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Should I pay off part of mortgage?

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  • 01-07-2006 9:07pm
    #1
    idontpeefreely2
    Closed Accounts Posts: 1 ✭


    I bought off plans twelve months ago and Im set to move in soon.
    So so far 'all' I parted with is 10% of the purchase price.
    Anyways, I've got 40k in savings and I'm trying to figure out what should I do.
    Aside for the mortgage while i should be able to pay off fairly comfortably, I have no debts.
    What are my options and which of the following should I do.

    Pay off a chunk of my mortgage?

    Leave in an online/NorthernRock account?

    Buy a second investment property with a relative?

    Can someone recomend the benefits, and pitfalls of each.
    Thank you


Comments

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    #2
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    The general rule of thumb is to retire your most expensive debts first when you have equity.

    It is highly unlikely that you are going to get an interest rate on your lump sum even approaching your mortgage rate- so unless you have a good reason for needing ease of access to liquidity in the immediate future, you would be best advised to pay down a chunk of your mortgage. Keep in mind you will have to pay DIRT at 21% on any interest earned if you keep your lumpsum on deposit......

    Vis-a-vis buying a second investment property with a relative- you have to make a decision whether you are willing to accept the risk that this entails (in the current market).


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    #3
    iguana
    Moderators, Entertainment Moderators Posts: 12,916 Mod ✭✭✭✭iguana


    If you do decide to pay off part of the mortgage I would suggest that you shorten the term, rather than reduce your monthly repayments. You have said that your repayments are a comfortable amount for you, so you don't need the reduction. By reducing the term you reduce the interest you have to pay and this will be of the biggest benefit long-term.


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    #4
    Lex Luthor
    Registered Users Posts: 11,220 ✭✭✭✭Lex Luthor


    iguana wrote:
    If you do decide to pay off part of the mortgage I would suggest that you shorten the term, rather than reduce your monthly repayments. You have said that your repayments are a comfortable amount for you, so you don't need the reduction. By reducing the term you reduce the interest you have to pay and this will be of the biggest benefit long-term.
    ya agree here...if you can afford the monthlys, shorten the term...i've done that 3 times in the last 10 yrs. I'm now in a position after 10yrs that next month is my last payment on a 25yr mortgage:D


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