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Mortgage lump sum payment

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  • 10-02-2010 11:35pm
    #1
    lazygal
    Registered Users Posts: 12,644 ✭✭✭✭


    I've a lump sum of €5100 coming my way in early June. I've a 40 year tracker which I'm only paying interest on at the moment due to financial contraints-this arrangement is up in July 2011. Should I put this lump sum into my mortgage and pay off a little bit (its €320k) or find some sort of savings scheme to earn some interest for, say 12 months, and then make a payment? Anyone done anything like this?


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    #2
    lotsofthegreen
    Registered Users Posts: 474 ✭✭lotsofthegreen


    I would recommend that yes, you should put it in an easy access savings account. At the end of the day, a lot of people never see their mortgage paid off, lifes short and credit could get even more difficult to get in years to come so you'll have that amount if, for any reason, your financial situations worsens. For example if you paid it in a lumpsum and two months down the line you can't pay that months payment, the bank won't care about that 5k

    On the other hand if you think you'll just blow it, pay it of your mortgage

    Just my opinion


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    #3
    Pablo Sanchez
    Closed Accounts Posts: 1,207 ✭✭✭Pablo Sanchez


    To follow on from the previous comment i agree use it to reduce your mortgage. Having experience of paying 'interest only' for the first three years of my mortgage i would recceomend anyone who can to begin paying the capital off as well. It was sould destroying to see the anual statments arrive showing all the interest paid.....but the capital staying the exact same, essentially you are renting the house.

    With interest rates at an all time low, any capital you pay off will count double once the rates inevitably rise!

    My two cent anyway:rolleyes:


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    #4
    Priapus
    Closed Accounts Posts: 114 ✭✭Priapus


    Personally I would keep a portion of it, say 2100 just for a rainy day. Especially considering you said you are under financial contraints as it is. No harm keeping a small cushion. I wouldn't bother trying to put the entire lump sum away in order to earn interest. Honestly on that amount you wouldn't earn very much at all and the interest you earn would be subject to DIRT (tax on interest earned).

    I'd use about 3000 against the mortgage, and keep the rest. Somewhere like the post office or credit union, as opposed to a savings account with your mortgage providing bank, so they won't see it on deposit - out of sight is always prudent


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