# Pay off Mortgage



## Conn (30 Jan 2012)

Hi,
I have recently sold an overseas property and have 90k cash ( sounds great but I invested 190k). I also have saved hard over the last 5 years and have managed to salt away 110k.

My mortgage is coming to the end of an IO .5 over ecb tracker with NIB to the value of 900k. the house is valued at 650k.
My repayment on this today is only just over 1k pm. It will however rocket after shifting to capital & interest and I will be up the creek when interest rates eventually rise.

I also have two RIPs with a combined value of 350k and combined mortgages of 500k. Both on an IO forbearance deal and yielding a rental profit of 700pm.

I have my own business and my income is variable but over all business is ok. I managed to earn 170k last year gross and this year I should do 190k. The wife works part time and earns 20K pa gross.

We have three young children and pay around 1000 pm in crèche fees. No other debts at all.

Thinking about what to do with this cash and looking for a way out over time. The negative equity on the RIPs and my Jumbo mortgage has me freaked. 

What would you do?


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## Brendan Burgess (30 Jan 2012)

You will find a full answer to this topic here

Should I use a lump-sum to pay off my mortgage? 

Some points specific to your situation...

Ask NIB will they give you a discount if you sell your home and pay off the  mortgage?  They are losing a lot on a €900k tracker. They will probably refuse, but ask anyway. They might change later, so hold onto the cash anyway.

You are overexposed to property and to mortgage rates, so you should sell a property. Ideally your home. If you don't want to part with your home, the cash would allow you to sell the investment properties. If you pay the cash off your home mortgage, you won't be able to sell the RIPs. 

Who lent you the money for the RIPs? Can you play them off against each other? Are the RIPs on trackers? 

If the rates are the same, it's better to pay off the home loan first as it attracts little or no tax relief.

Brendan


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## Conn (30 Jan 2012)

I asked Nib if I paid them 200k would they knock off 50k, I was told to go away.
The RIPs with Ulster Bank. How do you mean play them off?

The RIPs were (maybe still are) on trackers of .75 until I requested an IO extension, now they are referred to as a "forbearance mortgage" on correspondance. The IO period is up in November as is the IO period on my home loan. 

Repayments on the RIPs did reduce however with the recent interest reductions. Can they take me off trackers on these considering the modification I requested?
I may be ok to let them run if so in the hope they may recover somewhat. They are good properties close to Dublin.


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## Brendan Burgess (30 Jan 2012)

The banks could make the rescheduling of the RIPs contingent on coming off the tracker rates. They can't do this with your home.

Another reason for keeping cash to make sure that you can meet the capital and interest payments.

I am surprised that the banks allowed you to reschedule while you were able to save cash. 

By "playing off" , I mean telling NIB that you will pay off you UB account unless they give you a discount. If I was NIB I would be delighted to 
1) Get the negative equity reduced
2) Reduce the tracker exposure. 

But none of the banks is doing this at present.

Brendan


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## Conn (30 Jan 2012)

Thanks Brendan. Appreciated.

I lost my job at the time of the modification and was just getting going in the new venture. A letter was all that was needed laying out the stall, no checks at all and the io was extenðed for two years.


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## Bronte (31 Jan 2012)

What is forebearance in relation to mortgages?

Your two investment properties are making a profit, and you are well able to manage the repayments on these from the rent, can you also lob in the profit every month to reduce the capital amount to get the negative equity down if it it troubling you and also in case you have to come of IO (interest only) it might be a good idea as then they will be more affordable. 

In relation to your home, you have 200K in cash and a really good income. How about you put 150 K into the mortgage, keeping 50K, that would give you a mortgage of 750K so a negative equity of 100K and then with your very large income you could overpay the mortgage. 

You say on this you are only paying 1K a month, what would this be if capital and interest. Very surprising that on your income you are only paying 12K in mortgage repayments. How much are you saving annually?

Certainly I'd be concentrating on getting rid of the negative equity and overpaying so that should the day come and you have to pay capital and interest that it will be possible to do so comfortably on your income and also have the possibility of being able to sell if need be. Nothing worse then being forced by a bank into a corner.


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## Brendan Burgess (31 Jan 2012)

The problem with paying capital off either mortgage now is that you don't know which one might act tougher in a few years. With cheap mortgages, you are probably better off keeping your cash available. It may attract a higher interest rate than you are paying on your mortgage. 

Brendan


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