# Reduce mortgage or put redundancy on deposit?



## ivannomonet (18 Feb 2009)

*Age:*
45
*Spouse’s/Partner's age:*
35
*Annual gross income from employment or profession:*
E46,000
*Annual gross income spouse:*
Currently Unemployed (became pregant between jobs and coudlnt get another while pregant)

*Net Income me:*
E38,753
*Net Income Spouse:* 
getting E204 per week Jobseekers benefit => 204.30 * 52 => E10,623
+ child benfit and Early childcare Supplement for 3 children => (535 * 12) + (92 * 3 * 12) = E9,732
E20,355

*Type of employment:*
both private sector

*Expenditure pattern:*
Previously managed quite comfertably on combined incomes, never really exceed 2k savings over the last few years due to buying house twice (traded up), stamp duty, kids etc. Both came from previous marraiges so started late with nothing financially but no debts or responsabilities either.

*Rough estimate of value of home*
E260,000 (based on assuming a conservative 25% drop in value, most recent sale of similar was 280k in december 2008) 

*Mortgage on home*
E272,000 - Outstanding, just over 20 years remaining. Mortgage was 290,000 2 years ago over 23 years, on a purchase price of 350,000

*Mortgage provider:*
AIB
*Type of mortgage: Tracker, interest only, fixed rate*
Tracker ECB +1.1% so currently paying 3.1%

*Other borrowings – car loans/personal loans etc*
3,900 on MBNA CC @ 3.9% (I used the CC to repay a personal loan with AIB that was @ 10.8% APR)
Currently paying down at the rate of 800Euro per month to repay before August 09 when 3.9% rate ends.

*Do you pay off your full credit card balance each month?*
I have 3 credit cards:
AIB Platinum I use for work related expenses, Limit 11,000 Always pay in full every month. Zero owing.
MBNA for personal spending Limit 15,000 currently 3,900 @ 3.9% APR owed as detailed above.
Ulsterbank Zinc Limit 5,000 . Opened a few years ago to do a balance transafer at 0% for 6 months. Zero owed.
I know these cards cost 120 Euro government duty but I think the benefit of a guaranteed line of credit if required is worth this.

*Savings and investments:*
E1,000 savings Credit union ( I pay in E50 per month ) .
I keep this account open as I have borrowed and repaid over 120k in the last 25 years so good credit record with them.
E2,000 surplus in current account.

*Monthly outgoings:*
Mortgage 1488 - TRS 168 =>1320 (Was 1818 upto 5 months ago until rates dropped)
ESB Average monthly => 78
Playschool fees => 95
Home & Contents Insurance => 35
Mortgage Life Assuarance => 100 (high because we're smokers)
MBNA CC => 800
Diesel => 50
Petrol => 60
Shopping/Groceries => 860 ( napppies & baby stuff are expensive )
Cigarettes => 250 ( I know! I Know!)
Beer/Wine => 60
Mobile Phones => 40
Contribution to Annual bills =>300 (TV License, service charges, car tax, car insurance, heating oil etc)

The remaining approx 900 Euro a month fritters away on once off bills, clothes, toys, takeaways, dvds, birthday presents, wedding gifts etc. It's never actually there.

Upto last year it was paying off the remaining car loan we had. We have 2 cars now both over 6 years old, both paid for.

*Do you have a pension scheme?*
Work scheme into which I pay 6% of gross and employer pays 8%.
Wifes pension static at the minute , not making contributions since leaving employement.

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

*Ages of children:*
3 years, 2 year, 2 months.

*Life insurance:*
Mortgage Protection (Level term? ).
Death in Service benefit at work of four times salary.

*What specific question do you have or what issues are of concern to you?*
Possibility I could be made redundant within the next two months. Now its only an if but I want to think ahead...
If so I could receive a net redundancy lump sum of either 92k or 106k depending on the deal I can broker.
Would I be better off continuing to pay the existing monthly mortgage payment of 1488 from this until I get a job of similar pay or it runs out
OR
should I make a 90k or 100k lump sum payment off the mortgage to keep the term the same but reduce the monthly payment to approx E1000?

Or what better things could I consider to ensure I stay financially stable until one or both of us would get decent employement again?


----------



## steviel (18 Feb 2009)

I would use 50k to pay down the mortgage straight away, in order to absolutely guarantee that the house is worth more than the mortgage even in a worst case scenario. If things took a turn for the worse in the near term, you then wont have added worry of being unable to sell the house - having a mortgage worth more than the house value is not a situation I would like to be in


----------



## z104 (18 Feb 2009)

Firstly I would pay off the credit cards then I would keep the remaining money and continue to pay mortgage and bills monthly until I found a new job. Once I found a new job I would consider paying down the mortgage.

No point paying 100k off your house if you cannot make next months repayment.


----------



## Brendan Burgess (18 Feb 2009)

check the Key Posts where this is dealt with in some detail


----------



## Mommah (23 Feb 2009)

Depends on your interest rates.
Negative equity in itself is not a problem unless you need to sell the house.
If you mortgage interest is 3% for example 
Deposit interest is nearly 5%...makes NO sense to pay off mortgage.
If you are out of work and sink your fund into the mortgage ....you will have difficulty borrowing other than those pricey credit cards.

So IMHO...keep it on deposit one or two different accounts in case access becomes a problem in one or other.


----------

