# Planning for the future - Overpay mortgage, invest or ?



## JohnnyJohnJohns (24 Feb 2017)

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

*Annual gross income from employment or profession:*
€38,000

*Annual gross income spouse:*
€43,000

*Type of employment:*
Both public sector employees on lower end of our scales.

*Expenditure pattern:*
We are both generally 'savers'

*Rough estimate of value of home*
€380,000
*Mortgage on home*
€240,000

*Mortgage provider:*
UB

*Type of mortgage: Tracker, interest only, fixed rate*
Variable

*Interest rate*
Loyalty - 3.1%

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

*Do you pay off your full credit card balance each month?*
Yes

*Savings and investments:*
€42,000 in saving account earning about 1%

*Do you have a pension scheme?*
Yes, I'm on single public service and my wife is on the superannuation pension

*Do you own any investment or other property?*
No.

*Ages of children:*
1 x 6 month old

*Life insurance:*
Yes (Zurich), covers the mortgage.

*What specific question do you have or what issues are of concern to you?*
Each month we have over €1,000 that goes into savings and I'd like this to work a little harder than 1%. Our options seem to be:

a) savings at a low rate
b) investing in the market (We're both somewhat risk averse)
c) overpaying the mortgage (We both have permanent jobs with increments so this feels like it will take care of itself over time.

Is mortgage overpayment the only game in town or are there alternatives?

Thanks.


----------



## Sarenco (24 Feb 2017)

There are always alternatives but, if I was in your position, I would definitely prioritise paying down the mortgage ahead of schedule.


----------



## Gerry Canning (24 Feb 2017)

Its very good that you put k1 aside ,so even if rates rise by 3% on mortgage you will still be ahead and not be forced to cut back on normal living.
With Sarenco,  to pay down mortgage by that k1 per mth, because things do not always stay (good) and you still have the k42 as a very good buffer.

The 1year + 6 monther, will also get more and more expensive ! (little darlings !).
So if you future find you need the k1 to fund them you can stop overpaying for a while and still stay comfortable.


----------



## Itchy (26 Feb 2017)

Another option available to you is to make AVCs. Just FYI.


----------



## JohnnyJohnJohns (2 Mar 2017)

Ok, so overpay seems to make sense. Is there any options with the 41k or is it just best left in a standard savings account? 

Regarding AVC's we both have public sector pensions (I'm on the single public service scheme and my wife is on a superannuation scheme) and will both retire on full service. Do AVC's make sense in this case given that we should be mortgage free by then and on reasonable pensions?


----------



## gnf_ireland (2 Mar 2017)

Have you factored in childcare costs into this? I assume the child is not yet in a childcare facility at 6 months, but this will cost roughly 1k a month full time. I have no idea what other arrangements you may be able to come to etc. This will continue for a few years to come, including national school after-school and holiday time

Are you planning on having any more children - you need to keep any additional costs, or extra time off, in mind here

Personally regarding the 41k - I would keep a lump sum of it as the rainy day fund and pay the rest off the mortgage. Every 10k saves you €250 a year (3.1% - 0.6% (net of DIRT)) - Over 25 years that's 6250 euro !



JohnnyJohnJohns said:


> investing in the market (We're both somewhat risk averse)


As discussed on here, investing in the market outside a pension is not very effective from a tax viewpoint given the higher rates of CGT/Exit Tax on any earnings. That said, it is possible if you wish to do it


Personally, I believe Ireland does need some sort of ISA arrangement to encourage people to save and increase that 'saving' mentality !


----------



## JohnnyJohnJohns (2 Mar 2017)

gnf_ireland said:


> Have you factored in childcare costs into this? I assume the child is not yet in a childcare facility at 6 months, but this will cost roughly 1k a month full time. I have no idea what other arrangements you may be able to come to etc. This will continue for a few years to come, including national school after-school and holiday time
> 
> Are you planning on having any more children - you need to keep any additional costs, or extra time off, in mind here
> 
> ...



Childcare is factored in and is going to savings at the minute so that we don't get a shock when he goes to creche. We'd like to have one more but that's about two years out when increments and rolling back of public sector pay cuts hopefully align pretty close to our son moving to the ECCE and hopefully this will keep income/expenditure fairly balanced but certainly something to keep in mind!


----------



## gnf_ireland (3 Mar 2017)

JohnnyJohnJohns said:


> hopefully align pretty close to our son moving to the ECCE



ECCE is around 250 euro a month for 10 months (approximately). The average full time childcare bill in a creche would be around 12,000 euro. ECCE would reduce this to around 9,500 (approximately)

Something else to keep in mind !


----------



## tallpaul (3 Mar 2017)

gnf_ireland said:


> Personally, I believe Ireland does need some sort of ISA arrangement to encourage people to save and increase that 'saving' mentality !



I agree!! Unfortunately Government policy for the past number of years has actively discouraged saving by putting DIRT levels to a ridiculous 41% at one stage.


----------

