Mortgage advice pls...

Celtic Mech

Hey,
Myself and the missus bought a house 2 years ago...at the time we received a Tracker Mortgage from AIB (ECB +1.1%) for the full duration of the loan (35years). The house was bought for 330k and we mortgaged for 303k (92% LTV). Ever since we started paying the mortgage, we both budgeted 400 euro per fortnight each pay day and put this into our joint account (i.e. 1600 euro total per month). This is used to pay both mortgage and bills.
When the ECB rate was at its highest this 1600 just about covered all the bills and mortgage. Now, its a different story, as we all know, due to situations the ECB rate has come down to 2% (and hopefully likely to fall further). Got a letter in post today saying the new payment, as a result of the last ECB rate cut, will be 1197, less Mortgage interest relief. But we are both still putting away the 400 each per fortnight and dont really want to change this as its a good habit and factors in times when the rates will rise in future.
As opposed to things being tight when rates were at highest, we are now looking, each month, at having a surplus of roughly 300ish per month and wish to do something constructive with this. What would be your advice on this? Would you recommend trying to pay off more of the mortgage per month, or maybe putting it into an investment account? I would be interested to seeing suggestions as the best options that people would consider with this.
(we both are lucky enough to have Defined Benefit Pension Schemes and also secondary supplemental schemes with our jobs, so wouldnt really consider too much AVC's)

stepbar

Celtic Mech wrote: »

Hey,
Myself and the missus bought a house 2 years ago...at the time we received a Tracker Mortgage from AIB (ECB +1.1%) for the full duration of the loan (35years). The house was bought for 330k and we mortgaged for 303k (92% LTV). Ever since we started paying the mortgage, we both budgeted 400 euro per fortnight each pay day and put this into our joint account (i.e. 1600 euro total per month). This is used to pay both mortgage and bills.
When the ECB rate was at its highest this 1600 just about covered all the bills and mortgage. Now, its a different story, as we all know, due to situations the ECB rate has come down to 2% (and hopefully likely to fall further). Got a letter in post today saying the new payment, as a result of the last ECB rate cut, will be 1197, less Mortgage interest relief. But we are both still putting away the 400 each per fortnight and dont really want to change this as its a good habit and factors in times when the rates will rise in future.
As opposed to things being tight when rates were at highest, we are now looking, each month, at having a surplus of roughly 300ish per month and wish to do something constructive with this. What would be your advice on this? Would you recommend trying to pay off more of the mortgage per month, or maybe putting it into an investment account? I would be interested to seeing suggestions as the best options that people would consider with this.
(we both are lucky enough to have Defined Benefit Pension Schemes and also secondary supplemental schemes with our jobs, so wouldnt really consider too much AVC's)

This is opinion only and does not constitute financial advice.

First I would keep up the payments (1.6k) for as long as possible and start building up a pot of money. With 400 eur p.m you could start some sort of High interest account like an Easysaver (http://www.bankofireland.ie/personal/savings_and_investment/savings/easysaver/index.html) or some other similar product with another bank.

I would then be looking to make lump sum repayments to your mortgage account once the 7 year TRS period is up and / or interest rates start to increase.

Otherwise you could look at the money being some sort of rainy day fund in case one of you loose your job.

Or you could just start putting the money into your mortgage. However with current interest rates it might not be the best option.

I would forget about the avc's for the time being. They are really only effective if you have a lump sum to put in / are on the higher tax bracket / want to retire early / or buy pension benefits.