less than a week. I don't get any money until the end of the month. I owe EDF £1.5K and don't have a hope in hades of paying it.

I suggest you spend a few quid out of your savings, buy a dictionary and look up the meaning of the word 'dire'.