# Should I pay off tracker mortgage on investment property?



## suicra05 (26 Nov 2019)

Should I pay off my tracker mortgages as I have monies on deposit in the post office which could help pay some of these trackers. I am receiving some tax benefits from the yearly interest rate paid. My situation is as follows: I have two rented properties.
I have 104k loan outstanding on a rented property and the tracker rate is .65%, loan will be paid in 2026. I also have a 180 k loan outstanding on another rented property and the tracker rate is .8%, loan will be paid in 2030. I would appreciate any advice.


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## Sarenco (26 Nov 2019)

Impossible to say without a lot more information.

Do you have a mortgage on your PPR?  If so, at what rate?

Do you have any other loans?

Do you have a pension?  If so, are you maxing your tax-relieved contributions?

What is your marginal tax rate?

What rate are you receiving from your State Savings?  For example, 5-Year State Savings Certs are currently paying 1%pa, tax-free.


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## suicra05 (28 Nov 2019)

In answer to above questions:

Do you have a mortgage on your PPR? If so, at what rate? NO

Do you have any other loans? NO

Do you have a pension? If so, are you maxing your tax-relieved contributions? YES

What is your marginal tax rate? High rate

What rate are you receiving from your State Savings? For example, 5-Year State Savings Certs are currently paying 1%pa, tax-free. YES


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## Sarenco (28 Nov 2019)

Thanks for the additional details.

So, you are paying an effective blended rate (allowing for the fact that the interest is deductible for tax purposes) of approximately 0.35% on the mortgages.

However, you could be earning 1% pa, tax free, on 5-Year State Savings Certs so that's where I would put your savings.

To be fair, you would be bearing the risk of a material increase in your mortgage rate over the 5-year holding period but I think you are being well compensated for doing so.

Having said that, the difference isn't massive so if you would feel more comfortable paying down the mortgages ahead of schedule then by all means fire ahead.

Hope that helps.


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## Brendan Burgess (28 Nov 2019)

suicra05 said:


> I also have a 180 k loan outstanding on another rented property and the tracker rate is .8%, loan will be paid in 2030.



This loan is costing you 0.5% after tax. 

This will probably increase as the ECB rate will increase from 0% at some stage. 

So, would I put money on deposit at 1% fixed for 5 years or pay off a loan at 0.5%?  No, I probably wouldn't.  If the ECB rate rises, can you cash the Statge Savings early? What would the penalty be? 

Having said all that...
If you have a fully funded pension and you own your home outright and you have two investment properties and tracker mortgages at 0.8% and 0.5%, I would not pay off the trackers and I would not invest in state savings.

You can handle the volatility of the stockmarket comfortably, so you should invest the cash in the stockmarket and hold on to your cheap trackers.

Brendan


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## Sarenco (28 Nov 2019)

Brendan Burgess said:


> If the ECB rate rises, can you cash the Statge Savings early? What would the penalty be?


State Savings Certificates can be redeemed at any time but have to be held to maturity to get the full interest payment.

The amount of interest payable on an early redemption depends on when the Certificate is redeemed. For example, if the Certificate is redeemed on the fourth anniversary of purchase, a total cumulative interest payment @1.90% applies.

Any increase in the ECB repo rate would have to be fairly material and happen pretty quickly for the mortgage pay down to "beat" the Savings Certificate.


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## moneymakeover (29 Nov 2019)

suicra05 said:


> Should I pay off my tracker mortgages as I have monies on deposit in the post office which could help pay some of these trackers. I am receiving some tax benefits from the yearly interest rate paid. My situation is as follows: I have two rented properties.
> I have 104k loan outstanding on a rented property and the tracker rate is .65%, loan will be paid in 2026. I also have a 180 k loan outstanding on another rented property and the tracker rate is .8%, loan will be paid in 2030. I would appreciate any advice.


Siucra

You're basically getting the tracker money for free from the bank

The 104k loan is costing you after tax €338 per year!

The 180k loan is costing you about €720 after tax per year!

If you pay off these loans you're basically giving away your fantastic deal.

Hold onto your cash


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