To feel panic to owe this much on my mortgage?

[Seoalp]

I’m 36 and recently took stock of my finances after separating from my partner and I am now a single parent to a nursery age child. I own my home but it has an outstanding mortgage of 220k. I feel that approaching 40 this is an awful situation. I have 10k savings and a car on finance. Would you downsize to remove the mortgage? I can manage the repayments but 220k feels like SO much money to owe. I am awake most nights recently worrying about it. My friends never discuss finances at all so I have no frame of reference and feel very alone.

"But if everything went tits up and you needed money, you could sell at approx 550k, pay back your 220k mortgage and still be left with 320k, in cash. 320k!"

You seem to be missing an awful lot of legal fees and tax in those calculations, in addition to moving costs etc.

If you have 10k in savings why not pay half of it as a lump sum?
It's good your overpaying every month but interest wise is it not better to pay a larger amount in one go than smaller amounts over a year?

I would be nervous about that purely because being the sole income for a mortgage is pretty risky. If something happens with your job you could be screwed.

My sister is the same age as you, she only has a little terrace but she'll be mortgage-free in 4 years and is planning to make the most of it. There's no "right" answer, it's what you prefer.

I'm a similar age.

We have £220k left on our mortgage too. (House is worth around £750k) so we aren't bothered if it doesn't get paid off as we eventually plan to downsize anyway.

Doesn't stress me out at all as we have pretty low repayments and a decent enough fixed rate for the next 4 years.

It might stress me out when we need to get a new fix!!!

Read through your mortgage for repayment options. I'm in N America, so ours might be different, but I have various options in addition to my fixed pmnts: pay a lump sum every year, double pmnts, pay random extra pmnts, for ex. These can all help chip away at the principle. Don't panic. Everything is fresh right now, so overwhelming. Review your incoming/outgoing regularly and look to trim where you can to build that buffer as well.

If you can afford the repayments and you’re happy with the house, stay and pay. You’re doing fine. If the house is too big or not suitable then down size. But as you’ve got the mortgage and you’re doing ok it’s a good thing to stay. Maybe stop overpaying for a year and add the extra £6k to savings to have a bigger buffer and then go back to over paying.

If you don't have any emergency savings, I'd prioritize that. You can overpay if you want once you have that. Think of how much equity you have in the house to make yourself feel better.

It sucks OP but loads of us in our generation (I'm 37) are in the same boat or haven't even managed to buy yet. You're not doing unusually badly or anything. I'd say the contrary.

So what. If you need to downsize when you're near retirement, do it then.

I don't think you're being insensitive at all. Different people have different attitudes to risk and view their mortgage payments differently. For example, I don't subscribe to the thought that if someone can afford their mortgage payment then everything's fine. The bigger picture is that if paying for your house is stopping you achieving financial goals e.g. affording your pension/investing for the future or making you stressed e.g. about reduced quality time with your children or potential job loss, then a mortgage can feel overwhelming. Paying a £220000 mortgage over 20 years at 5% would cost £128000 in interest over that time (assuming someone didn't overpay). It's a lot of money and worth balancing against what's important to you.

We're extremely risk averse (caused by bad decisions by family members in the past). Like you, we also overpay to mitigate our risk. We're paying off our first mortgage age 39 and we'll never take a mortgage over £200000 in the future even though our household income is around 140K. The people around us can think we're crazy all they like but we're very cautious people and we align our actions with this. We don't need therapy (as some have suggested here to you) we just need to do what we feel is right for us and our children.

If you can manage the repayments then sit tight. That would be my advice

Im sure you posted the same question last week?

In any case, stop overpaying your mortgage. Invest that money instead so you have access to cash.

You can use it to pay off the mortgage at a later date if need be - and if for whatever reason you can’t pay your mortgage, you have a savings buffer.

I am an economist. You can manage the payments? Then you're fine.

Instead of staying awake worrying about the "debt", you could alternatively stay awake and congratulate yourself on owning an asset. Assets are only set to rise in the price (of course, I might be wrong, in which case I am a bad economist).

It’s good debt and it’s getting eroded by inflation. Try not to worry.

It didn't, you were just asking for advice. People need to calm down. Hope you're ok following to he breakup.

I’d say mortgages and house buying is a long game. Yes your debt is high but that means when the mortgage is paid off you will have a high value item.

You couldn't even buy a shoebox for 200k where I live.

Does seem like a big mortgage to carry alone OP.
Honestly, if it’s keeping you up at night with worry, that’s not good.

The amount you owe doesn’t really matter because you own a house that is worth more than that. As long as you can manage the monthly payments then it’s fine. I’ve been in exactly the same position and it feels overwhelming BUT over time the amount will come down, the value of the house will likely increase and your equity will increase. So as long as you can afford it each month, and you can afford to remortgage if you’re on a fixed term deal then you’re fine. Well done and keep going

You're actually in a very good position OP, it's possible that the recent changes have just led you to fixate on this one thing with your anxious thoughts, but your actual situation it's anything to be anxious about at all.

I’m an accountant and I think that if you can afford the repayments, you are in a good position.

Let’s say your cash outflow is £1,500 a month on your mortgage - a large portion of that will be repaying capital, ie you are swapping your cash for a bit of your house each month. You are swapping a liquid asset (cash), for an illiquid one (house) but that’s fine. The cash outflow is not wholly an expense - you still have something of value for your money.

Your expense is the interest element each month, which is going to be way lower than it would be if you were renting, plus you have more security.

In addition, the equity in your house will increase over time due to a) capital repayments and b) house price growth. You benefit from the whole £500k of house value growing, including the element you have not yet repaid. If house prices increase by 1%, you make £5k and you can crystallise that in the future if you choose to downsize, or leave it to your family.

On the flip side, the liability (debt) that you repay doesn’t increase as house prices grow (although it may change if interest rates move). The bigger the house value, the more you can benefit from growth.

Finally, as well as being a good investment, and a way to grow your equity, you can use your property to live in too and it will provide security and enjoyment.

I realise it can seem daunting, but the real cost here (interest) is low for the benefit of having a valuable asset and the ability to grow your investment.

I agree with those posters who suggest looking at redirecting your overpayments for the moment. Aim to have 3 months salary in an instant access savings account, and another 3 months in a 90 day notice account, so you've got 6 month's money you can get your hands on easily if unemployment or redundancy hits. Then check the car payments to see if there are any early redemption clauses, and if not pay that off if the interest rates are higher than your mortgage. While it's nice to be able to see the value of your mortgage going down more quickly than expected, you're not necessarily guaranteed to be able to take a payment holiday if your circumstances change, so sinking a big chunk of your spare cash into mortgage overpayments isn't a good idea.

I'd say it depends on what you earn. If you're on £15k a year, then it's a lot; but on £150k, it's not. Given you can overpay by £500 pcm, I suspect you're ok.

I am a single parent with a mortgage as well. I've come to terms with not paying off my mortgage. I've used it many times when I've needed funds for big things/expensive kid things so it been valuable in that and other ways.
Occasionally I worry that it is a big debt but I try and make sure it is my only debt and I'm playing the long game. I am putting any extra money into my future as I can, because I don't want to work forever. If and when I am feeling a little more comfortable, I'll put extra into the mortgage but that is not now and I'm ok with that.
It's a different kind of stress I think when you are the sole driver, the only one making the decisions. Expectations play a big part as well. Lose those and focus on what you can do now and what is going to be best for you to be where you want to be. Sometimes you need to let go of certain expectations and come back to them if and when you can.
I found talking to a financial advisor helpful. I assumed you had to actually HAVE a certain amount to do so but you don't.
Like I said, I've come to terms with this big debt I have because it is affordable, it is equity and I can always extract myself without necessarily suffering negative consequences if I ever reach that point.
See if you can get some advice. Just to reassure/guide you so you feel less panicky and more empowered

If you can overpay by such a large amount - a great buffer for it rates increase again! - you have nothing to worry about! My DH and I are 40, we owe £400k and have 27 years left on the mortgage - we’ve always taken the view that down the line the amount we pay now will seem much less in proportion as salaries increase with time. We don’t overpay ours at the moment as repayments are fairly pricey!