# We are actively overpaying mortgage to be mortgage free between the ages 45-47 hopefully.  Any thoughts?



## jimmy1981 (7 Oct 2019)

Thanks for taking time to read and reply . Always found advice here a great help

Age: 38
Spouse’s/Partner's age: 39

Annual gross income from employment or profession: *55000 *
Annual gross income of spouse:*38000*

Monthly take-home pay *5800*

Type of employment: e.g. Civil Servant, self-employed  :*Private both*

In general are you:
(a) spending more than you earn, or
(b) saving? *Saving*

Rough estimate of value of home *500000*

Amount outstanding on your mortgage: *130000 with 11 years left*
What interest rate are you paying?* 2.75* *Variable*

Other borrowings – car loans/personal loans etc *none all paid*

Do you pay off your full credit card balance each month? * Yes balance of 0*
If not, what is the balance on your credit card?

Savings and investments:
*50000€ In deposit account used as emergency fund if needed.  Children’s benefit kept separate for education needs in future.*
Do you have a pension scheme?

*Yes DC for myself 55k fund approx, 8% ER &6%EE and  small company PRSA scheme for spouse 18k fund*

Do you own any investment or other property?

*We will inherit a couple of properties in Long term*
Ages of children:
*1 & 4*

Life insurance 4e: *both have death in service* *4&2 times with company plans, no other policy bar mortgage protection obviously *


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

*We have actively overpaying mortgage to be mortgage free between the ages 45-47 hopefully . My own personal thought is to continue down this road as fortunately it’s the only debt we have ... Creche fees won’t last forever and to put what money left over into reducing this balance rather than a deposit account . Also my pension needs an increase in AVC’s I suspect .

Toyed with the idea of setting up a EFT /shares however lack of knowledge and expertise put me off. Some house renovations are on the horizon but not large and mainly manageable from emergency fund. LTV is very good due to large deposit also. 

We are just looking for some outside thoughts on our situation/ plan? Any improvements to it and recommendations? Investments and /or pension advice.*


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## Sarenco (7 Oct 2019)

€50k earning zero interest looks like overkill as an emergency fund when you're paying 2.75% on your mortgage.  Something closer to €30k looks about right as an emergency fund in your circumstances. 

Beyond that, I would prioritise maximising your tax-relieved pension contributions ahead of paying down your mortgage ahead of schedule, at least to the extent that you get tax-relief on contributions at the higher rate.

I don't think it makes sense to invest after-tax money while carrying a mortgage.  Max your pension contributions then use any surplus to pay down your mortgage.

Keep it simple!


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## HollowKnight (7 Oct 2019)

Most schools of thought have the 'emergency fund' as 3 - 6 months expenses. In this case, it's likely to be nearly ten times your monthly expenses. So contribute max to pension for last year and this year. Then put the rest against the mortgage.


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## jimmy1981 (25 Mar 2022)

Hi All

Just a update on above. 

Mortgage balance is down at €50K now after using some of our emergency fund and regular overpayments of various amounts…I have increased pension contributions to 20% of salary for myself (fund at 100k ). Emergency fund is at 20k and child benefit separately saved(approx 16k). No car loan or debts bar mortgage. 

Just wondering should we fix at lower rate  as balance is lower or continue on road of regular larger overpayments on to clear and remain on variable <50% rate ? In our mind we want to clear ASAP however just looking for opinions or views on it.

Thanks


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## misemoi (25 Mar 2022)

How much spare cash do you have in the next year or so to put towards the mortgage? When we were at a very low balance I was able to work out that it made more sense to move to a variable rate that a fixed as we would pay less interest to the end of the mortgage as we could overpay quicker on the variable. Though tbh at your kids ages with college so far away I would just put the child benefit against the mortgage and then maybe take a look at a college savings plan, which you can fund out of the previous mortgage payments. At this stage you're almost there and there's something nice about being mortgage free at that age ! (Hoping to get there ourselves in the autumn all going well!).


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## jimmy1981 (25 Mar 2022)

Thanks misemoi for reply . We have been topping up monthly with a minimum of 500€ per month versus the real payment of 460€ each month and various other lump sums at different times depending on times of year etc ..We are hoping within next 3-4 years to have it pretty much done but understand your point re child benefit especially as in credit union doing nothing . Well done on nearly finishing yours . Mentally it’s a nice milestone to achieve so early !


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## Sarenco (25 Mar 2022)

In your shoes, I would stick with the flexibility of a variable rate and keep paying down the mortgage ahead of schedule.

At this stage, the bulk of your mortgage payments are principal repayments anyway so a modest difference in the mortgage rate won’t make much difference either way.

To own your home outright in your 40s would be a great achievement and it puts you in a fantastic position to really put money by for retirement and for your kids’ education.

BTW, you can get tax relief on contributions to your pension of up to 25% of your salary in the year you turn 40.


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## misemoi (25 Mar 2022)

Looks like the fixed rates with AIB (based on your rate I've assumed) are higher or not much higher than your variable. Who knows what's ahead with rates but at your low balance it won't have much of an impact if they rise. So I'd stay on variable and continue the focus on the monthly and ad hoc overpayment...I know for me it's just easier to clear the money out as I get it, if I had to save and do it once a year it would find another home. 

Try to view all your money as one pot, and your CB portion of the pot is actually costing you as it is 2.75% plus inflation minus whatever dividend you earn in the CU. Would you pay that potential rate of 7-8% on a credit card debt for example? Probably not. You could clear the mortgage one year earlier if you use this to pay down a lump sum.  Even if you wanted to go with the simple deposit fund you'd have it back at the same level in 16 months.


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## jimmy1981 (25 Mar 2022)

Appreciate the replies, sticking with variable suits tbh and each month/review clearing out some cash as outlined   . Good point on the deposit account and timeframe . We do have a bit of time before that .


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## skrooge (26 Mar 2022)

Before you completely discount the fixed rate option and assuming you're with AIB have a look at the following thread






						Calling AIB customers who fixed before the latest fixed rate cuts in September 2020
					

Any customer currently on their 3 or 5 year fixed rates can break for free, and refix now at the lower rates. This is because of an extra calculation that AIB do looking at their own interest rates, so because they provide 2 & 4 years rates higher than the existing 3 & 5 year rates, they cannot...



					www.askaboutmoney.com
				




In short you can have both the flexibility of a variable with the protecting of a fixed.


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## Clamball (26 Mar 2022)

You mention 20% pension contributions for yourself, but what about your wife?  Is her pension pot matching yours?  She may not have had the opportunity to grow her career given her child care responsibilities, but she is likely to live longer than you (statistically) so what would her pension be like if you died first?


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## Cervelo (26 Mar 2022)

This is a tough one to answer but if it was me been so close to the finishing line I'd probably dump all the savings plus the CB into the mortgage 
and presumably with the over payments be done with the mortgage within the year.
Then been debt free you can start building back up your savings either aggressively or at a more leisurely pace depending on your needs
but having said that you're going to be debt free in a short few years so why the rush!!

But there is something wonderful when you are debt free


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## Gordon Gekko (26 Mar 2022)

I think you’re focussing on the wrong area.

Your pension funds are woefully underfunded.

I believe that mortgage overpayments should only be made AFTER AVCs are being maxed out.

€50k is too much cash also.


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## Cervelo (26 Mar 2022)

Clamball said:


> so what would her pension be like if you died first?


A lot better than before he died!!

Sorry couldn't resist


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## SPC100 (26 Mar 2022)

Agree. Especially as there will be future property inheritances too. So it seems like a missed opportunity for tax relief.

I'd max the pensions first (assuming you were still getting higher rate tax relief)


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