# Pay off Tracker?



## Dubdad21 (2 May 2021)

Hi my wife and I have 2 kids. We owe around 90000 over 9.5 more years on our tracker at ecb+0.95% from ptsb. She has just been made redundant and is getting around 86000 net. We have no other loans or debts (car,credit card etc) and also have an additional 80000 in savings. Should we pay off the tracker? What should we do with the other 80000 as it is just sitting in various accounts getting little/no interest.
I am a 51 year old male. no pension. Wasn't working as I was taking kids school, collecting them etc but will be getting job after summer. I am not fussy.
Female is 48. Has pension of around 40k total saved from work. She will take over looking after kids and maybe get part time job.  Kids are 6 and 9. The good thing is kids are getting bigger and we don't need childcare. We are happy where we live and plan to stay in our house forever. We were thinking get mortgage paid. Then instead of paying 800 odd a month to that we could maybe keep saving it.
I read PTSB gave an extra 10% off a tracker mortgage if paid off early but that was in 2011 dont know if they would now?
Or is there an account that gains decent interest that we could put the 86000 into that the mortgage could be paid out of if we didnt just pay off the tracker in a lump sum?
 Love bit of advice.
Thanks guys.

Sorry if this is repost as i couldnt reply to my previous one for some reason.


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## Gordon Gekko (2 May 2021)

Hi Dubdad21,

It’s an interesting question. The fact that you’ve very little pension coverage is a little concerning. If you were still working, I’d ask you for details of your income etc with a view to getting you going on the pension side.

But as things stand, I think you should clear the mortgage. Then, once you find a new job, you should set-up a pension and make the maximum contributions.

You should identify an amount of money to retain in cash, perhaps 6 months’ family expenditure?

Then you should invest the surplus and the ongoing savings in lieu of your mortgage repayment.


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## Marc (2 May 2021)

Yes pay off the mortgage.  Being debt free has more value than just the monthly interest payment it gives you more financial security.
People who describe a tracker as free money often miss the substantive points
1)you service the loan from taxable income
2) interest rates in the future could rise
3) the emotional benefit of having no debt is often worth more than the financial benefit of being able to leverage your investments

She can make an additional pension contribution for last year and this year and should do so. She will also continue to earn state pension credits while the children are under 12.

You should start a pension when you start work and redirect  the monthly mortgage payments to that.

keep the rest in state savings certificates to provide a flexible cash buffer 


Marc Westlake
Chartered Certified and European Financial Planner
www.globalwealth.ie


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## Sconeandjam (2 May 2021)

You will never get a loan at such low rates in the near future. Personally I would leave the mortgage alone and have an account with enough for a few years repayments and find another place for your savings. 
This was a few years back.
I did read some where there was a guy who had 300k tracker. He was made redundant with about 100k redundancy payment. Instead of paying the normal repayment until he got a job he cleared 80k off the mortgage. He could not get a job for a while and ended up the bank went after him for the balance and started repossession proceedings. The bank forgot about the overpayment. 
Put some away for long term plan. Think of it if you need car and have no cash available the repayments could be anything from 4% up to 12% so think about that.


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## Dubdad21 (2 May 2021)

Gordon Gekko said:


> Hi Dubdad21,
> 
> It’s an interesting question. The fact that you’ve very little pension coverage is a little concerning. If you were still working, I’d ask you for details of your income etc with a view to getting you going on the pension side.
> 
> ...


Thanks for swift reply. Sounds like good advice. Its just that i have read so many posts with people saying hold onto a tracker for dear life. I know i have been putting pension off for far too long and it worries me but i will definately need to start one. Thanks


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## Dubdad21 (2 May 2021)

Thanks for advice marc i will start a pension when i start work. We want financial security but so many people say hold onto tracker for dear life. Its a minefield


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## Marc (2 May 2021)

It is a minefield 

I’ve set out a detailed analysis framework here 









						Should I Overpay my Mortgage or Pay into a Pension? - Everlake
					

As with many things, the right course of action is going to be specific to your individual financial circumstances.




					globalwealth.ie


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## RedOnion (2 May 2021)

Dubdad21 said:


> so many people say hold onto tracker for dear life


That's the problem with general comments that people throw around. 

If you are going to have borrowings, you should keep the tracker. If you don't need it, why pay 0.95% to borrow money you're going to put into a current account at 0%?

It looks like you would be able to completely repay the mortgage, and still have 75k cash in the bank. 

Your pensions are underfunded, especially relative to your overall financial position. Your wife should maximise her AVCs for last year, and this year. I think if she wanted to make an AVC into her current pension, she would need to do so before leaving. Otherwise it'd be an AVC PRSA - others far better versed in pensions than I can correct me.

Then work out what cash you have left. It'd be a comfortable buffer, so long as you are able to get employment quickly. But remember you've no monthly mortgage payments any longer when working out your emergency fund.

I'm mortgage free, and as @Gordon Gekko   suggested above, I've set up a monthly amount that gets automatically invested which would be equivalent of our mortgage payments (in fact, 50% goes into our children's names, it can be either a college fund, or set them up with a house deposit if it performs well). The danger is becoming complacent and letting your lifestyle eat up that extra free cash you have.


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## Dubdad21 (2 May 2021)

Thanks RedOnion,
Makes sense. Yes the pension side of our finances have been put on back burner for too long i need to sort this out as it was worrying me. I will chat to wife about her AVCs. Be great to be mortgage free. Well done. Sound advice. I would like to set up an account like yours where it would just come out of my current account and i wouldnt even see or miss it! Cheers


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## Dubdad21 (2 May 2021)

Thanks Marc i'll have a read of that.


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## niceoneted (2 May 2021)

Another consideration, is there life assurance tied to the mortgage? if so I would hold on to it. You will be paying it for the next 9 years. If you were to clear your mortgage and take out a new policy, it could be at a much higher value given your ages and if you have had any change in health. This is one of the big considerations I used when deciding. 
You could put 20k - 40k each in ten year saving certs for the kids that would be ready if they wanted to go to college. 
Start adding to a pension and put 4 yrs worth of mortgage payments aside and drip feed from that your monthly payments.


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## Brendan Burgess (2 May 2021)

The principle of contributing to a pension is correct. 

But it's not clear that you should do it if you are not in the top tax bracket. 

Is your wife in the top tax bracket this year? If so, she should max her pension contributions. 

If you are not in the top tax bracket this year but will be next year, wait until next year to contribute to the pension. 

If you don't expect to be in the top tax bracket at all in the future, then maybe contribute enough to use up the 20% tax bracket.

Brendan


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## ginslia (2 May 2021)

One piece of advice I got regarding a redundancy lump sum, was not to make any rash decisions with it, until you work out what you are going to do next.
- it might take a while to find your next job
- unplanned expenses may arise
- you might want to return to education and not be earning for a while.

re your wife’s pension, I agree with @RedOnion above re making the extra contribution before her last paycheck, though it can be difficult with all the tax free redundancy calculations to ensure she gets the relief @40%.


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## NoRegretsCoyote (2 May 2021)

I wouldn't hurry to pay off the mortgage, at least not in full.

It is basically free money when you allow for inflation and no one will ever lend this to you again at this rate.

Your pensions are very low (possibly a PRSI contributions gap too).

When you both have earned income again I would prioritise tax relieved pension contributions. Long run this will be a better return than paying off a tracker. Also better than having cash at 0% too.


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## Gordon Gekko (2 May 2021)

NoRegretsCoyote said:


> I wouldn't hurry to pay off the mortgage, at least not in full.
> 
> It is basically free money when you allow for inflation and no one will ever lend this to you again at this rate.
> 
> ...


Free money to do what though?

They have €166,000 in cash and €90,000 of debt.

There should be enough there to clear the mortgage, make pension contributions, and retain a significant cash buffer.


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## NoRegretsCoyote (2 May 2021)

Gordon Gekko said:


> Free money to do what though?


It's not taboo to make non tax-relieved contributions.

We don't have their full financial picture but you have very soon a household with no income for a while, and a pension gap in 15 years or so.

I wouldn't be in a hurry to clear the *full* mortgage. Every thousand borrowed costs them less than a euro a month.


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## Dubdad21 (2 May 2021)

Thanks guys for all the advice. We'll need to sit down and look at our options.


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## cremeegg (3 May 2021)

Gordon Gekko said:


> They have €166,000 in cash and €90,000 of debt.


And no job!

Keep the cash until you are working again, you don't know how long that will be.


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## newirishman (3 May 2021)

I rather have no mortgage, if I have no job a and “only” 76K savings than 166k cash and 90k debt.
it is much easier to live from eg dole money only than having to pay a mortgage as well - and see your savings dwindling on a monthly basis.
Especially when you aren’t getting any interest for your savings anyways.
Of course, YMMV. But 76K savings is a good buffer in anyones book I guess!


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## Marc (3 May 2021)

Yes this is why paying off the loan is the correct course of action in this case


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## NoRegretsCoyote (3 May 2021)

cremeegg said:


> Keep the cash until you are working again, you don't know how long that will be.


The impact of cash savings on a means-tested unemployment benefit might be relevant at some stage though.


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## Dubdad21 (6 May 2021)

Thanks guys.


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