# advice with lump sum



## seashore (11 Aug 2008)

Age 55
Single
Retired Civil Servant
Pension 40000 p.a
Mortgage 98000 : 4.75 at NIB
Value of House 500000(remortgaged recently to modernize hse)
No other loans
Pay credit card in full  monthly.
Savings: 20000 in 2 different deposit accounts
Shares: approx 12000 currently. Bank and low risk shares I thought!
Generally low maintenance person.
Specific Question: Will get lump sum  in October 120000. Would love to invest 80000 in summer cottage with sister. Any advice, or should I pay back mortgage. Thanks for your suggestions.


----------



## davidoco (12 Aug 2008)

Keep savings for raining day - you'll have lots by the looks of the weather these days.

Use 80k for cottage, 40k left to play with.  You could pay that off some of mortgage but as you get older getting finance will prove more and more difficult. 

What's the term of the mortgage?


----------



## seashore (12 Aug 2008)

Thanks Davidoco for advice,  approx seven years left in mortgage and am comfortable with repayments. I will be able to get temporary work if I want to, so not totally dependant on pension.


----------



## davidoco (12 Aug 2008)

At current rates you will have paid €17,000 in interest on your mortgage between now and when you have it paid off.

If you threw the remaining €40,000 off the mortgage you would save €7,000 in interest repayments over the same term with corresponding lower repayments to make.

You have to run the figures yourself but investing that €40,000 wisely over 7 years would in the past have earned you that €17,000 but there is inflation and DIRT to think about.

PM me for with a email address and I'll send you off a handy Excel mortgage calculator so you can play around with the figures for the mortgage or even visit your bank and they will run the figures for you.

IMO when you have a mortgage and you come into some money it is not always the best course of action to pay off the mortgage, as it's the cheapest money you can get.  This is especially the case when you can find some other outlet for the lump sum.

You have to decide say in 5, 10 or 15 years what sort of money on deposit would you be comfortable with or need.  You are in a relatively strong position with the 20,000 already saved.


----------



## seashore (13 Aug 2008)

Thank you so, so much Davidoco for your information. I had no idea that I would pay so much money in interest for the next seven years. Am just learning about finance(better late than never) thanks to AAM. Will probably wait until we have bought cottage which will be another 6 mths before making final decision.


----------



## Susanna (14 Aug 2008)

Make sure you discuss fully with your sister who is going to use the cottage and that you have a legal provisio for either of you to sell it if necessary...all to often you hear of siblings falling out over properties.


----------



## seashore (14 Aug 2008)

Thanks Susanna, have discussed  purchase with solicitor and plan on having appropriate legal documents in place.  Have been advised to wait a little longer until prices in property market  'cool'. Not sure when that will be.


----------



## simon44 (19 Aug 2008)

Best time to buy a house or property is in 6 months time just before the price hike again. This will give you a buffer as well so those selling wont think ah sure I'll hang on a while until it all goes back up.


----------



## eileen alana (19 Aug 2008)

simon44 said:


> Best time to buy a house or property is in 6 months time just before the price hike again.


 

Says who??


----------



## Bronte (19 Aug 2008)

Don't forget there is mortgage interest relief so you don't pay as much as you think.  If your loan is fixed you pay a penalty if you make a lump sum repayment.  Also if the holiday cottage is going to be let out it would be better to have a mortgage on this property as the relief is higher for investor mortgage interest relief than on home owners.  And don't forget that if you are paying interest of 4.75,  you can currently get more for depositing the lump sum.


----------



## simon44 (19 Aug 2008)

eileen alana said:


> Says who??


 
its simple economics. In my business degree I did economics. One of the theories of economics on property in first world countries to date has been that every 4/5 years property prices reach a high and then hits a low 4/5 year later. However, in the past (on average mind) the lows havent lasted as long and will hit a certain point (higher than the last low on the price chart) and then begin to rise again.

In simple terms this would mean it rises for 5 and falls for 4 and rises for 5 and falls for 4. ok?


----------

