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.

Please see MSE for whether to overpay or save

https://www.moneysavingexpert.com/mortgages/mortgages-vs-savings/

I hadn't even looked at it this way. I just imagined OP to be in that immediate panic of "I don't have a second salary as backup". I'm sorry you're having such a shit time @FreeRider Thinking about it. We have a 2 income household and don't have 1k to spare at the end of the month.

The general advice from the likes of Martin Lewis is it depends on which is greater interest savings or mortgage. At the moment you can get a savings account around 4-4.8% but it clearly makes you feel uneasy then you have it to either make a lump payment (but you have gained interest) at the end of the fixed term or yearly etc.

Personally in your shoes I would be using a savings account with split pot options (tandem and chase have these and reasonable rates). Put £500 a month into mortgage pot £500 into other saving pot (same saving account). Gain the interest then yearly pay off a lump you can also then easily see of you want to top it up from your other savings pot.

This way your gaining jnterest on savings whilst also having a good fall back and reducing the term.

@Whataballsupp you do not have to solve this today or tomorrow. Take a measured approach so you build up your savings but also pay down the mortgage. Is £500 realistic? Does £400 give you more wiggle room?

The tip I give everyone is if you get a pay rise:

• month one enjoy the increase
• month 2 - increase mortgage payments by 30-40% of the net increase, increase savings by 30-40% and use the remaining % on day to day expenses.

Don’t set a deadline to pay off the mortgage just know over paying anything is shortening the term and will save you ££ in interest.

Martin Lewis was asked a similar question on his programme the other week. His advice was, if your savings account has a higher rate of interest than your mortgage, then save. If your mortgage has a higher interest rate, then over pay.

Save it all for now, lump sum overpayment once you're at an even keel with savings, then start overpaying regularly. That's what I'd do with a 3% deal anyway.

£1000 a month spare you can choose to put into savings or pay down your mortgage seems like a rather lovely position that many people could only dream of.

If it’s on a low rate take advantage and overpay it before you remortgage on a higher rate and maybe keep say 3k for a rainy day and overpay beyond that?

Consider the fact that you’re home will almost certainly increase in value. When you’re dc have grown could you downsize to pay off the mortgage early? I wouldn’t stress about it for now because savings for a rainy day are much more helpful, but those savings will give you options when it comes to remortgaging.

what does your mortgage say you can overpay buy per month ?

Providing there’s no threat to your job you know off ?
id definitely pay as much as I could afford each month and bring the years down

keep your 5k for an emergency fund

1000 spare a month isn't anything close to dire. I think you're very lucky to have that much! Some months I'm lucky if I have 10 left - that's dire!

Definitely need to check how much extra you can pay off mortgage usually there are limits. If me I would save up to feel comfortable with my savings and then start to pay extra off the mortgage.

Savings is the better route providing you don't end up paying tax on the interest.

I'd save £300, put £300 in an account for emergencies and over pay the mortgage by £400 pcm.

The limit (on a fixed rate) is nearly always 10% of the balance, unless it's NatWest who allow 20%.

A spare £1k a month?! Very much not dire. Do you read the news OP?

I'd save up to £10k and then overpay. I feel you can cope with more than one setback with that amount.

I would save at the moment until you have a good buffer , several months salary , unexpected big bill money etc , then start paying it down .

In that case put the money aside in a high interest savings account, you'll earn more in interest that you'd save overpaying the mortgage. When the time comes to remortgage this will probably change.

It doesn’t sound like a dire situation at all! dire would be £1000’s of pounds of debt - with no way to pay it off in the near future.

You have a small amount of savings, own your own home and have a spare £1k a month.

Without knowing much more detail, my feeling is you need to build up your savings so that you have more “buffer” in case of emergencies. Once you have that (at least £10K), I would then start ploughing money into your mortgage. Don’t leave yourself short though.

How big is your property? Could you downsize to reduce the mortgage costs? £290k is a big mortgage. Or could you rent a room to a lodger and use the money to overpay? Of course you would need to be cautious with this considering you have children.

So would l

Tell us you've never struggled for money without telling us you've never struggled for money. No problem asking for financial advice but agree with others it's tone deaf to describe £1k spare per month as a dire financial situation. Especially during col crisis.

Anyway, hope everything works out for you. Personally I'd bulk up my savings first then start trickling into mortgage.

Bloody hell if that's dire I might as well off myself now. I earn a good wage but it's now gone up by over £500 a month since I moved in (and obviously my wages haven't). I have absolutely nothing to put in savings, zero, zilch. I'm starting to think the only reason I want a husband is to pay half the bills! 🙃

Don’t worry about naysayers anyone going from two to one income suddenly would panic a bit.

There is nothing quite as awful as having a life plan that radically changes. I would overpay half and save half.

You save until you have 3 months' living costs aside, then you start overpaying. You've got this 👍

I would see a financial advisor or mortgage broker to see if you can restructure your finances and put together a long term plan.
I am not sure if you have this in the UK but I have a mortgage with a savings account linked to it, which we call an offset account. The savings offsets the mortgage interest costs but doesn’t go on the mortgage itself. I can use it at any time and simply transfer the savings out.
In fact, I deposit all my pay into this account to maximise loan interest offset. I don’t pay any tax on the loan interest saved from my savings.

Mortgage brokers work for difficult cases like us single parents. He found me the mortgage and the interest rate was very competitive compared to the big banks. And every so often, the broker approaches my institution and asks for a further discretionary interest rate discount.