# advice please-put extra in mortage or start savings?



## rania (28 Jul 2009)

hi there
posted here before,got some good advice and doing better now.looking to short and long term now with regards to savings.
Age: 29
Spouse’s/Partner's age: 31

Annual gross income from employment or profession: 
Annual gross income of spouse:
53000 + overtime 20000
Type of employment: e.g. Civil Servant, self-employed -public service

In general are you:
(a) spending more than you earn, or
(b) saving?
saving
Rough estimate of value of home-275000
Amount outstanding on your mortgage: 270000
What interest rate are you paying? 
5.09
Other borrowings – car loans/personal loans etc
600 p month loan
Do you pay off your full credit card balance each month? no credit card
If not, what is the balance on your credit card? 

Savings and investments:
savings-
5k credit union
Do you have a pension scheme? 
yes,public service

Do you own any investment or other property? 
no

Ages of children: 
18mths

Life insurance: 
linked to mortgage


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

should we be 
a)overpaying on mortgage?
b)long term depost savings?
c)set up a/c for daughters future education?
d)just put all excess money into clearing loan?
e)set up extra life insurance /serious illness policies?
f)set up additional pension?

thanks


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## MANTO (28 Jul 2009)

I would personally be saving;

You are paying mortgage protection insurance. So, god forbid something happened to you or your partner your mortgage protection kicks in and the money you would have saved is wasted.


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## Diziet (28 Jul 2009)

I vote for overpaying the mortgage. At 5.09%, your borrowing is very expensive so it makes no sense to save unless you can get a higher savings rate than that (I have not seen one). So, as long as you have your rainy day fund in place and you can overpay the mortgage without penalty, the highest return comes from whittling down the mortgage.

I do not see that the money is wasted when overpaying in this way. The poster says they have life assurance, which would pay up if one of the couple dies, but this is the very worst case.


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## so-crates (28 Jul 2009)

Firstly I am assuming your mortgage is a variable rate?

Do you have an amount in mind that you can use as your starting point? There are a few things to consider, 

These options are all over different time spans. In order to compare effectively you need to look at them equivalently
Some of these options reflect aspirations such as home ownership and your daughter's education, others are risk management and others are wealth management, etc. You need to sit down and decide some goals, it will be easier then to decide what to do
Your existing savings are a little low for your income, you probably want to aim to have a fund of about three months wages available to cover you.
Your current savings are probably not earning you a great deal so you should consider moving them to something that will yield more interest.
The disadvantage of putting money into pensions is that that is tied up until you retire, the advantage is of course that then you have some savings to rely on and the tax advantage that accrues to saving for a pension.
The disadvantage of paying extra on your mortgage is that that is money spent, you do not have later access to it. Though of course the advantage is that it should mean you repay your loan earlier and considerably cheaper.
is there a reason you are considering more insurance? I'd suggest checking your pension terms, your mortgage insurance terms and your
I would suggest a little research on the costs and benefits of each option is needed.
1) check the best rates available for regular deposit savings (I think it is Anglo with 5% and a maximum monthly deposit of €1000). 
2) I think you need to see if you can change your mortgage (probably not as it is more than 90% of the value of the house). The rate you are paying is quite high.

Then draw up a comparison of each option, it's cost, the benefit expected and what aim it fulfills.

Personally I would move the credit union savings to a long term deposit account and set up a higher interest regular deposit account and put some of the money into that and use the rest to pay off the mortgage. I might also look at the options with regards to pensions but I would start with the other three first.


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## rania (28 Jul 2009)

mortgae is fixed rate until 2010 july unfortunatly,we took out a 7 year fixed term trying to be sensible and all that and it backfired on us bigtime.


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## so-crates (28 Jul 2009)

Is paying off extra an option then? Some do allow overpayments up to a certain percentage of the mortgage value.


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## Brendan Burgess (28 Jul 2009)

This issue is covered extensively in Key Posts on the topic.

Brendan


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## rania (28 Jul 2009)

yes, we are allowed to overpay by 60 euro per month.
so advice here is to overpay mortage.and leave savings till later?


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## chlipps (28 Jul 2009)

sounds like saving is best until the fixed rate passes in Jul 2010. If i were you i would try get savings up via a regular saver account. Note if you pay to mortgage then you will not get it back that easy


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## niceoneted (28 Jul 2009)

My questions in order to be able to assist are, what is the balance of the loan and what is the remaining time left for paying it off? Is it a loan from the credit union  where the 5 K is tied in as shares?

I assume your spouses job is fully secure and pensionable. If that is the case I wouldn't worry too much about some of the insurances for now especially if you are both healthy. 

As your mortgage is fixed I would not over pay on it for the time being. How much are you managing to save each month? Depending on loan balance I would save like mad for when you come off your fixed rate and then pay off a lump sum off the capital before looking for a new rate/institution to take on your mortgage. 

I would also look at perhaps opening a post office savings account for your daughter and when you collect the childrens allowance each month put half (or as much as you can) of it into the account. This is something my parents did for us and it was a great help when college came.(they were fortunate to be able to save it all). They periodically converted the savings to saving certificates which earned more interest.


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## rania (29 Jul 2009)

niceoneted said:


> My questions in order to be able to assist are, what is the balance of the loan and what is the remaining time left for paying it off? Is it a loan from the credit union  where the 5 K is tied in as shares?
> 
> I assume your spouses job is fully secure and pensionable. If that is the case I wouldn't worry too much about some of the insurances for now especially if you are both healthy.
> 
> ...


thats great advice thanks,
the balance of the loan is 18k,3 years left on it,its with the bank not the credit union.


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## so-crates (29 Jul 2009)

rania said:


> so advice here is to overpay mortage.and leave savings till later?


 
Um no, at the current count, it is one for extra mortgage repayments, three for additional savings and one for a bit of both!


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## niceoneted (29 Jul 2009)

Rania,

If that is the case I would use 4k to knock off the loan - if it's not fixed and would accelerate payments on it to have it cleared by the time the mortgage gets out of the fixed period. 
Try and work with a new budget for the next year and just cut back it will be easy as everyone else around you will probably be doing the same.


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