# 160 K Don't want to screw up



## Greengrass (21 Oct 2006)

Hi all,

I would really appreciate any advice on my current situation.
Family man 3 small kids, mortgage 240 k , recently sold site 160 k clear profit. Don't have pension, no car loan. no other assets, got lucky with site.
Am tempted to thro it all against my mortgage, reduce term to 10 years or so. Is this a no brainer or should i invest capital elsewhere.  

Thanks in advance


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## tiger (21 Oct 2006)

Pension is one thing to consider, independent, professional advice is another.  Use what ever you see here as food for thought only.
Good luck!


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## MOB (21 Oct 2006)

"Is this a no brainer or should i invest capital elsewhere?"

Some very simple thoughts to help you in your own considerations:

The mortgage is costing you - give or take - 4.5% per annum.  If you pay a lump off the mortgage, it is the same as guaranteeing yourself a return of 4.5% per annum.   It is quite possible that you would get a better - but non-guaranteed - return by investing the money elsewhere, for example in a pension.

If you are a top-rate taxpayer, €10k lobbed into your pension only costs you about 5,500.  To put it another way, 5,500 from your actual cash in hand instantly translates to €10k invested in a pension.   Even if the pension stands still for 14 years, that would be the equivalent of getting 4.5% per annum on the initial 5,500 invested.  In other words, 5,500 invested for 14 years at 4.5% would accumulate to roughly €10k.

If it were me, I would put the money into a pension.  Of course, if you are in the civil service or already have a great pension, you might look elsewhere. 


I hope this helps.


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## Greengrass (21 Oct 2006)

Thanks for replies.

Friends are telling me mortgage money is cheap, so try to re-invest in property or shares.
My good wife has other ideas though, reduce mortgage. Trying to look at big picture, prob only chance i'll ever get.

Thanks


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## Murt10 (21 Oct 2006)

MOB said:


> Of course, if you are in the civil service or already have a great pension, you might look elsewhere.



That's the problem with a civil service pension. If you have always worked in the civil service you cannot contribute any more.

You would think the bods in the D/Finance (civil servants themselves) would come up with some imaginitative way of allowing civil servants to save and get tax relief at the highest marginal rate on the amount saved. 

I'm envious of the people, who never stop bitching about benchmarking, who are getting this opportunity to save money before the taxman has his cut.


Murt


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## liteweight (21 Oct 2006)

If you're not on 42% income tax then putting it off the mortgage is a better deal than putting it in a pension. It really depends on your personal situation.


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## ClubMan (21 Oct 2006)

You really need to sit down and figure out your short, medium and long term goals and the financial planning that help to achieve these. You should only then start looking at specific short, medium and long term investment options that match your plans and build a diversified portfolio of assets so as not to undertake too much risk/volatility in a single area (unless that sort of approach is suitable for your specific needs). If in doubt get independent, professional advice on doing a personal financial health check and recommendations on a range of options suitable to your specific needs. Don't bung all of the money into some specific investment based on partial and vague advice or knowledge!


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## texasgamer (22 Oct 2006)

i'd say pay off the mortgage... and with the monthly income that you save (that would otherwise be paid in mortgage payments), invest that! (compound interest)


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## Greengrass (23 Oct 2006)

Thanks everyone for your views, much appreciated.

Might get some professional financial advice as you recommended.
160 k is an awful lot of money for us, really dont want to make any mistakes in bad investment.

Thanks


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## Satanta (23 Oct 2006)

Greengrass said:


> Friends are telling me mortgage money is cheap, so try to re-invest in property or shares.
> My good wife has other ideas though, reduce mortgage. Trying to look at big picture, prob only chance i'll ever get.


Mortgage money is cheap? ~4.5% and (possibly) climbing (depends on your personal views of the future of the ECB rate). 
Trying to outdo this with a guaranteed return isn't too easy, though it is possible. By reducing the mortgage you get a guaranteed return and have lower monthly outgoings which can provide an increased standard of living or means for other savings/investments.

Property/Shares. Both come with large risks. 
Property can be tough work. If you go for an investment property your exposing yourself even further (you already have one property - your home) to the property market. You then have all the issues which go with property investments (tax returns, registering with PRTB, unrented periods, upkeep of the property, vetting tenants etc. - lots of discussion of this on AAM). With foreign properties it can be even more of a minefield (with potential higher returns but again for higher risks).
Shares can be very volitile and shouldn't be considered as like for like with a mortgage repayment. You may gain more investing here, but the risks associated are far higher. Seeking professional advice will help you identify your risk profile, but certainly worth getting an idea of the associated risks in advance of the advice.

There is no right or wrong way forward. It depends on your own views and aims. How much risk you wish to take is something only you can decide. Even professional advice can only help you to decide on this, it can't make the decision for you (or at least you shouldn't let it!).


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## Greengrass (23 Oct 2006)

Thanks for your views Satanta,

Does this make any since to do, shop around (Eddie Hobs style) and try to get best interest rates from various banks for short to medium terms. Lodging maybe 100 k, should get good return as interest rates as going up also ?

Greengrass


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## snowdrop (27 Oct 2006)

hi greengrass

funnily enough, i'm in similar position to yourself.  sold an asset and sitting on 165K, mortgage of 241K with 18 years to run.  I'm considering various options of what to do but in the meantime I have the 165K in Northern rock currently earning 4%.  Like you, i considered paying all into the mortgage but then considered that really i was putting all my eggs in one basket ie property and in current climate are prices going to go down? Having the cash at least gives me some options re investment in something else, starting other business or simply a security blanket.
For information;  40, married, no kids, spouse and i self employed, have pension but underfunded.
I have a feeling I'll probably end up spreading it around ie a bit to the mortgage, a bit in investment vehicle, a bit in northern rock for the rainy day.


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## mell61 (27 Oct 2006)

Greengrass,
I think like most people who have already contributed to this discussion I'd look at spreading the money around a little, some off mortgage, some into investments, check out pension options...
With 3 small children maybe it would be worth looking into investing specifically for their education, as there is no way of guessing where our 3rd level will be in a few years, free or fee!    
Invest some in an advisor, who can look into all available options.

But, one thing I would say, treat yourselves now, be it a small holiday, something for the house....  By the sounds of it you're ready to tie down your funds for the longer term, so why not give yourself a small payday now!    You made a good investment that has paid off, now reward yourself!


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## Satanta (27 Oct 2006)

Greengrass said:


> Does this make any since to do, shop around (Eddie Hobs style) and try to get best interest rates from various banks for short to medium terms. Lodging maybe 100 k, should get good return as interest rates as going up also ?


Shopping around is getting easier and easier, most information is available directly from the institutions web sites so shopping around now can really just mean sitting down for a few hours and doing some detailed searches. (note: even easier where you've a utility like AAM where some of the pro's and con's of different offers are spelled out a little clearer than having to go through legal Ts&Cs).

Some excellent regular saver offers out at the moment so have a look into those. Also with interest rates still *expected* to rise the deposit rates should be increasing for at least the short term.

Lots of other excellent investment advice around so take in as much as you can and give yourself the knowledge to have confidence in the moves you make with the investments.

With that kind of money, personally, I'd definatly take the trip to a financial advisor, sadly, I've never had that kinda money (at least not yet ) so can't advise on a specific FA.


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## gleann (27 Oct 2006)

140K taken off the mortgage would make it look a lot nicer, wouldn't it. and it would keep other interested party happy. Esentially you're getting a tax free 4.5% return That would leave you with 20K to play with- pension, stocks, Funds, cash? that all depends on your own desires /goals. perhaps you decide what they are...


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## pennypincher (29 Oct 2006)

Greengrass if I were you and I was about 2 years ago I would switch to an offset type mortgage.You get all the benefits of the money as if it was paid off your mortgage but you still have it .You are able to pay your mortgage as is so why not keep paying it, but now you'll only mostly be paying capital,and if you wanted to/had to in the morning you could pay it off your mortgage.When I had the option of a guarenteed return versus a potential return I took the safer option-although a little part of me would like to take the chance of greater returns,but the other half was very happy as we had the best of both,paying almost all capital each month with the securtity of a lump sum behind it....when the debt is insignificant(<50k) then foreign properties,stocks,indices and ETFs all become viable!!


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## z107 (30 Oct 2006)

> *
> If you are a top-rate taxpayer, €10k lobbed into your pension only costs you about 5,500.*



I can understand this if the OP was moving the money out of a company and had to pay income tax on it. Is this still an advantage if the €160k is 'clear profit' ie, already sitting in his personal bank account?


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## GeneralZod (30 Oct 2006)

umop3p!sdn said:


> I can understand this if the OP was moving the money out of a company and had to pay income tax on it. Is this still an advantage if the €160k is 'clear profit' ie, already sitting in his personal bank account?



Where the money came from doesn't matter. The OP could put 10k say into a pension and reclaim 48% tax/prsi from the revenue assuming he's already paid enough income tax from other sources for the year.


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## allendog (30 Oct 2006)

What about the taxpayers on the 20% tax band, when it comes to making conributions towards the pension scheme - rather a disincentive - when the Govt is trying to tempt them with the E2,500 bonus for the SSIA matured funds to be re-invested in the pension schemes?
allendog


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