# To move or not? To borrow for car or pay cash



## CKT (8 Jan 2008)

Age: 31	
Spouse’s/Partner's age: 29

Annual gross income from employment or profession: 44k
Annual gross income spouse: 34k

Type of employment: Engineering , spouse: Shop manager  

Expenditure pattern: In general are you spending more than you earn or are you saving?  Saving €600 pm AIB regular saver 

Rough estimate of value of home: €380k
Mortgage on home: €186k
Mortgage provider: PTSB
Type of mortgage: Tracker 
Interest rate 4.80

Other borrowings – car loan Credit Union €6500 left paying €100 aw 

Do you pay off your full credit card balance each month? 
Yes 

Savings and investments: €10k in Rabo savings €1k in mix of investment funds, €15k in FA, €10k in AIB 7dd , €6k in AIB instant access, €4k on deposit 

Do you have a pension scheme? Yes

Do you own any investment or other property? 
½ share in house worth €265k, €138k mortgage, €12k in joint account 
½ share in house worth €150k, €124k mortgage, €18k in joint account

Ages of children: 3 months

Life insurance: to cover mortgage


What specific question do you have or what issues are of concern to you?

1). was thinking of moving house, cost €560k will cost about €2k mortgage a month. But house is out of town a bit, have to think about cost of doing it up. 

2). Need to buy new car around €15k should I borrow from CU 6.99% int, or pay cash

3). How am I doing?


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## Bob_tg (8 Jan 2008)

First of all, I'd pay off the current 6.5k car loan from your savings.

Next, pay cash for the 15k car (do you really need a 15k car??)

Finally, on the house thing, it's a bit hard to comment as the situation is a bit unclear.  You have two half-shares in these houses... but is there any income (rent) coming in from them or are they vacant?


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## CKT (9 Jan 2008)

Bob_tg said:


> First of all, I'd pay off the current 6.5k car loan from your savings.
> 
> Next, pay cash for the 15k car (do you really need a 15k car??)
> 
> Finally, on the house thing, it's a bit hard to comment as the situation is a bit unclear.  You have two half-shares in these houses... but is there any income (rent) coming in from them or are they vacant?



I know I'm borrowing from Peter to pay Paul, but I am managing the car loan and if I borrow more money it will still be the same payment albeit over a longer peroid.
Again would I not be better with money for a rainyday?

There is rent coming in on the two houses with a small profit which we just leave in the accounts.


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## Bob_tg (11 Jan 2008)

OK, so the other houses are covering costs.  Good!  What's the rush to move to the new 560k house?  This could blow your 'rainy day' money??

On the subject of 'rainy day' money, maybe set a target of X (e.g. 2-3 months' income).  Then make sure any surplus to your target goes straight to pay off any debts.  It seems like you have a lot of liquid accounts which are covering any rainy day requirements.  

It's not clear to me why you're not paying off that loan.


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## RainyDay (13 Jan 2008)

I agree with recommendations to pay off car loans. You'll need to crunch the numbers very carefully before deciding about the house move. I presume you're covering your tax obligations on the rented properties?


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## CKT (31 Mar 2008)

UPDATE:

Credit U loan 21k
House value down 20k
Another question 

Age: 31 
Spouse’s/Partner's age: 29

Annual gross income from employment or profession: 44k
Annual gross income spouse: 34k

Type of employment: Engineering , spouse: Shop manager 

Expenditure pattern: In general are you spending more than you earn or are you saving? Saving €600 pm AIB regular saver 

Rough estimate of value of home: €360k
Mortgage on home: €186k
Mortgage provider: PTSB
Type of mortgage: Tracker 
Interest rate 4.80

Other borrowings – car loan Credit Union €21,000 left paying €100 aw 

Do you pay off your full credit card balance each month? 
Yes 

Savings and investments: €10k in Rabo savings €1k in mix of investment funds, €15k in FA, €10k in AIB 7dd , €6k in AIB instant access, €4k on deposit 

Do you have a pension scheme? Yes

Do you own any investment or other property? 
½ share in house worth €265k, €138k mortgage, €12k in joint account 
½ share in house worth €150k, €124k mortgage, €18k in joint account

Ages of children: 6 months

Life insurance: to cover mortgage


What specific question do you have or what issues are of concern to you?

1). was thinking of moving house, cost €560k will cost about €2k mortgage a month. But house is out of town a bit, have to think about cost of doing it up.

We now have an offer on a 0.33a site for €250k in town, based of the same type of house build in area about 2 years ago we could build for €250k finished (I know one of the owners).

If we stay where we are we will build on an extension.

Repayments pm around €1700. Any advise?  

2). Bought car around €14k borrowed from CU 6.99% int

3). How am I doing?


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## Diziet (31 Mar 2008)

As others have said, there is absolutely no point in paying interest on a loan at almost 7% when your rainy day money is earning you considerably less interest than that (and you pay DIRT on it). You are losing money on the deal for the dubious psychological benefit of 'money in the bank'.

So how about an alternative that preserves the psychological benefit while not losing you money? Pay off the loan, take the monthly loan payment and set up a standing order to a deposit account. I would encourage you to stick the numbers in a spreadsheet and check the overall cost of the loan vs the alternative. The results will surprise you. There is no point in saying 'it's the same monthly payment, it just goes on for longer'. Money is money, why give it to the bank rather than to yourself?

Diziet


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