using interest on lump sum to pay off mortgage

[bizincork]

Is this possible or has anyone done it. Im looking to have my mortgage paid by interest on a lump sum deposit. say my mortgage is costing 800 a month and i can deposit 250000 or whatever. Would it be worthwhile to leave it on deposit and have the mortage paid. Or would it be better to just pay off the mortgage ?

Would there be issue with leaving that much money woth one bank AKA northern rock type meltdown - cant get money back

thanks

 

[ClubMan]

Paying off a mortgage lump sum immediately would yield higher savings than the alternative strategy. See Karl Jeacle's mortgage calculator for modelling such accelerated repayment strategies. Whatever strategy you choose make sure to agree in writing with your lender that any additional unscheduled repayments are to be set against capital.

 

[PMU]

You’re better to pay off the capital on the mortgage; it’s a risk free and tax free return at your mortgage rate. Any interest you earn on the lump sum deposit will be subject to Dirt at 20%.

 

[ronaldo]

Would the lump sum method not be better in the following scenario:

You buy a house using NIB's LTV mortgage at 4.5% interest. Therefore, if the interest in the mortgage is below the threshold for TRS, i.e. if the interest is below €20,000 for a married first-time buyer couple, your mortgage rate is effectively 3.6%.

The lump sum on deposit with Northern Rock will earn 5% (4% gross) - a savings of 0.4%. (There are better rates than 5% available but Northern Rocks is the only one with no upper limit).

Therefore, for every €100,000 lump sum, you'd be saving €400 per year. Not really alot of savings but worth considering.

 

[ClubMan]

The lump sum on deposit with Northern Rock will earn 5% (4% gross)

This is wrong - 5% gross is 4% net (of DIRT).

Another thing to consider is that if you reduce or clear the mortgage then you can most likely save on your erstwhile outgoings for mortgage protection life assurance premiums.