# Save or pay more off mortgage?



## Neverblue (22 Feb 2009)

Age: *31*
Spouse’s/Partner's age: *30*

Annual gross income from employment or profession: *€65k*
Annual gross income of spouse: *€65k*

Rough estimate of value of home : Approx.* €335k*
Amount outstanding on your mortgage : *€299k*
What interest rate are you paying?* tracker - ECB + 0.5%*

Other borrowings – car loans/personal loans etc *None*

Do you pay off your full credit card balance each month? *yes*
If not, what is the balance on your credit card? 

Savings and investments:
*€151k *

Do you have a pension scheme? *yes*

*Specific question:* We are hoping to buy a house within the next year, price range approx. €500k. It is looking unlikely that we can sell our current home so we are considering keeping it and renting it out. We have savings of €151k so we have decided to pay an extra €3,000 off our mortgage each month until we buy a new home. Is this the sensible option or should we be saving the €3,000 each month instead?

Thanks


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## Kine (22 Feb 2009)

There are other posts on this, and I think (If I read one of Brendan's reply's to one) there's a Key Post is one of the sections, hopefully someone will be kind enough to post the link for you. 

My view: Savings schemes will earn you a HELL of a lot more interest than the current mortgage you have (which is a VERY nice tracker...someone staff in a bank ). One reason for this would be that banks _were_ offereing nice interest rates for lump sum deposits, however I'm not sure what they are offering now. 

Considering you have a very nice nest egg, it would be shame to use this to pay off a house that doesn't necesarily need it (low interest rates etc). I always say, a mortgage is the cheapest loan you'll ever get. Considering you're ability to save (I wish I had the same capacity!!) the money would be better off earning you more ina  savings account.


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## Neverblue (22 Feb 2009)

Thanks for that Kine. Our aim in paying off extra on the mortgage is to lower the amount owed, so when we do go to rent out our current home we will have a lower mortgage, hence a lower amount to make up after rent


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## dave2k (22 Feb 2009)

I'd have a read of this:

[broken link removed]


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## infinity (23 Feb 2009)

key post worth a read too:

http://www.askaboutmoney.com/showthread.php?t=6217


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## JohnnyBoy (23 Feb 2009)

Hi there,
I'm in abit of a similar position.Im lucky to have a bit of spare cash at the moment & I'm in 2 minds re whether I should reduce my mortgage(tracker 0.95% +ECB rate) or should invest in a safe bank account with limited access but a relatively high interest rate.My brother has advised me that if the interest rate minus dirt is greater than the mortgage rate I'm paying,then it is a no-brainer.However I'm concerned re the ability of the government to guarantee all deposits & could they overnight repeal this?


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## Pope John 11 (23 Feb 2009)

JohnnyBoy said:


> Hi there,
> I'm in abit of a similar position.Im lucky to have a bit of spare cash at the moment & I'm in 2 minds re whether I should reduce my mortgage(tracker 0.95% +ECB rate) or should invest in a safe bank account with limited access but a relatively high interest rate.My brother has advised me that if the interest rate minus dirt is greater than the mortgage rate I'm paying,then it is a no-brainer.However I'm concerned re the ability of the government to guarantee all deposits & could they overnight repeal this?


 
Yes, it would make a very interesting letter to your mortgage broker outlining that you cannot repay your mortgage because the government has frozen your account, or have not guaranteed your savings up to the previously agreed limits.

Just refer your mortgage company to Mr. Brian Cowen, The Government


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## Bob_tg (23 Feb 2009)

Neverblue said:


> We have savings of €151k so we have decided to pay an extra €3,000 off our mortgage each month until we buy a new home. Is this the sensible option or should we be saving the €3,000 each month instead?



If I was in your shoes, I'd save.  I'm not so sure about the interest rate advantage either way - I'd say it's quite marginal, but I'm sure you can work this out for yourself.  

The reason why I'd save is that loan-to-value ratios seem to be increasingly important in attaining and negotiating better mortage rates.  Cash will be extremely important in negotiating your next mortgage - you have quite a lot; but it could be helpful to continue to save more.  

You never know...you could be buying your next house for cash at the rate we're going !!


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## Neverblue (25 Feb 2009)

Thanks for that Bob tg.


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## coppers (26 Feb 2009)

You should save. Your goal is to have the majority of your property debt on your investment mortgage (ideally interest only) where you will get tax relief.


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## Kemo_Sabe (26 Feb 2009)

coppers said:


> You should save. Your goal is to have the majority of your property debt on your investment mortgage (ideally interest only) where you will get tax relief.


 
I suspect that tax relief on mortgage interest paid on non-PPRs will come under attack in the forthcoming budget - it's an obvious target.


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## coppers (26 Feb 2009)

Kemo_Sabe said:


> I suspect that tax relief on mortgage interest paid on non-PPRs will come under attack in the forthcoming budget - it's an obvious target.


 
They removed it in the late 90's but restored it when activity in the property market slowed significantly.


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## Raskolnikov (27 Feb 2009)

Neverblue said:


> *Specific question:* We are hoping to buy a house within the next year, price range approx. €500k. It is looking unlikely that we can sell our current home so we are considering keeping it and renting it out. We have savings of €151k so we have decided to pay an extra €3,000 off our mortgage each month until we buy a new home. Is this the sensible option or should we be saving the €3,000 each month instead?


If you want to keep the current house, the best thing to do is to increase your savings. When you go to trade up, you'll have a decent LTV ratio and will be more likely to be able to borrow what you need to fund the purchase.


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## minion (28 Feb 2009)

Kemo_Sabe said:


> I suspect that tax relief on mortgage interest paid on non-PPRs will come under attack in the forthcoming budget - it's an obvious target.




I seriously doubt that.
They tried it before and it was a disaster.
More likely PAYE will be attacked.


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