To ask how to come to terms with this financial situation

[Justcaant]

I’m 40 soon and last year separated from a long term partner. I now have our DD all week and he has her EOW. CMS is sorted but the real issue is that I now own a home alone (we rented previously as were saving for a house).

I have a 240k mortgage to pay off. I may never actually pay it off. I feel completely financially stuck. I am constantly worried about my job and bills. I have 1.5k in savings and try and add 100 a month but it’s hard. I never thought at 40 I would be in this situation. My parents are reasonably well off and I was brought up in a way that is now totally different to my daughter and I feel terrible about that too. I keep thinking I will be old and alone and unable to pay bills so end up on the streets. I am waking every day at 3am for some reason and just going over and over this and there is no way out. I wish I had made better financial decisions when younger and now it’s too late to fix it. How do I cope with this and accept where I am? I don’t want this to rub off on our child.

OP, kindly, I think you might want to see a GP for this stress x I also worry incessantly about the future sometimes, and I get it's difficult in a position where you can't save either, but this doesn't sound healthy.

You'll have your pensions - check you're up to date with NI credits if applicable, that gives me peace of mind even if something happens to my private one!

You may well inherit. It may be taxed, but that doesn't mean you're left with nothing! I know you shouldn't count on it, but if you're worrying about worst case scenario you can also acknowledge that's a possibility!

Build equity for 20 years and then downsize - either to a flat or worst case, to rent somewhere?

If all else fails, there'll be social housing. It may not be incredible, but you wont be an OAP living on the streets 💐

Re inheritance, your parents can jointly leave 1 mill between them before IHT starts, so I think you can rest easy knowing you've got that potential financial cushion on the horizon.

(Appreciate it may be split between siblings).

I don’t feel I can rely on inheritance, their home is 900k, there are 2 of us siblings and any tax will surely wipe out anything that could come to us. My parents also want to travel and do things so it may be there is nothing there anyway.

Assuming you are the only beneficiary of the will and, under current regulations, you will "only" pay around 150k tax which leaves you with plenty of change from 900k to pay off your mortgage and then some.
As others have said, though, everything may change in 30 years time. There is really absolutely no point worrying about it right now. You do need to maybe get yourself an appointment with a financial advisor to talk about a plan going forward.

You can survive on that it’s just getting your mindset adjusted to paying for everything alone. Three of my friends are divorcing. They are a decade older than you at least. All will be worse off though two of them will still be better off than the majority it’s still a monumental mind shift.

The easiest way to make some money once your DD has left home is to rent out a room.

@LittleRedRidingHoody thank you. I have got a pension but it is not good… another silly mistake I made when younger.

There's a lot of over 55 housing being built. You only have to have 70% to not have any additional fees. There will be more solutions for you as a homeowner. There's equity release etc.

At the moment I don’t have enough equity even for that though and I’m paying mostly interest so far

Everyone mostly pays interest at the start, but in 15/20 years time you’ll have paid off more and gained a good bit of equity.

In terms of career, don’t think about it just now - give your head and heart time to process where you are now. There will come a point when you can focus on your career and see possibilities, you need time though to adjust to where you are now. Catastrophic thinking won’t help though.

I agree about not relying on an inheritance. People think about care home fees but stuff like my sister remarried at almost 70, all manner of things can happen.

Yes, this is what many people will do. In 30 years the home will be worth more so you could pull out some equity, downsize, or move into retirement accommodation. It really is not worth worrying about now (and certainly not at 3am).

If you want genuine advice you need to put figures down; income, outgoings, mortgage term, pension.

You still have 20+ years of working, your wages will increase with inflation whilst your mortgage payments should stay relatively static, your daughter will move out, you can over pay as the situation gets easier.

Worst case scenario is that you could sell your house and use the equity to pay the rent. Or your daughter grows up and you get a lodger. Or you remortgage and take longer to pay off the house. Not ideal, but there are options available to you as you have equity.

Best case is that you meet someone who shares the mortgage (much easier with two payers). Or you inherit enough to pay off the mortgage. Or you get a promotion that makes the situation easier. There are all sorts of possible scenarios in which your life turns out just fine.

Having a young child is a huge responsibility, and I suspect your financial anxiety is rooted in that. As she gets older, and the mortgage gets smaller life will get easier. Nobody can see the future, but you are in a better position than many, and whilst it’s a slog now, it will get easier. Lots of people have few (or no) savings at 40.

Maybe talk to someone about your anxiety? Your life has changed massively and it would be surprising if you weren’t anxious. If you can get through the worst of that and realise that your position is nowhere near as dire as you think, things will get better in general. You need some decent sleep. Look after yourself and your health, and the rest will follow.

You would really benefit from therapy to see this situation more clearly. You've gone through a huge emotional shock with the separation and you seem overwhelmed. Your kid will not mind they didn't have the clubs and activities you had as a child, but unless you get help your mindset and anxiety will be the thing to ruin their childhood. Especially as she'll also be dealing with the trauma of the separation. Please, please focus on your emotional wellbeing and healing, not your finances.

OP, in the nicest possible way, you're being ridiculous and you need to stop believing whatever rubbish you're reading that makes you feel like this.

You 'only' have a 3 bed house that you're buying with a mortgage that you've qualified for so the lender has deemed to be affordable? You have nearly 30 years before retirement age, so it should be paid off by then?

Presumably you have a workplace pension?

You're worried about inheritance tax 'wiping out' what you'll inherit? Perhaps read up on it? There's a £325k allowance and the tax is 40% over that, meaning that if the £900k house is your parents only asset, you'll inherit about £335k as your half of the value of the house after IHT, so enough to pay off your mortgage and leave a six figure sum on top of that. That's an enormous amount of money.

When I split up from my ex husband about 7 years ago I ended up with the house on my own.
I was terrified however I'm still here. The things that helped me were making sure all my insurances are in place- house, buildings, life, insurance protection.
As my kids have got older I've been able to work and earn more (I've always worked FT but I can apply myself more and I've moved up the salary ladder).
Owning a house is a massively amazing position to be in/ try and think longer term.

You could always rent out the 3 bed you’re in now and then use the rent you get to rent somewhere smaller for yourself when you’re older.

You’re overthinking this a lot. You have a lot of options long term.

Yes but you are only 40 🙂 In another 20 years you will have a lot of equity.

There is no sense worrying now about what your situation will be like in 30 years time. Your Dd will be all grown up. The political and economical landscape will have totally changed. So will our lifestyles and infrastructure. You’re okay for today, tomorrow and next year. Focus on that 👍

there's been enough in the news about inheritance tax recently - how can you not be aware that with two parents and primary asset being the home you'd be within inheritance thresholds? If you've not heard any of that, googling inheritance tax thresholds takes ten seconds.

that aside - and their assets could get swallowed up by care fees, what is the term of your mortgage?
For women, pension age has risen in recent years from 60 to 67 - so yes, lots of people are working longer.

You're in a better position than people renting, and you're able to save a small amount..
Try being more logical about some of the things that you're so anxious about.

Once you've built up your emergency savings switch to paying off the mortgage at a slightly accelerated rate. It will do wonders for your mental health. You'll see the principal start to drop and assuming you can do it regularly and in small amounts your minimum payment will drop as well. Once it does drop don't pay just the minimum keep paying what you were paying and the decrease will accelerate. It doesn't take a lot of overpayment to see a significant savings on interest payed over the term of the loan. As a bonus usually the overpayments are applied to the principal, but also held in a reserve so for some reason if you needed to hold off on paying you could once you had built up a significant reserve. We will have payed off our house in 13 years instead of the 25 year term simply by making regular overpayments. We hammered it before we had kids, but since then it was more of a consistent £120 overpayment (over the past 6 years) and keeping the payment at the original minimum and not the refactored minimum given that we had overpayed so much of the principal.

Essentially, hopefully with the above you'll almost be at an inflection point and things will just get better and better until the house is payed off and then you're gravy.

No if the home is 900k and it is two parents who own nothing will be tax as they both have the 500k allowance for a house (we just sold my in laws house for 900k and didn’t pay tax)

Even better. But I didn't know whether OP had both living parents so even in the worst case scenario where she would have to pay "something", it is not going to "wipe out" the entire inheritance as she seems to think.

Op with the kindest respect.

You do have a buffer, you have savings. You managed to put away £60 this month. Many people can't afford to put that away and many can't afford to feed themselves by the time their bills are paid. You need to be easier on yourself. People have made suggestions so I won't bleat on.

Maybe see your gp. You've gone through a big change and that's hard

I've been in both positions. 6 years ago my "pay" from my good career didn't last all month and it was awful.

How long is your mortgage term? If it’s 30 years, you can reduce it in the future when you have more equity and potentially more income.

None of us will get to retire at 60!

Is your ex paying as much as he should be? And contributing to extras for your DD?

Your sense of what’s normal is warped by having grown up with money. You’re in a far better position than most single parents.

But OP, kindly, I don’t think it’s really about the house. Once you’ve come to terms with the split and your life having changed, things will start to feel a lot better.

No one knows what will happen in the future, when I had feelings like this, after divorce and taking on the mortgage alone, I used to tell myself 'you are alright now, in this moment, you have somewhere to live and enough to eat, your children are OK.' I am now in my 70s and again, have moments of panic about what my life will be like in the future, how will I cope with any ill health and struggles with mobility? There is no point in speculating about things that haven't happened, just keep going, you are doing all you can, and it will be enough.

Well done for having your own house and providing a stable home for you and your child.

So many people in the same boat - the hope is that in time your house will have increased in value and your mortgage will have decreased. When the time comes that you have less income, you’ll have equity in your house to allow you to downsize - buy something smaller outright (maybe in a different area if necessary) and have some money in the bank. The higher your mortgage now, the bigger that equity will be in the future - the bank wouldn’t lend it to you if they didn’t deem it to be affordable for you.
You’re also young, there’s a high probability that you’ll meet a new partner, cohabit and share the bills in the future.

For now I’d focus on creating a home for you and your child and filling it with happy memories. No one knows what the future holds but there’s no sense in worrying about the what ifs and missing out on living and enjoying the right now - your little one won’t be little forever and it sounds like you’re doing a great job ❤️