# Savings on deposit or Lump sum Mortgage Repayment?



## jruing (12 Nov 2008)

Age: 36
Spouse’s/Partner's age: 32

Annual gross income from employment or profession: 45000
Annual gross income of spouse:42000
Type of employment: Factory Operator
Spouse: Accounts Payable Assistant

In general are you spending more than you earn or are you saving? saving small amount

1000 per month jointly

Rough estimate of value of home 450,000
Amount outstanding on your mortgage: 90,000 (tracker rate) 11 years remaining
Monthly repayments 850, currently over paying


Other borrowings – car loans/personal loans etc 
None

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


Savings and investments: €30,000 on deposit, €12,000 savings with local credit union

Do you have a pension scheme? yes but only recently & not very substantial

Do you own any investment or other property? No


Ages of children: None

Life insurance: Yes

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

Should I use savings on deposit €30K to make repayment on mortgage, currently savings is on deposit at 3.5%, & mortgage is tracker rate +.85%. Do not currently foresee us needing this €30K in short to medium term and would like to be mortgage free sooner rather than later. So are we better off paying mortgage or are there better rates for savings on deposit out there?



*any feedback greatly appreciated*


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## WaterSprite (12 Nov 2008)

Have a look at the Best Buys section for lump sum deposit rates but you can get 5% in Northern Rock from the get-go.

Personally, I'd increase your overpay on the mortgage and keep the cash handy - but that's just because I really like to have a rainy day fund.


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## jruing (12 Nov 2008)

Hi WaterSprite

Thanks for reply & advice.

At the moment we are looking upon the €12K in credit union as a rainy day fund. Is Northern Rock Governement Gauranteed?

What about pensions - would we be better off increasing our pension contribution?


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## WaterSprite (12 Nov 2008)

jr said:


> Hi WaterSprite
> 
> Thanks for reply & advice.
> 
> ...



Northern Rock is 100% guaranteed by the UK government.

On pensions, certainly, that's a possibility.  It depends on how much you are currently contributing - your pension company should have a printout of what your anticipated pension would be based on current levels of contributions.  So it might make sense to increase contribs to 10-15% of salary.

You might also consider investing in equities - some believe that now is a good time to invest because the prices are so low.  It depends on your attitude to risk on that score.  Have a look through the Savings and Investments threads to get more of an idea of the investment options available to you.  Don't buy a house in Bulgaria

You'll probably get a better rate than 5% with a fixed term deposit, as you say you don't need the money in the medium term.  It won't be substantially more than that though - 5.5% or thereabouts (I haven't checked the best buys for fixed term deposits lately). You'd get an even better return if you opened up some regular savings accounts and moved the money around that way.

Personally (again!) I'd put maybe 9k against the mortgage (a nice 10% off it) and overpay by at least 500 a month and then look to what a higher risk investment strategy could be for some of the lump sum and perhaps some of that €1k you are saving currently.

It's a nice situation to be in - but you should assess your options for investing to see if you want to stick with the more conservative options of paying off mortgage/deposit savings/pension contributions.  Nothing wrong with not wanting to take risks mind you!


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## paddyd (12 Nov 2008)

As mortgage interest is front loaded to the beginning of your mortgage, and decreases over time, you won't gain all that much from paying it at this stage ('only' 11 years remaining). Your repayment is mostly Capital.

best mortgage calculator around; just calculate the month to pay the lump sum (something like month 240) add in your lump sum:
www.jeacle.ie/mortgage


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