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?

If your mortgage is 3% and you can get 5.5% on your savings then it is best to keep saving and then pay a lump sum off either up to your maximum permitted amount at the end of each year or when you next remortgage.
If however you are worried about losing your job bear in mind that if you have over £16k in savings you won't receive any Universal Credit. ( You may be eligible for Jobseekers allowance based on your contributions but this is not any where near as much money ). You would not be able to reduce your savings at that time by paying off extra on the mortgage as that would be considered deprivation of capital. Somaybe consider if you are likely to qualify for UC if you did become unemployed and keep the savings below the £16k.

Martin Lewis’ website has a calculator where you can see if you’d be better off saving or overpaying (it’s not quiet as simple as having a better rate on savings as reducing mortgage term is a big saver too).

i would consider tax free savings and mortgage repaying side by side as your currently savings pot should be ample for ‘emergencies’.

Also longer term, do you want more children, do you want DC to go to private school, is there a chance your exs situation might change or is your house likely to need significant work or are you likely to inherit?It’s all relevant. You’ve got a great savings pot though so lots of options!

What would you rather have:
a) 3% interest on £950 a month, and lock the money away once committed (mortgage)
b) 5% interest on £950 a mo th, with the flexibility to use on mortgage or other stuff (savings).

Whilst the savings interest rate is greater than the mortgage rate keep it as cash!

I was in a similar position. I started over paying the mortgage. Now mine is so cheap even after all the interest rate increases, I'm over the moon. As long as you have some savings in your bank account, over paying your mortgage is a great idea.

Offset mortage is the solution. Its a savings account linked to a mortgage, which is subtracted from the size of the mortgage when they calculate your interest payments, but is still available for you to take money out of whenever needed.

Just read that your savings interest is higher than your mortgage interest. Definitely keep it in savings then, at least until either of those figures changes.

I would split it but also as you are young enough open a Moneybox LISA to put your max £4k a year and get the govt £1k, you will get access at retirement but read the T&C's carefully.

have you considered downsizing perhaps? is it worth having such a huge mortgage when you could have a smaller place? I realise not all areas are cheap for property etc but if there's an option to find a smaller mortgage I Would definitely consider. Could be a huge reduction in stress for you.

if you over pay the mortgage you can then be entitled to payment holidays should you need them. But you don’t want to overpay too much as you can be liable for penalties.

I would split the £950 into 3. I’d use a portion to overpay the mortgage, I’d put some into a general savings account and the rest into a savings account with a view to using it to pay off a lump sum of the mortgage a few years down the line. That way you still have access to cash should you need it for something else, but you are also unlocking the payment holiday function that could also give you a bit of peace of mind

Why is it causing you stress? I've never even thought about it - we just pay each month. It'll go eventually. I'd consider getting income protection for yourself if you're worried about not having a job.

I'd continue putting the money into savings that you can fairly easily access (I say this because putting cash into a five year bond is no more helpful than paying into the mortgage if you need a new boiler!).

Then when your current rate ends, you'll have a period where you can make an overpayment of any size with no penalty and you make a judgement call.

Or, as you're saving significantly every month, just make a judgement call that if you have an unexpected outgoing you'll pay it on a credit card and then redirect savings to paying off the card.

DON'T bank on payment holidays. They can be arranged, but mostly this is done when the customer is having difficulty paying and may be reflected on your credit file.

Overall though I think you're massively overthinking this.

Save for 11 months and do as close to a 10% overpayment on the mortgage on the 12th month. Most providers only allow a 10% overpayment each year. Save in the high rate account and earn the interest.

I'd keep saving until you have 6 months salary saved and then pay half of your spare monthly cash into the mortgage.

You can always stop if you find you need the money.

Firstly well fucking done! It's not easy to save that amount of money, even with two incomes in the currently.

I would personally, looked at how much you're allowed to over ay mortgage and max out on that. Over time, any over payment should decrease the interest you're paying back.

I would save as much as possible to take advantage of the higher interest rates available on savings. Ensure you're savings are getting a decent return in a suitable account.

Depending on what your pension is looking like, I would be paying a portion of what you can save each month into your pension on top of any contributions you already pay in.

You're right not to bank on maintenance or expenses from your ex as thus can change literally over night. It may also be worth looking into life insurance and accident cover if you don't already have some set up.

Continue to save and cut back where possible within reason. You still need to live! Any additional savings, can help further down the line.

OP you are in a really strong financial position - please stop stressing about it. You have so many options e.g. investing v saving, downsizing, overpayments, reducing hours etc. In all honesty, my advice would be make sure you have a will, pension, life insurance, critical illness cover and maybe medical insurance and then crack on and enjoy life.

If the mortgage is causing such stress, can you move to a smaller home. With just you and one child I imagine there are more affordable homes.

Do you have reason to fear losing your job? ie have you had warnings?

I presume the child maintenance is a private arrangement as it is unusual for to have ALL expenses paid for.

Everyone saying about going over 10% of the mortgage, I wouldn’t be anywhere near this with 950 a month going in surely?

I’d overpay the mortgage but not by £950 maybe £500 just so you have some cash to access. Although you already have £17k so that could cover any emergency expenses.

Simple maths suggests not. Your mortgage is almost 200k I imagine.

You wouldn’t be. 950 x 12 = 11,400 and given your mortgage will be £185k in three years with overpayments you wouldn’t be over the 10%.

I think people get confused by 10% of their monthly payment and 10% of the outstanding mortgage amount.

Thank you @PoppyCherryDog @Mummyoflittledragon

I am guessing people make assumption that 17k that OP already has in savings will be put towards the mortgage alongside 950 a month which will push it over 10%.

You can usually only overpay 10% of your per year anything over and you’ll trigger an early redemption penalty. This might answer your question.

We did this for a while and found that for us personally, we preferred having the cash accessible. We have paid large one off overpayments on the mortgage and kind of wish we hadn't tied up the money tbh. So now we make a small overpayment and keep everything else as savings. We plan to make large overpayments if we get to a point where it makes sense/we feel comfortable with the savings we have.

That's purely an emotional slant though, not one in terms of what is financially the best.

Keep 15k for rainy day/ emergencies and start overpaying your mortgage by £950 a month? Speak to your mortgage lender what is optimum to pay to reduce it?