# What (if anything) Should I Change?



## fungie20 (31 Oct 2020)

*Age: *31
*Spouse’s/Partner's age: *32

*Annual gross income from employment or profession: *130k (100k salary with approx 30k in bonus and shares)
*Annual gross income of spouse: *50k (took a decent pay decrease recently but long term will be higher)

*Monthly take-home pay: * not 100% sure but probably between 6-7k combined

*Type of employment: e.g. Civil Servant, self-employed: * Private sector, partner public sector

*In general are you:
saving: * Approx 2k/month and partner approx 1k/month

*Rough estimate of value of home: *500k
*Amount outstanding on your mortgage: *420k with 29 years to go
*What interest rate are you paying: *2.8%
We bought our house just under a year ago by taking a 5 year fixed term with Bank of Ireland taking the 3% cashback offer (2% already received and 1% if we see out the fixed term). We overpay the max amount per month allowed, 10%.

I recently enquired about moving from the 2.8% rate (4 years left) to their 2.3% 5 year fixed rate. I worked it out that the savings in interest would be approx 4.5k over the next 4 years and the break fee was about 4.6k. They did say that this rate wasn't available to existing customers but I haven't been able to find anywhere where it says this online, but that's a different story.... Either way, it doesn't make sense to do it currently.

Our plan would be to pay off a large chunk of the mortgage when the fix rate ends or we break. Ideally, we would get to a lower LTV band to avail of lower interest rates, i.e. Avant's lower rates or similar. I'm not one to predict future house values or interest rates but will get the best deal available at the time.

My question is: is this a reasonable course of action or is there a better way I'm not thinking of?

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

My car is 15 years old at the moment so probably will only get another 2-3 out of it before it makes more sense to get another one. I wouldn't take a loan out though, probably buy second hand 3-5 year old car.

*Do you pay off your full credit card balance each month? * I have a student credit card still but don't use it often but always pay it off when I do
*If not, what is the balance on your credit card? *N/A

*Savings and investments: *Approx 60k cash total, this includes: 25k rainy day fund, 10k will come off for wedding which was covid'ed and 5-10k honeymoon in 202X. So free cash is a good bit less than 60k.

*Do you have a pension scheme: *Approx 40k, I only started working about 4 years ago so this is lower than I'd like. My partner works in public service and also has an PRSA (~25k). They intend to max out contributions each year.

The company I work for give 8% of salary if I contribute 2%, I give an additional 8% via AVC's at payroll. I maxed out 2019 personal contribution limit with a lump sum recently. I plan on doing this every year from now on (the remaining 10%) if circumstances allow. The reason I don't do the full 20% via payroll is 

I started a new job and need to decide which fund to invest pension in. Ideally, due to my age, I'd like to invest it in a 100% equity, passive fund with low fees but this isn't open to me. I've 2 options:

1) 100% equities actively managed with expense ratio of 0.56%, I believe it invests in 50 companies, in several sectors, at any one time (or something like that)
2) 70% equities, 15% equity alternatives, 15% bonds, passive fund with expense ratio of 0.31%

I'm not sure which is the best one to pick, any insights would be great!

*Do you own any investment or other property?*
No other investments. I looked into putting some money into ETFs but due the the high taxes, I think maxing out pension and clearing mortgage would be better but feel free to suggest otherwise.

There's a small chance we would move to where my partner is from in rural Ireland so there is a chance we would buy a house there but not in the medium term.


*Ages of children: *No children

*Life insurance: *Mortgage protection, 650k life policy (39 years left) and 4x salary life policy via work. My partner works in public sector so whatever they get, if any.


*What specific question do you have or what issues are of concern to you?*
I asked some questions throughout that I hope can be answered.

Long term, we'd like to ability to retire early if we choose to do so.


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## Brendan Burgess (31 Oct 2020)

The break fee is €4,600 on a mortgage of €420,000 - so roughly 1%.

If you are both in secure jobs, you do not need a rainyday fund. When you want to buy a car, start saving in advance for it. You will have €20k available for your wedding anyway which you can use if a rainy day appears suddenly.

So that leaves you with about €40k
You should pay this off your mortgage. You will pay a penalty of €400 but save yourself €1,100 a year. 

At your age, you should only contribute enough to the pension to max your employer's contributions. 

You should aim for an LTV of 60% or €300k. So focus on achieving that first. 

Then worry about pensions.

Brendan


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## Sarenco (31 Oct 2020)

The LTI on your mortgage is only 2.3 times your joint income, which I would regard as very reasonable.

As such, I would prioritise maximising you tax-relieved pension contributions before paying down your mortgage ahead of schedule.


fungie20 said:


> 1) 100% equities actively managed with expense ratio of 0.56%, I believe it invests in 50 companies, in several sectors, at any one time (or something like that)
> 2) 70% equities, 15% equity alternatives, 15% bonds, passive fund with expense ratio of 0.31%
> 
> I'm not sure which is the best one to pick, any insights would be great!


Personally, I would go for Option 2 (although I don't know what "equity alternatives" means).  The lower expense ratio would tip the balance for me.


fungie20 said:


> I looked into putting some money into ETFs but due the the high taxes, I think maxing out pension and clearing mortgage would be better but feel free to suggest otherwise.


I agree.  Our tax code is such that I don't think it makes sense to invest outside a pension wrapper while carrying a mortgage.


fungie20 said:


> Our plan would be to pay off a large chunk of the mortgage when the fix rate ends or we break. Ideally, we would get to a lower LTV band to avail of lower interest rates, i.e. Avant's lower rates or similar


That sounds like a good plan to me.  You might as well collect the extra 1% cashback before switching to whatever is the best deal at that time.


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## NoRegretsCoyote (31 Oct 2020)

fungie20 said:


> *Life insurance: *Mortgage protection, 650k life policy (39 years left) and 4x salary life policy via work. My part




How much life cover do you and partner both have? It seems like a lot.......


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## Brendan Burgess (31 Oct 2020)

Sarenco said:


> The LTI on your mortgage is only 2.3 times your joint income, which I would regard as very reasonable.



Agreed that 2.3 times income is reasonably comfortable.

However, a 60% LTV allows the borrower to avail of the lowest rates and as they are just 32 years old,  so achieving that really should be the priority.

Also at aged 32, they might want to trade up or move at some stage in the future, so building up equity gives huge flexibility.   Their Loan to Value at present is 84%, so even if you think that aiming for 60% is wrong,  getting it below 80% is really the  highest priority.   It would take only a 16% fall in house prices to push them into negative equity.   In theory this is not a problem if they are in their forever home, but it's a very uncomfortable place to be. 

 Given their high salaries and young age, they will have plenty of time to build up a pension fund.

Brendan


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## Sarenco (31 Oct 2020)

Brendan Burgess said:


> However, a 60% LTV allows the borrower to avail of the lowest rates and as they are just 32 years old,  so achieving that really should be the priority.


Not really Brendan.

The difference between the rates charged at different LTVs is pretty modest.

On the other hand, pension contributions operate on a “use it or lose it” basis.

In my opinion, the only reason to prioritise paying down a mortgage ahead of schedule over maximising tax-relieved pension contributions is where the mortgage is uncomfortably high, having regard for a borrower’s income.

That is clearly not the case here.


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## NoRegretsCoyote (1 Nov 2020)

Brendan Burgess said:


> It would take only a 16% fall in house prices to push them into negative equity. In theory this is not a problem if they are in their forever home, but it's a very uncomfortable place to be.



Yes but house prices won't fall overnight and they are reducing their LTV by 2pp a year or so.

In 95% of the country €500k buys a pretty comfortable house.

I agree that pension overpayment is a priority but they will face expenses when kids come.


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## Brendan Burgess (1 Nov 2020)

I have set out the full argument in this Key Post





__





						Key Post - Should a person in their 20s or 30s contribute to a pension?
					

This is based on the current pensions and tax regime. This regime will change before you reach retirement   Tax relief on pensions may be changed to 30% for everyone. If you are paying tax today at 40%, then you will lose out if you defer contributions to a time when the  tax relief is reduced...



					www.askaboutmoney.com
				




Since it was written, there have been a few developments which tilt the balance further towards paying down the mortgage 

There has been a greater move to lower mortgage rates for LTV lending. Avant now has the lowest rates but it's for <60% LTV mortgages 
Covid has made the future a bit more uncertain.  While I don't speculate on house prices, the chances of a fall in house prices have probably increased.  So building up equity is important for that reason also.
Brendan


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## Brendan Burgess (1 Nov 2020)

I have updated that Key Post


Updated October 2020

In uncertain economic times, paying down a high LTV mortgage becomes more important.

For example, someone who bought a house recently with a 90% mortgage, who now has an 85% LTV mortgage will move into negative equity if house prices fall by 15%. That is a very uncomfortable position to be in.

It just seems very clear now that people should be prioritising reducing their mortgage over contributing to a pension.


The returns on equity investments in pension funds in the medium term are much less certain.
Paying down your mortgage gives you a tax-free and risk-free return equal to the mortgage rate
The outlook for house prices is uncertain - this matters if you are aiming for a lower LTV mortgage rate. If the value of your home falls, your LTV will rise.
Your employment and income may be less certain. If you run into difficulty paying your mortgage, it will be much easier for the lender to restructure a smaller mortgage and lower LTV than a large mortgage in negative equity.
*Of course, the opposite is true. When the economic uncertainties have reduced and the outlook is more predictable, then the pendulum swings towards prioritising your pension over your mortgage.*


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## Sarenco (1 Nov 2020)

By accelerating mortgage repayments, the OP will (a) incur significant break costs and (b) reduce the value of the Year 5 cash back payment.

I really don’t see how that would be a sensible approach.

I still think it makes more sense to prioritise pension contributions in this case.


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## Coldwarrior (1 Nov 2020)

Sarenco said:


> reduce the value of the Year 5 cash back payment.


I could be wrong but think the Year 5 cash back is 1% of the original mortgage balance


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## Brendan Burgess (1 Nov 2020)

Hi Sarenco
The break cost is 1% of the amount repaid.  It certainly is a factor, but I don't think it should be significant enough to sway him from getting his LTV down to 80%, if not 60%.

Assuming the cash back is 1% of the balance remaining after 5 years, I think that would be a factor closer to the end of the 5 years. 

Brendan


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## ArthurMcB (1 Nov 2020)

Is there an arguement that in times of stock mkt volatility and when markets are down - that is the time to increase pe sion contributions? I.e buy in at better value.?


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## fungie20 (1 Nov 2020)

Thanks for all the comments and suggestions. Plenty of food for thought. Like most things, no right or wrong way of doing things, just trade offs.

We wouldn't be without a emergency fund and are willing to pay for it, via from not gaining from using it elsewhere and low interest rates. I could lose my job tomorrow, like almost anybody in the private sector.

In terms of the mortgage overpayment vs pension contributions, why not do both:

@Brendan Burgess I'll look into an overpayment of 30-40k, it makes sense to me to clear some of it sooner rather than later. I just need to make sure, by making an 'unscheduled' overpayment, I'm not forfeiting the 1% cash back at the end of the fixed term (@Coldwarrior yes, it's 1% of the original amount). It may still make sense to pay it off even if it is gone but got to get confirmation either way first.

In terms of pensions, we've both already maxed out 2019's contributions so there is nothing left to give there, so the 30-40K is free for mortgage repayment, assuming it makes sense to do so. For 2020's pension contributions, it looks like I'll have to give 4-5k (net of any revenue refund) to max out my contributions from 2021. This will be very achievable by Oct/Nov next year. My partner would be in a similar boat.

Long term, I think we'll try max out pensions and then use any unrequired excess cash to pay off chunks of the mortgage, paying any break fees, once it makes sense or wait until end of fixed period, whichever is cheaper (i.e. pay off 10k each year extra rather than wait 5 years to pay 50k).

@Sarenco For which pension fund to pick, I should say, it isn't an either or but rather I can mix between them (and several other lower risk funds but don't want to do that). I could do a 50/50 or 60/40 split between them, what do you think of that? The 2 funds are:

1) Irish Life Diversified High Growth Fund (ES35)
2) Zurich Life 5 Star 5 Global Fund

@NoRegretsCoyote Yes it is a lot of insurance but one is through my job, they come and go. My policy predates the mortgage and I have it for a very specific reason that I won't go into here but it makes sense.

One more question: If I was to overpay the amounts said above, do my repayments change or does the term automatically change to keep repayments static or does term and repayments stay the same but the principal/interest ratio of each repayment change, e.g. mortgage repayments will pay proportionally more off the principle after the overpayment than before?


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## Blackrock1 (1 Nov 2020)

Looks good at the moment but lots to consider like :

Will you have kids ?
If you do will the house you have work or will you need to move / extend
Will you both work will full time once you start a family ?
How do you not know your combined net income ?


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## fungie20 (1 Nov 2020)

@Blackrock1 Jury is still out on children but either way the house is suitable for the rest of our lives if we have to, that includes room 2 children. We tend to be flexible with finances and not stick rigidly to any plan just for the sake of sticking to  a plan. Pension and overpayments can be reduced/dropped for a few years if income will go down due to those reasons.


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## Blackrock1 (1 Nov 2020)

If the house will work then that’s great and makes planning all the easier.

the only advice I’ll give you re kids is not to sleepwalk into it and make a decision one way or the other. Life can be great either way but it’s one of those decisions you both need to be fully invested in .


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## NoRegretsCoyote (2 Nov 2020)

fungie20 said:


> Yes it is a lot of insurance but one is through my job, they come and go. My policy predates the mortgage and I have it for a very specific reason that I won't go into here but it makes sense.



If I read you correctly your partner will cash in over a million on your death.

This is overinsurance by any measure and is costing you money. Particularly large given she has her own job and you have no dependents.



fungie20 said:


> One more question: If I was to overpay the amounts said above, do my repayments change or does the term automatically change to keep repayments static or does term and repayments stay the same but the principal/interest ratio of each repayment change, e.g. mortgage repayments will pay proportionally more off the principle after the overpayment than before?



The term always stays the same. The monthly repayment will reduce and the principal:interest ratio is unchanged.

In your position I wouldn't be in such a hurry to put the cash out of reach by paying off mortgage. We had a 5-figure inheritance a few years back and I wanted to put all of it off the mortgage. Mrs NRC talked me into holding on to about half in cash. This turned out to be the right decision as we needed a new car soon after and we had a chance to trade up as well and the cash made the conversations with the bank much easier. The opportunity cost of holding €30k is about €1k which might make sense if you don't have other sources of cash (like relatives) to draw on if you have a sudden need. Credit union or bank borrowing (for something like a car or a new roof) is often more expensive than your mortgage.



Brendan Burgess said:


> While I don't speculate on house prices....





			
				Also Brendan Burgess said:
			
		

> .....the chances of a fall in house prices have probably increased.



Am not sure I can reconcile these two statements @Brendan Burgess


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## Brendan Burgess (2 Nov 2020)

NoRegretsCoyote said:


> Am not sure I can reconcile these two statements @Brendan Burgess



Not sure why you are having a problem with that? 

Would it help if I said "I don't speculate about share prices, but the chances of a fall in stockmarkets have probably increased"?


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## NoRegretsCoyote (2 Nov 2020)

Brendan Burgess said:


> Would it help if I said "I don't speculate about share prices, but the chances of a fall in stockmarkets have probably increased"?



I think it's functionally equivalent to a claim that your expected outcome is a _fall _in share prices 

FWIW I am not an efficient markets hypothesis zealot, but a local housing market can remain out of equilibrium much longer than an equity market for, as it takes much longer to adjust.


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## Sarenco (2 Nov 2020)

fungie20 said:


> I could do a 50/50 or 60/40 split between them, what do you think of that? The 2 funds are:
> 
> 1) Irish Life Diversified High Growth Fund (ES35)
> 2) Zurich Life 5 Star 5 Global Fund


That might be a reasonable approach.

To be honest, I wouldn't be crazy about either fund but I guess you have to work with what you've got.


fungie20 said:


> Long term, I think we'll try max out pensions and then use any unrequired excess cash to pay off chunks of the mortgage, paying any break fees, once it makes sense or wait until end of fixed period, whichever is cheaper (i.e. pay off 10k each year extra rather than wait 5 years to pay 50k).


That looks like a solid plan to me.


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## _OkGo_ (2 Nov 2020)

fungie20 said:


> I recently enquired about moving from the 2.8% rate (4 years left) to their 2.3% 5 year fixed rate. I worked it out that the savings in interest would be approx 4.5k over the next 4 years and the break fee was about 4.6k. They did say that this rate wasn't available to existing customers but I haven't been able to find anywhere where it says this online, but that's a different story.... Either way, it doesn't make sense to do it currently.



Are your numbers correct? The 4.5k looks more like the reduced monthly payment (not savings) while the interest saved would be closer to ~8.4k (420k x 0.5% x 4yrs). A bit less because of reducing principal over 4 years so roughly 8k.

Either way, I don't believe you can get that rate of 2.3% (I'm assuming the BOI Green rate), see here BOI Green T&C's 
_"The Green Mortgage fixed interest rate is not available (a) on a mortgage loan where it (or part of it) is used to repay an existing mortgage loan from a lender whether the lender is in the Bank of Ireland Group or not (for example, this means the discount is not available for mortgage loans where you switch a mortgage loan to us from one of our competitors)"_

And I also don't think that it is worth your while switching to any competitor. The cost of switching to you is losing the 1% cashback at year 5, the break fee and whatever solicitors fees so roughly 9.8k (4.2k + 4.6k +1k). Your LTV is too high to to get any rates that will save you that on interest over 4 years. I would be heavily inclined to follow Brendan's advice and start overpaying your mortgage in chunks to get the LTV down so that you can avail of the best rates when you are ready to switch. Your only other alternative is to attempt the multiple switches that have been done by AAM posters but I'm not sure how straight forward that is anymore since Covid...

As for your cash reserves, they do seem a bit too high. You are saving at 3k per month and that probably doesn't include the irregular lump sums from bonus + shares so you don't really need to be holding cash for a honeymoon that could be a few years away and would only take you 3 months to save for. Lots of people don't like to deplete their savings all at once so ease yourself into it over a period of time by making quarterly lump sum payments. Get down to your own 25k reserve limit and once you are comfortably, you will realize you can go lower


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## LS400 (2 Nov 2020)

When I looked at this originally, I thought you were in a great position.

But carrying such a huge mortgage debt, Im not so sure you really are.

For a combined income of what you have displayed, and having paid 12 months mortgage already, €420k is a savage amount to be in debt for years.
A property worth €500k now , was pretty much worth that 12 months ago, your down payment was shockingly low based on your earnings, is what Im saying.

For head-space and sanity, Id be plowing as much as possible to get that mortgage to a comfortable level. If kids come along, they're not cheap to bring up, and your talking another mortgage payment per child pretty much.

Yes, I know you cant wind back the clock with age/pension years availability, and yes, you are well covered insurance wise, but, as we dont know whats around the corner, Id rather get around the corner with less baggage weighting down on my shoulders.

You can make "out of course payments" to your mortgage balance, doing this will not alter your regular monthly payment amount, if done this way, just the term.

All going well financially, and with a comfortable mortgage balance to take care of, should any misfortune come your way, your are in a better position to steer your ship accordingly.


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## NoRegretsCoyote (2 Nov 2020)

LS400 said:


> For a combined income of what you have displayed, and having paid 12 months mortgage already, €420k is a savage amount to be in debt for years.


 
Compared to what though? They have a high household income so an LTI below 3.

They are on track to have mortgage paid off at 61.

For a household of their age the OP really has a very healthy set of finances.


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## DublinHead54 (2 Nov 2020)

LS400 said:


> When I looked at this originally, I thought you were in a great position.
> 
> But carrying such a huge mortgage debt, Im not so sure you really are.
> 
> ...



I think the Op mentioned they only started working 4 years ago, so probably wouldn't have had a huge downpayment saved and perhaps college loans to pay off. I suspect as well that the monthly payment isn't too dissimilar to rent they were paying before hand.

I do agree that I'd be looking to pay down the mortgage now. I think the happy medium is a 75/25 (mortgage / pension) or similar.


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## fungie20 (7 Jan 2021)

Just an update: I'm about to pull the trigger on paying down the lump sum off mortgage. I can reduce the term of the loan by x years, keeping my current payments the same or keep the term the same but monthly payments reduced by about 150-200 per month.

Which is generally the best way to go? I can see pros and cons for both. Keeping the term the same is more flexible and I could simply save the difference between current and future payments to pay off in another lump sum. The negative being that it might be more expensive in the long term not to reduce the loan term. I haven't ran the number so am unaware of the interest payment difference, over say the next 4 years.


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## Sarenco (7 Jan 2021)

fungie20 said:


> Which is generally the best way to go?








						Key Post - "Overpaying my mortgage - should I reduce the term or the monthly repayment?"
					

This question comes up in a variety of ways and the threads often go off topic with irrelevant calculations.  The interest charged each year is exactly the same - we will return to this.  Reducing the repayment is simply reducing the payment you are contractually obliged to make under your...



					www.askaboutmoney.com


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## fungie20 (7 Jan 2021)

Thanks for that. I would add, since I can only repay 10% of monthly repayments, I can't really do what is suggested here. I can't overpay to bring my payments back to what they originally were before lump sum.

Example:

Before lump sum:

standard payment: 2000
overpay: 200
total: 2200

After lump sum:

standard payment: 1500
overpay: 150
total: 1650

Is keeping term the same, still the best option if this is the case?


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## Sarenco (7 Jan 2021)

fungie20 said:


> Is keeping term the same, still the best option if this is the case?


Yep - it gives you more flexibility.


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## Coldwarrior (8 Jan 2021)

fungie20 said:


> Thanks for that. I would add, since I can only repay 10% of monthly repayments, I can't really do what is suggested here. I can't overpay to bring my payments back to what they originally were before lump sum.



You can still overpay more than the allowed 10%, there may be a small breakage fee on each over-payment above the 10% but it'll still be less than the interest savings.


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## fungie20 (8 Jan 2021)

Coldwarrior said:


> You can still overpay more than the allowed 10%, there may be a small breakage fee on each over-payment above the 10% but it'll still be less than the interest savings.



If this could be done as part of the monthly direct debit, I would for sure. On the other hand, If I've to do a transfer every month and then tell them to take it off the capital via phone, I'd probably give it a miss.


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## fungie20 (8 Feb 2022)

I thought I'd provide an update since I've some more questions:

*Age: *32
*Spouse’s/Partner's age: *33

*Annual gross income from employment or profession: *170k (122k salary with rest from bonus and shares)
*Annual gross income of spouse: *66k + overtime

*Monthly take-home pay: *Not sure exactly but cashflow isn't an issue

*Type of employment: e.g. Civil Servant, self-employed: *Private sector, partner public sector

*In general are you:
saving: *Saving on average 2-3k/month

*Rough estimate of value of home: *572k (bought for 500k in 2019, price index suggests about 14-15% increase since, will need to get valued)
*Amount outstanding on your mortgage: *353k with 28 years to go. We paid off lump sum upon suggestions here, thanks!
*What interest rate are you paying: *2.8% (Just under 3 years left of 5 year fix)
We overpay the 10% allowed from bank of Ireland + extra money to bring monthly repayments to about 2000, the contract amount is about 1550.

In theory we are meant to pay a breakage fee on the extra repayments (taking into account the break fee has been about 0.8-1%) but the bank hasn't been charging us for it, nor do they recalculate the repayment amount every month, even though they probably should. It's probably due to incompetence and bad IT systems but either way we don't get charged on it.

Due to get 4300 eur in cashback if we stay the fixed term

*Other borrowings – car loans/personal loans etc: *None
I was planning on buying a car (with cash) but with another car and home working and shortage of second hand cars, I'm in no rush here.

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

*Savings and investments: *65k in cash. About 25-30k was earmarked for car up until recently. About 15k was for maxing pension contributions for last year and like about 15k rainy day.

*Do you have a pension scheme: *Approx 90k, partner contributes to public service pension and maxes PRSA. Estimate fund at around 40k. Both max contributions


*Do you own any investment or other property?*
None

*Ages of children: *No children

*Life insurance: *Mortgage protection, 650k life policy (38 years left) and 4x salary life policy via work. 400k or so mortgage protection. My partner works in public sector so whatever they get.

Prob over insured, I'll prob stop letting my life policy increase.

Since I overpaid mortgage, can I reduce mortgage protection inline with it?


*What specific question do you have or what issues are of concern to you?*
I'm wondering if it makes sense to break fixed term, move to Avant or ICS? I try not to predict the future but I think in 3 years, mortgage rates will either be the same or higher than now. Therefore, it might make sense to fix at a low rate for a longer time.

We aren't far off the 60% LTV and could use some of the cash to get to it, if required after we get it valued.

I calculate if we were to move to avant today we would save approx 8500 in interest over the remaining fixed period. (353k x (0.028-0.0195) x 3, then allow for principal reduction over that time of 500 eur, bit of a guess).

We will have to forfeit the cash back (4300), the solicitor + valuation will cost about 1500 and the breakage fee I'll have to find out about. I'll be pessimistic and say 1% of loan (3500). So it looks the swap would be pretty cost neutral over the next 3 years, plus or minus a few hundred euro. If interest rates were to stay the same, there would be no point doing this.

My question, is it worthwhile to swap to Avant's low rate for 7/10 years as a hedge against interest rate rises in my case?


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## Blackrock1 (8 Feb 2022)

Have you considered cancelling the mortgage protection and using the life policy in its stead? Thats what i am going to do, as i pay down the mortgage the amount left over on the life policy should something happen to one of us gets larger and it has dual use.

Also do you intend on having kids, because if you do a lot of what you think might be the case in the future will change dramatically


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## fungie20 (8 Feb 2022)

Blackrock1 said:


> Have you considered cancelling the mortgage protection and using the life policy in its stead? Thats what i am going to do, as i pay down the mortgage the amount left over on the life policy should something happen to one of us gets larger and it has dual use.
> 
> Also do you intend on having kids, because if you do a lot of what you think might be the case in the future will change dramatically



It's a joint policy and my partner also needs it. I don't think I could cancel my half. Either way, it's 30 eur a month, while something perhaps to look at in future, the savings isn't that large relative to other things.

In terms of children, even if we had them, I'd still want to minimise cost of mortgage so I don't think it matters.


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## Blackrock1 (8 Feb 2022)

fungie20 said:


> It's a joint policy and my partner also needs it. I don't think I could cancel my half. Either way, it's 30 eur a month, while something perhaps to look at in future, the savings isn't that large relative to other things.
> 
> In terms of children, even if we had them, I'd still want to minimise cost of mortgage so I don't think it matters.


ok i assumed the life policy was joint as well, maybe not, if it was then you could cancel the mortgage cover.

Re the kids its more things like will you want to move house (maybe your own is already well set up for having kids), will you both continue to earn (in our case even though my wife was earning a large salary it made more 'life' sense for her to take a break from it, only issue now its hard to see her going back for a variety of reasons!)


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## fungie20 (8 Feb 2022)

Blackrock1 said:


> ok i assumed the life policy was joint as well, maybe not, if it was then you could cancel the mortgage cover.
> 
> Re the kids its more things like will you want to move house (maybe your own is already well set up for having kids), will you both continue to earn (in our case even though my wife was earning a large salary it made more 'life' sense for her to take a break from it, only issue now its hard to see her going back for a variety of reasons!)



We've 2 spare rooms so plenty of space in this house. May move but not for a while.

I'd be interested in hearing views on should I break and move to lower rate.


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## ClubMan (8 Feb 2022)

fungie20 said:


> I'd be interested in hearing views on should I break and move to lower rate.


You need to find out what, if any, early breakage fee/penalty applies, what lender/rate you can move to and what you might gain by switching in terms of lower ongoing interest costs and maybe also switching cashback.


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## fungie20 (8 Feb 2022)

I've laid it out that it would be very close to cost neutral. Question is, is it worth it.


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## ClubMan (8 Feb 2022)

If it's cost neutral then what's the point in switching?


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## fungie20 (8 Feb 2022)

ClubMan said:


> If it's cost neutral then what's the point in switching?



Because the interest rates could well be higher in 3 years. It's cost neutral over next 3 years but cheaper after.


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## NoRegretsCoyote (8 Feb 2022)

fungie20 said:


> Mortgage protection, 650k life policy (38 years left) and 4x salary life policy via work. 400k or so mortgage protection. My partner works in public sector so whatever they get.
> 
> Prob over insured, I'll prob stop letting my life policy increase.


I still think you are overinsured.

At your age there is something like a 15x greater risk of suffering a life-limiting disability than dropping dead.

I would look at income protection insurance to some extent instead. Read the fine print as I know the criteria for payout can be strict. I thought I was invincible at your age and trust me from experience that you don't value your health until you lose it.


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## fungie20 (8 Feb 2022)

NoRegretsCoyote said:


> I still think you are overinsured.
> 
> At your age there is something like a 15x greater risk of suffering a life-limiting disability than dropping dead.
> 
> I would look at income protection insurance to some extent instead. Read the fine print as I know the criteria for payout can be strict. I thought I was invincible at your age and trust me from experience that you don't value your health until you lose it.



Unfortunately I can't get income protection for reasons I don't want to go into here. It's not from a lack of trying. I was lucky to get life and mortgage protection with no exclusions.


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## Blackrock1 (8 Feb 2022)

fungie20 said:


> I've laid it out that it would be very close to cost neutral. Question is, is it worth it.


Well in that case it's a no brainer.if you believe interest rates are going up you are basically getting a free hedge against it.

If they don't it's unlikely they will go lower than what you can fix with avant with so you are only down a few k anyway.


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## ClubMan (8 Feb 2022)

fungie20 said:


> It's cost neutral over next 3 years but cheaper after.


So doesn't that answer the question?
You should switch.


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## fungie20 (9 Feb 2022)

I just rang the bank and currently there's no breakage fee. So probably worthwhile doing.


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## Blackrock1 (9 Feb 2022)

fungie20 said:


> I just rang the bank and currently there's no breakage fee. So probably worthwhile doing.


100%


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## fungie20 (17 Dec 2022)

Took the advice of here and swapped to Avant for 7 years at 1.95% a week they increased rates.

We are in the position to pay off a lump sum if we choose to before the end of year, approx 30k as Avant allow you to pay 10% off the capital per year. My question is, is it still a good idea to overpay lump sums? I know the wisdom here has been traditionally overpay mortgage and max pension; we've already maxed both our pensions for last year and will continue to do so. Is overpaying a mortgage at 1.95% still the best thing to do, or have things changed enough to do something else?


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## ClubMan (17 Dec 2022)

fungie20 said:


> My question is, is it still a good idea to overpay lump sums? I know the wisdom here has been traditionally overpay mortgage and max pension; we've already maxed both our pensions for last year and will continue to do so. Is overpaying a mortgage at 1.95% still the best thing to do, or have things changed enough to do something else?








						Better to save than to overpay a low fixed rate mortgage in some instances?
					

A recent post got me thinking are we close to the point where it makes financial sense to save rather than to pay down debt i.e., for some borrowers the return on savings (net of DIRT & PRSI) is greater than overpaying a fixed rate mortgage.  There was a point in the past where this strategy...



					www.askaboutmoney.com


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## Brendan Burgess (17 Dec 2022)

Hi fungie

Yes, you should pay it off. 

If you can find a safe bank which pays a deposit rate of about 3.5%,  on a notice term less than the term left on your fixed rate, then you could consider putting it on deposit instead.

Brendan


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## ClubMan (17 Dec 2022)

Brendan Burgess said:


> Hi fungie
> 
> Yes, you should pay it off.
> 
> ...


Why 3.5%? They say that their mortgage rate is 1.95%.


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## interested21 (17 Dec 2022)

I was wondering if it might nearly be worth you starting investing so I did the maths.

A €30k mortgage overpayment will save you about €4k over the next 7 years (the length of your fixed term)

If instead you invested the €30k in an index fund that got you a return of 5% (not an unreasonable return to expect from a diverse fund) you'd make a gross profit 12k. The taxman would then take their 41%, leaving you with €7k

It's up to you whether the increased risk is worth the extra profit. You of course also do a hybrid approach as well.

If you continue your saving rate and overpaying your mortgage, you'll have your mortgage paid off over the next couple of years. You are eventually going to have to figure out somewhere else to put your money.


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## Brendan Burgess (17 Dec 2022)

ClubMan said:


> Why 3.5%? They say that their mortgage rate is 1.95%.



The 3.5% is subject to DIRT and USC or PRSI - I can never remember which.

Brendan


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## ClubMan (17 Dec 2022)

Brendan Burgess said:


> The 3.5% is subject to DIRT and USC or PRSI - I can never remember which.
> 
> Brendan


Then the other post that I linked to is confusing because there you ignore taxes/deductions for simplicity which would lead some to conclude that they should maybe put the money on deposit if the headline/gross deposit interest rate is greater than the mortgage interest rate.


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## Brendan Burgess (17 Dec 2022)

In the other post, I made an assumption initially to clarify the principles involved. 

By the end of the post, I had got rid of that assumption 



> If the term of the deposit is less than the remaining fixed rate period
> and
> If the deposit rate after taxes is higher than mortgage rate
> and
> ...


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