Paying Off the Mortgage

PaddyJules

We currently have 9 years remaining on our mortgage and currently owe about 30,000. We have alittle nest egg of 40K and therefore we were considering paying off the mortgage with the 30K. We have a variable mortgage and me and my husband both work (me part time). It seems the sensible thing to do but am I missing something.

Just need some advice - would we be better off investing the 40K or going ahead and paying off the mortgage. What implications will we face ie. with tax relief etc.

Any words of advice as I dont want to rely on the advice of the bankers!!

coylemj

If there's only 9 years left on the mortgage then it's unlikely that you're getting any tax relief. If you are getting tax relief it should be showing on your statements as something like 'TRS' (Tax Relief at Source), that's how it used to appear in my BOI mortgage a/c.

Interest rates on deposit accounts these days are very low so unless you were prepared to take a punt on the stock market or buy some kind of unit-linked investments (and hope to get a better % return than what you're paying on the mortgage), I'd say you'd be be as well off to pay off the mortgage.

If you do pay off the mortgage I'd start some kind of savings plan to divert the existing mortgage payments, otherwise it will get sucked into your monthly spending and you won't see the benefit of paying off the mortgage.

chris85

depends on the interest rate on your mortgage. If you can get a higher rate on a deposit account then on your mortgage would be better to keep funds on deposit.

It all about the rates. Variables are set for increases so you may see higher rates on the mortgage soon.

Personally I would pay off the mortgage since its variable you will have no penalties which is very good. You will then still have about €10k in savings which you can work on rebuilding for a rainy day.

As coylemj says if you clear your mortgage do use the payment instead into a savings account. Good rates going at moment for savings. Or invest in a pension which can prove to have good returns in later life but pick your pension plan carefully.

coylemj

chris85 wrote: »

depends on the interest rate on your mortgage. If you can get a higher rate on a deposit account then on your mortgage would be better to keep funds on deposit.

If he's paying a variable rate there is no possibility of getting a higher rate on a deposit a/c. Otherwise I'd run straight out tomorrow, mortgage my house to the hilt and put the cash on deposit.

Lenders can't pay depositors more than what they are charging borrowers.

Kennie1

Depends. Look at your overall picture and ask yourself these questions such as;

Have you other debt that you are paying higher interest rate on e.g. car loan, credit union loan, credit card debt etc... Pay off these debts first

Have you life, serious illness and income protection in case the unforseen ever happened? If not how would you cope

What would happen if you or your partner were to lose your job, how would you cope with only 10,000 of a nest egg? (sure your mortgage would be paid off alright though)

Have you any expected expences coming up in medium term such as a child going to college or a child getting married home or home renovations or upgrading your car? No point paying off a mortgage which may have a rate of 3.5%pa and taking out a personal loan with a rate of 8-10%pa

Maybe you could do a combination of paying off a portion of your mortgage thus reducing the term and invest in a deposit/investment account for the rainy day.
There is an investment bond that is being marketed at the moment with a major life company with an interest rate of 5.1% AER (total return 25%) over a 4.5 year term with a potencial extra bonus of 10% based on stock market return so there are investments that will beat mortgage rates at the moment but mortgage rates are forcast to go up before the end of the year. My mortgage rate is 1.8% while my deposit rate is 3.4% so I am making money at the moment so you would also need to check your rate

coffee_cake

I'd be inclined to pay it off straight away if I could because you'd have 10k left over... the only thing is would you get stung for paying off early fees?

kaiser sauze

bluewolf wrote: »

I'd be inclined to pay it off straight away if I could because you'd have 10k left over... the only thing is would you get stung for paying off early fees?

Doubtful as it is a variable.

ravima

I'd suggest paying off as then no matter what happens, you can't lose the house.