Advice on paying off Tracker mortgage (1.25% ECB rate) early - 18 years remaining with €200,000 more to pay

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TestLink

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I have a tracker mortgage (1.25% ECB rate) with 18 more years left on it with €200,000 more to pay. The original mortgage was 360K. I am thinking about increasing the monthly mortgage payment amount and pay off the mortgage in max 10 years time. Is this advisable? I am currently paying about €1,500 per month without any arrears till now.

The main reason is myself and my wife would like to retire early at 60.

Also if the above is Ok, which is better - shall I increase the monthly mortgage payment or save money and pay in bulk once in a a while?

Any advice welcome. Thanks...
 
TestLink said:
I have a tracker mortgage (1.25% ECB rate) with 18 more years left on it with €200,000 more to pay. The original mortgage was 360K. I am thinking about increasing the monthly mortgage payment amount and pay off the mortgage in max 10 years time. Is this advisable? I am currently paying about €1,500 per month without any arrears till now.

The main reason is myself and my wife would like to retire early at 60.

Also if the above is Ok, which is better - shall I increase the monthly mortgage payment or save money and pay in bulk once in a a while?

Any advice welcome. Thanks...
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so whats your overall rate you are paying on the mortage? 5.25%? would you not fix for a lower rate?

and to your original query the earlier you pay the earlier you save the interest charge.
 
Setup access to your mortgage account on your internet banking (if you don't already have it) and set it up as a Payee. Then transfer a funds into the account when you want to. Note: AIB blocked transferring from AIB Current Account into an AIB Mortgage Account, but you can bypass this by transferring from amount bank. What you should not do is arrange with your bank to increase your monthly payments, if you want to change back they will treat you as if you cannot make the full payments. Requiring much form filling and full financial details etc.
 
TestLink said:
I increase the monthly mortgage payment or save money and pay in bulk once in a a while?
Click to expand...

The sooner you pay it off the less interest you pay.

But whether you should pay it off or contribute to a pension is a different question.

There really is no basis to want to be mortgage-free in 10 years. It may well be better to have a small mortgage and a big pension in 10 years.

Brendan
 
Blackrock1 said:
so whats your overall rate you are paying on the mortage? 5.25%? would you not fix for a lower rate?

and to your original query the earlier you pay the earlier you save the interest charge.
Click to expand...

There are no more tracker mortgages available now. So if I change from my current plan I would have to go for variable or fixed rate mortgage plans, which I dont want to do.
 
TestLink said:
There are no more tracker mortgages available now. So if I change from my current plan I would have to go for variable or fixed rate mortgage plans, which I dont want to do.
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but you are paying a lot more interest than you need to at the moment, so you are taking a bet on interest rates coming way down. Without a tracker i'm fixed at 2.2% and others at 1.95%, im not sure a 1.25% tracker is that valuable.
 
Blackrock1 said:
but you are paying a lot more interest than you need to at the moment, so you are taking a bet on interest rates coming way down. Without a tracker i'm fixed at 2.2% and others at 1.95%, im not sure a 1.25% tracker is that valuable.
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What is the current variable rate with BOI, if I could switch from Tracker ?

Also can the bank refuse request for a change in the mortgage plan?
 
You are currently paying ECB (4.25%) + 1.25% = 5.5%.

The ECB rate is expected to fall. If it falls to 3% you will be paying 4.25% but probably not for another year or two.

Here are the BoI fixed rates

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The 1.25% has some value. I certainly wouldn't give it up to fix for a year or two.

In your particular case as you intend to overpay, then you should stay on your tracker, as there is no penalty for overpayment.

If you fixed for 10 years and then wanted to overpay, you could face a penalty.

Brendan
 
Brendan Burgess said:
You are currently paying ECB (4.25%) + 1.25% = 5.5%.

The ECB rate is expected to fall. If it falls to 3% you will be paying 4.25% but probably not for another year or two.

Here are the BoI fixed rates

View attachment 8985

The 1.25% has some value. I certainly wouldn't give it up to fix for a year or two.

In your particular case as you intend to overpay, then you should stay on your tracker, as there is no penalty for overpayment.

If you fixed for 10 years and then wanted to overpay, you could face a penalty.

Brendan
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Thanks. Shall I increase my monthly payments or as Towger suggested pay in bulk whenever I save some money.
 
Brendan Burgess said:
The sooner you pay it off the less interest you pay.

But whether you should pay it off or contribute to a pension is a different question.

There really is no basis to want to be mortgage-free in 10 years. It may well be better to have a small mortgage and a big pension in 10 years.

Brendan
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Is it better to put 500 euro extra for mortgage payment or 500 euro as AVC every month? I plan to take early retirement in 5 years time (if possible), due to ill health and go back to my country of origin. In this case I will be able to rent my house.
 
TestLink said:
Is it better to put 500 euro extra for mortgage payment or 500 euro as AVC every month?
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There are loads of existing threads on the pension v mortgage question that you can find by searching. There's also this key post:

Key Post - Overpay mortgage or contribute to pension or do something else?

This comes up in a lot of different threads, so I will set out some principles here to kick off the discussion. I will edit it in the light of feedback. There are many options with your savings in excess of your emergency cash fund Pay down your mortgage Build up a fund to enable you to trade...
www.askaboutmoney.com
 
ClubMan said:
There are loads of existing threads on the pension v mortgage question that you can find by searching. There's also this key post:

Key Post - Overpay mortgage or contribute to pension or do something else?

This comes up in a lot of different threads, so I will set out some principles here to kick off the discussion. I will edit it in the light of feedback. There are many options with your savings in excess of your emergency cash fund Pay down your mortgage Build up a fund to enable you to trade...
www.askaboutmoney.com
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I think the information is bit outdated. So I will explain my situation here.

I only have 6 years total experience in Civil Service. Currently aged 49 and would like to retire aged 55 / 60. My current salary is around 58k.

My house value now is 375k. 18 more years to pay mortgage. Currently paying around 1500 per month. Around 200k to be paid.

My elder kid is in 3rd level and younger doing 3rd year. My wife is working full time with 20 years work experience in public sector.

So what should be my strategy - pay more mortgage or invest in AVC?
 
TestLink said:
I think the information is bit outdated. So I will explain my situation here.
Click to expand...
I don't see how it is. It's a thread from 2020 that was updated in 2022 so hardly that old. And, as I said, there are many other similar threads in existence too.
 
The Key Post referenced by ClubMan sets out the principles. They are not out of date to any significant extent.

I recommend paying down the mortgage when it's high and you are young so you have plenty of time to make up for the "missed" pension contributions. In your case, the mortgage is comfortable and your pension is underfunded and you don't have long to go to retirement, so you won't have time to make up the pension contributions.

So it's clear that you should pay AVCs.

Another issue in your case is that you intend to let the property. In that case, you will get tax relief on the interest paid, further reducing the net rate.
 
If I retire at 55, do I have to wait till I am 66 to get the pension? Or is it only for state pension to wait till 66?
 
You should really start new threads or else do a Money Makeover as you have gone far from the original question and those who know the answer to this question might not be interested in the question suggested by the thread title.
 
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