Accelerated mortgage repayment versus additional AVC contrib

L

lillypat

Guest
Not sure if anyone can make since of this question but lets try!!!!!!!!!!

Principle residence Mortgage of 118K at UB tracker 2.85%. Repayment 645pm starting June 1 2004 (have increased monthly repayments by 250 pm month) this reduces the term to 13yrs and 9 mths and a saving of approx 13K in interest. Mortgage will be repaid when I am 56yrs. Have owned ths property for 4years - mortaged switched from PTSB recently. Property value 450k

Investment mortgage of 85k with 22 yrs remaining with PTSB 3,55%. Repayment 460 pm, rental income of 850pm. Mortgage will be repaid when I am 64yrs.Value 250K

AVC payments of 600pm allows me to retire at 61. Increasing payments by 350 pm allows retirment at 55.

Question1:
Would i be better off leaving my residential mortgage at its normal 20 yr repayment cycle and increasing ACV contributions so I have a choice to retire at 55 but would have still 7 years of mortgage remaining

Question 2:
Use the large equity available on both houses (500K) to fund further property investments
 
There is no easy answer to this really and I would be inclined to recommend that you seek independent, professional advice on the matter to be honest. Some things to consider:

Are your existing pension arrangements sufficient (on a projected basis obviously) to cater for your pension needs? If not then the pension may need prioritisation.

Do you really want to concentrate your investments even further in a single asset class (property) and geographic location (Ireland presumably?)? Most commentators would be more inclined to recommend that individuals build up a mixed portfolio of investments diversified by asset class and geographic location instread unless there was a good reason why concentration was a preferable strategy.

Reducing debt, particularly high cost debt but even lower cost debt such as domestic or investment mortgages, is generally a good idea.

In the greater scheme of things it may be relatively small beans but you should probably aim to maximise your SSIA contributions over the remaining term of the scheme before doing anything else. The maturing fund can then be used for whatever purposes you decide (e.g. reduce mortgage(s) or top-up pension).
 
Re: Accelerated mortgage repayment versus additional AVC con

Because of the tax breaks, I'd be more inclined to make AVCs than accelerate mortgage payments.

This will mean the mortgage won't be repaid when you retire but you could always use the tax-free lump sum you get at retirement to pay it down.
 
We charge you to make a loss.

My own AVC is worth over 3% less than it was 3 years ago. I am not sure even if the tax relief will compensate for this. The trouble with pensions is that your investments are in the hands of others. These guys are great when things are going well but....
 
Judging a pension over three years doesn't really make sense. Anybody with a good few years to retirement should most likely be mostly or fully in equities and the values will fluctuate over the years. The past few years, bar recent months, have been poor ones for equity returns. However over the long term equities should (no guarantees though) generate higher returns than most other asset classes. Short term fluctuations should not deter people from investing in equities in order to generate retirement income.
 
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