# Should We Pay Off Loan And Increase Mortgage Payments.



## Mebs (7 Feb 2010)

The following is a rough outline of our situation.

We currently have an outstanding Credit Union loan of €4,500 on the car and I have around €5,000 in my C.U. account. Current gross repayments are €300 per month.

Our mortgage has about 4 years left on it and we're repaying a little over €300 per month.

We also have about 14 years left on a holiday home mortgage and we're repaying in the region of €700 per month on that.

Both mortgages are on variable rate with PermanentTSB and, due to their recent rate hikes, I'm thinking of paying off the car by transferring money from my Credit Union savings, and then putting that €300 towards the mortgage in extra payments, to shorten the term.

As well as this, we have around €9k in savings. We're hoping to do renovations and put on a sunroom etc., in a few years time. I don't know how much this will cost (maybe €40k or thereabouts). And we're also thinking of externally insulating the house in the near future. I reckon that would cost about about €7k, nett of the grant.

I'm interested in hearing Members' advice on all of this. 

Is paying off the car and increasing mortgage payments a good idea? Should we hold off on the insulation till we do the work on the house? Is there a risk that the grants won't be there in a few years? Or should I do something else entirely?

Thanks in advance.


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## chlipps (9 Feb 2010)

I would clear the car debt and then open a high interest savings account and save up for the works on the house... No point in reducing your mortgage as you may struggle to borrow money again. Good to have a rainy day fund so hold the 9k for same. If you want to do mods to house, would bank give you a low interest home improvement loan?

By the way, it is hard to give advice when we dont know where you stand from work and job security perspective. Also what salary are you on... If you fill out the standard money makeover forum it would be easier for people to read and respond.


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## Mebs (10 Feb 2010)

Thanks, Chlipps. Information is as follows.

Both aged 48.

Combined income of about €120k.

Both Public Servants.

Public Service pension policy.

Remaining Mortgage on home..... 15k......4 years left......Monthly payments about €300/month. House value about €385k currently.

Holiday home (Equity release on home mortgage)...14 years remaining...Outstanding amount about 90k and repayments of about 700/month. Current value about €225k.

Both mortgages with PermanentTSB. Variable rate.

Good life assurance.

2 children. Teenagers.

Comfortable lifestyle and able to save about €300 per month.

Plus the information supplied above.

I don't think that getting a credit union loan for the renovations would be a problem. Hope this makes things clearer.

Meabh.


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## chlipps (14 Feb 2010)

You are in great position. Great salary and low mortgages. I would clear the car loan anyway as that would be one less to be looking at. I think you should try for a home improvement loan if you can get it as that would be lower interest rate than that available from credit union. Home improvement loans during the boom were approx 1% higher than a mortgage int rate. Approx 4% for home improvement vs. 9% in CU. Not sure if banks are still giving them. Also CU's usually expect you to have 1/3 on deposit I think? If you do take out this loan, you will not be saving as the 300 saving at moment would have to go against the new loan. Can you cut back spending in any way to try save more? Based on 120k salary can you save more and hence pay loan more comfortably?

Best of Luck


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## Eithneangela (14 Feb 2010)

Not sure in the present economic climate whether paying off anything is really good for you.  Keep the mortgages, oustanding loans etc. - after all, with your really healthy financial situation (both Public Sector employees) nobody in any financial institution in their right minds is going to disallow any request from you for funding for anything!


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## so-crates (20 Feb 2010)

Seems a strange way to look at it! Debt has a cost and it has to be repaid. If you are able to pay it now then you are saving the interest repayment in the future as well as giving yourself the certainty of knowing that you don't owe it if circumstances turn against you. Public sector employees find themselves in difficulty too sometimes! And banks aren't amenable to every request tabled to them these days.


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## D8Lady (21 Feb 2010)

I'd actually question your whole situation!
300 main mortgage
700 holiday home mortgage
300 savings per month
=1300 per month

Income 120k. p.a = 10,000 per month (gross or nett?)
10,000 - 1300 = 8700 per month after mortgage payments.
How are you spending 8700 per month? how come you can only save 300 per month? 
The 15k mortgage could be gone in a year if you threw an extra 950 per month at it.

There are a few gaps in information here. You are in a good situation. With a serious review of your spending and focus on specific goals, you could be in a great situation.


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