# Negative Equity but have come into money



## misterman (13 Jul 2011)

Hi all, I'm hoping for some advice here, as history has showed me to be bad with money!
I own a house that I rent out covering the mortgage (just about)
i owe 178k on that house, and it's worth about 110k. I have a Tracker Mortgage currently at 2.65% (ECB+1.15)
i have about 10k of personal loan/credit card debt.
i've just inherited 70k.

So i'm suddenly faced with lots of options. I figure I clear the CC and Personal Loan debt first (as it's the highest interest)
I then have 60k left to either deposit or pay a lump off my mortgage.
I like the idea of reducing the capital on the mortgage as it reduces the cost if i am ever without a tenant (who knows what'll happen to rental market) and my mortgage is pretty cheap compared to what's out there now.
What would you all do?


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## Baracuda (13 Jul 2011)

You have the right idea about clearing the personal debt, if it were me though I would put the remainder in the post office in savings certs where you will get about 3.5% net which is a higher rate than you are currently paying for your mortgage. However you should ask your mortgage provider if they are willing to give you a bonus for paying down your mortgage as the PTSB were doing this eariler in the year and it is quite possible that they may still be doing this as well as other mortgage providers without actually advertiseing the fact.


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## misterman (13 Jul 2011)

hmm, that's interesting i'll look into that thanks.
so as a rule of thumb if i can get higher than 2.65% interest on the lump sum in a deposit account it makes sense not to pay off the mortgage?


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## Brendan Burgess (14 Jul 2011)

If you are bad with money, then you should pay down your mortgage with the remainder, even if it makes arithmetic sense to hold onto the cash. 

Savings certs are risky - the government _might _default and you could end up losing some or all of your deposit. 

As Baracuda says, you should ask your lender for a deal. In fact, you should offer to sell the property and see how they react. If you owe €178k, they should be delighted to get rid of a loss-making tracker like than for €160k. This would leave you cash over. 

Have you any interest in buying another house to live in? If so, you should consider keeping the cash as a deposit. 

But the most important consideration is the fact that you are bad with money. If so, use it wisely and reduce your borrowing.


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## Baracuda (14 Jul 2011)

Agree that there may be a possibility that the government might default but no matter where a person puts their money these days there is a risk, given the developments in recent days regarding Italy and Spain! Not even German banks are truly safe given the exposure they have to "PIGS" (now that the "I" now includes Italy as well as Ireland) Banking Bonds and Guilds.


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## misterman (18 Jul 2011)

thanks all for the sound advice. i've got some thinking to do!


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