Is this a risky plan as a single parent?

[Singlepp]

I can currently afford to save 950 a month. I live in constant fear of losing my job as I am so frazzled all the time with ds but so far so good… ds is 15 months.

Ex pays decent maintenance and so far this has covered all DS’s expenses including nursery.

Im aware both my job and or maintenance could change at any time, so I want to be realistic. I have so far been saving the 950 a month and have 17k. However I have a huge mortgage. If I put the 950 into my mortgage every month, then in 3 years I would owe 185k on a 560k home. Would it be silly to do this and not have cask available? I feel so stressed about the mortgage and would love to only owe 185k by age 40. But I feel I’m in such a worrying situation as a single parent. Do I just accept I will always have this massive debt or would you risk less savings and plough into paying off?

*cash not cask!

if You can get an interest rate on your savings that’s higher than your mortgage interest rate, better to save.

@Peonies12 yes I’ve found interest of 5.25 and my mortgage is 3. But the mortgage causes me huge huge stress

Use the savings account for mortgage money so you get the interest then in three years or at the end of every year if that feels more comfortable, pay a lump sum.

Is there any likelihood of you moving in the next few years? If so then a higher rate savings account would make more sense because if you downsize then your mortgage is likely to be less.

Can you split it and overpay 475 and save 475, then you will still have a buffer?

Liquid assets > illiquid assets in your current position.

What’s your mortgage rate and when does it end?

You can always pay a chunk off your mortgage in 3 years with the cash you have saved. Invest that money in a S&S account rather than keep it in a bank account.

You might not be allowed to over pay your mortgage by that much.
Mine (With the halifax) is something like 10% per year.

Take a look at your overpayment terms. We have very low overpayment fees and we have a clause that says that we can essentially "bank" overpayments. So if we overpaid by the value of 6 months worth of mortgage repayments, we can essentially take 6 months mortgage holiday at any point if needs be.
Another way to look at it, if you lose your job, you will have to find the money to pay the mortgage anyway. So, it would probably help massively if your repayments were a lot lower (and could potentially be covered by UC in the short term).
Are you at risk of losing your job? Unless on fixed term contract, I would always chose to reduce the debt rather than worry about savings. Yes, on paper, you can get higher percentage interest on your savings than your current mortgage rate but because your mortgage is such a huge sum (and 3% of the huge sum is a lot more than 5% of the little sum), the tangible difference in your pocket will be more or less imperceptible. And if it is causing you stress, you may decide you are better off reducing your overall debt.

I'd pay off £500 a month and save £450 personally, best of both worlds.

Unless you live in London where prices are crazy, I'd move to somewhere cheaper and take the pressure off.

Check overpayment terms as it’s likely to be around 10%
what about some half way? Either split it straight away, or set up a savings account and at the end of the year use half of it towards the mortgage. Then you still have the buffer ongoing and sense you’re saving towards the mortgage?

At those interest rates I’d save it all, then when you’re mortgage fix ends pay off a lump sum then.

So there's a few things at play here:

Firstly you will definitely want a cash buffer, ideally at least three months salary and given you are worried about the job and your mortgage, maybe a bit more. Ideally if you were to lose your job (or your ex stopped contributing as much) you want to be confident you can pay your mortgage and other expenses in the short term.

Secondly £950 per month is a great amount to be able to save. You haven't said how much you earn, but if you are earning over £50k then you will be taxed on any savings interest over £500, so just under £42 a month April-April.

Once you're earning more savings interest than this(and have a sufficient cash buffer), it makes some sense to put anything extra into your mortgage. Though if you have any other debts, pay these first. You can usually make a lump sum overpayment at the end of the current term without penalty, though within term, 10% is often the max as noted above. Or you can make a regular overpayment which will see the debt drop each month.

When does your current mortgage term end? That's usually a good time to reassess your payments and the less you owe relative to your property value, the lower percentage you'll pay.

Finally I'd say the size of a mortgage debt need not of itself be stressful (unlike other debts, it's usually a necessity). It's whether you can continue to pay medium term that's important.

Good luck - sounds like you're doing great!

I would keep 6 months worth of living expenses in an account and then overpay the mortgage

I would find out how much you can overpay by each year. I would always have a cash buffer. You could put half your savings into a stocks and shares isa and then use half to pay off a chunk of your mortgage

I put my money into a savings account and when it's time to change my mortgage I'll use it as a lump sum deposit. It makes more sense to gain the extra interest plus have a bit of a safety net instead of tying all your cash up in a mortgage.

You need to speak to a financial advisor that's alot of spare cash to have a month. I think paying off your house is a great idea but I would also be thinking about a retirement pot too x

This. IMO it makes no sense to overpay the mortgage rather than save. The interest rate on the mortgage is lower than savings rates so you lose money in that way. You also lose liquidity so that if you end up with a large unexpected expense you may be unable to meet it even if you have lots of equity in your house. This actually makes your house less secure than if you had not overpaid but had large savings because you may end up unable to pay your mortgage or urgent house repairs - the fact that you’ve overpaid may not prevent you having to make monthly payments. The only reasons to overpay is if you can’t trust yourself not to spend your savings on things you don’t need or for peace of mind accepting that you are effectively paying for that peace of mind.

As a single parent I’d ideally want more than 3 months salary in savings because you could run through that very quickly if you lost your job / ex stopped paying maintenance/ expensive house or car repairs etc.

I’d also be more inclined to spend money on my children while they’re growing up than overpaying the mortgage e.g to be able to take them on some big holidays like Disney later.

I personally take the opposite approach of borrowing the maximum and keeping as much as possible in savings. I may never pay the mortgage off but then I don’t need to live in a 4 bed house near a nice school when I’m 60 anyway.

I'm no expert but could an offset mortgage be available to you?

Otherwise once i had 3 months salary saved, I would try to overpay at least a bit, personally. Not the whole 950 though.

Save the money! put it in an offset account

You always save the money. Even billionaires get mortgages.

What are you stressed about?

I guarantee you would be more stressed owing 50k on a mortgage and having no savings at all, then having an emergency and not knowing how to pay. So close but so far from actually owning your home.

You need some money for a buffer e.g 4-6m living costs then I would start overpaying your mortgage. Ours is 10% a year you can pay without penalty

We have gone for a lower mortgage monthly payment over longer so if something comes up we can manage but the idea is to overpay every year to bring it down

£17k savings seems reasonable and enough to me. Overpaying your mortgage is a bit like saving as it creates a buffer - if you were to lose your job the bank would take into account your overpayments and allow you to pause your repayments whilst you got back on your feet. I would definitely want to get my mortgage down if I was you as that’s still a big mortgage to have by 40.

The £950 per month is working much harder for you in the 5.25% account than it is paying off your 3% mortgage. See the savings as earmarked for paying off the mortgage when it is in your financial interest to do so.