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's really no need to be snarky. We needn't have a poverty contest.

OP is grappling to adjust to a relationship break up, being a lone parent and managing the bills alone. And it's a big mortgage if she's had to make it such a long one.

As I said I wish OP all the best and totally understand it's a big change. I stand by my opinion that her description of £1k spare per month as dire is insensitive, not to mention nowhere near a poverty contest!

Not always the case! But some will allow you to not pay for a coupe of months if you have the reserves.

I think it’s a great plan to save some and over pay the mortgage with some. I overpay, but don’t have it automatically going out. That way if I need to hang onto the but I over pay - e.g around Xmas, or if it’s a month with lots of birthdays or other expenses I will skip over paying that month. Only happens maybe 2 or 3 months out of a year, but handy to have the flexibility. Once you start overpaying it’s a great feeling, particularly when you can see the reserve is X amount. And at 3% it’s better to be overpaying while it’s relatively low interest

I would save in a high interest account and then pay off a lump sum in a years time when I know I can live without the extra £500

Save £1000 a month in a high interest account until you have £15k. Then start to over pay instead. Good to have 3 to 6 months cash in bank incase of job loss etc.

I've not seen anyone make the suggestion of reducing your monthly mortgage amount instead of reducing the time. Most mortgages allow you to do this you might need to call them to ensure it's done this way instead of shortening the payment period.

Money is far more valuable now then in 20 years. By reducing your monthly mortgage payment you can build up your savings more quickly and have much more flexibility. While your child is young this is really important.

As pp say, I would save your excess income in a high interest account to 3-6 months salary amount as a safety net. Anything above that is paid off but tell them to reduce the monthly charge. This will compound over time with the monthly amount going down and you able to save/over pay more.

Is downsizing an option? I’d downsize if possible to have a lump sum as a safety net and then put monthly surplus towards mortgage.

if downsizing is not an option, then save the £1,000 and put it into an Isa. When you have enough to cover 6 months mortgage+bills then start repayment.

dont panic about the mortgage just now. The priority is building savings in case of unemployment/cash emergency.

worst case scenario you can downsize when the kids move out and clear the mortgage in one fell swoop.

I agree. She’s obviously anxious and still processing this massive change in her life.

Your sign off doesn't mitigate the snarkiness. And she only has £1k "spare" because her mortgage teem is so long.

It really isn't insensitive to ask for advice when you're unsure what to do. Your problem here is that you've centred yourself in this issue when of course it's not about you.

Do people really have to point out that other people are worse off? I’m sure OP is aware of that but her situation seems dire FOR HER! Recently divorced with a toddler is tough however much you earn and I’m sure it’s a big adjustment to her previous lifestyle.

Check your mortgage agreement if you are in a fixed rate deal because most will only allow you to over pay by around a set % per year/over the term of the agreement. Think mine for example is 9% per year otherwise there are penalties in place.

I would work out how long til your next remortgage opportunity, then put the 1k a month into a high interest isa for that period then pay-off a chunk at remortgage time. This was the advice given to me by my mortgage advisor.

Never claimed it was about me. It isn't. OP's question was "this is a dire situation, isn't it?". I think it is not a dire situation.

I am a single parent like you. I don’t want to wait until my children are 18 to overpay, compound interest, as you’ve seen works well paying at the start of the term.

I don’t have as much spare as you per month but I prioritise overpaying my mortgage. Yes I could put it in savings, but for my mental health having a lower outstanding term, being mortgage free and then being able to have a much lower cost of living afterward is worth it to me.

i think you should get a financial cushion first, a total of £20k perhaps, and then overpay

Find it very uncomfortable that you would describe this situation as dire when you can afford to overpay your mortgage and people are struggling to feed their children and the elderly are dying in the cold in their homes.

no OP, your situation isn’t dire.

You owe your own home and have £1k a month spare?

Thst’s not a dire financial situation by any stretch of the imagination.

You can still do this and use the savings to pay off a larger chunk when you remortgage than you would by dribbling money into the mortgage each month

Most lenders allow you to overpay the mortgage by 10% each year without penalty so that is what I would do in your shoes

I'd save 6 months of living costs. That doesn't have to be what you currently spend, but what you'd need to have if you suddenly lost your income. That should be in an account which you can access without delay, but in practice don't touch. When you have enough you don't need to add to this other than to review the amount every year and top up if needed.

I'd then have some savings in a different account for replacing the washing machine or going on holiday or whatever you need to save. This should be added to month by month, ideally just after getting paid.

And then you can overpay your mortgage. This is last because although it saves you the most in the long-term, you can't access about of it once you've paid.

Don't despair if you can't overpay as much as you'd like. Every penny is compounded. And a cost of living crisis is a hard season in which to overpay! Also bear in mind that over time your mortgage is likely to become a lower proportion of your expenses, and overpaying will be easier. So be encouraged.

Personally I would overpay by 10% so you can see the impact of overpayments and this is also what most mortgage companies allow you to do if on a fixed rate deal but you should check that first. Save the rest and when it comes up for renewal you should have a lump sum to pay off the mortgage.

3% is cheap. Save it all into a 5% ISA until your mortgage is due to renew, then put half into the mortgage, and keep half as savings.

I have a mortgage which will finish when I'm 75, or would have if I'd not paid some extra off. I will now pay it off at about age 62, but keeping the essential payments low has helped me keep a reserve for when things go wrong.

I would suggest overpaying rather than saving, and then if you have an extreme emergency look to draw down on your mortgage if this is possible. If you are disciplined that allows you to pay off your mortgage more quickly and if you desperately need cash when your roof collapses (not just for routine bills) you can take a bit more out of the mortgage to pay for it.

I don't know if all mortgages allow this, but we are with the big Spanish bank and they do.

Could you sell and downsize?

I would put some in savings and some on your mortgage, that way if you end up struggling, you can underpay your mortgage as you've given yourself a buffer.

Honestly though OP, this is far far from a dire situation, if you have £1000 completely spare that you don't know what to do with you're not doing too badly, try not and overthink, as you'll make the decision much bigger and scarier in your mind.

fuck me. if that’s a dire financial situation you’d struggle to swap lives with the majority of other single mums or even couples

Agree

Personally I would set the overpayments up to go automatically and do it now as you don't get used to having the money. Put the rest into savings if you can, hopefully salary etc will go up over time. If you have kids will maintenance be incoming as well which should help.