Advice on savings

H

hamster

Registered User
Messages
10
Hi,

I have €27K saved in Northern Rock (4.3%) and add €1K each month. I am aware of Halifax's deal. I am looking for some ideas or recommendations for savings. I earn approx €50/Yr.

My question is that - what would you do now at this stage - accelerate pay off the mortgage month by month or use the money to invest in a another tracker?

If recommending investment...
I think I have enough in Quinn Life as I'd like to spread it around. Is there anything close to Quinn Life with no entry/exit spread fees and a simple annual charge of 1% or less? I don't mind a med/high risk tracker? I would be looking at saving initially maybe €350 a month. I will look at the best buys in the meantime.

Or would you pay off the mortgage? My folks think it would be a waste. ie, the argument is that inflation "pays" off some off it. I am not convinced and think I should whittle it down. It's a tracker mortgage at 4.95%. I pay €400/month on it. They think I would be better off using the money for something else rather than hitting the mortgage that they think is low enough.

My background is:
54K in Irish and UK shares. (built up over 8 years)
38K in Quinn Life (split between Irish/Europe/some US)
3.6K in 7.1%/Yr AIB Save Plan
27K in Northern Rock (I would consider 12K core emergency savings)
7K ESPP
73K Pension

On the flip side
57K remaining on mortgage
No debts.

I am in IT sector for 8 years, single and in my early thirties. I have no aims right now. My investment outlook is open ended, long-term and medium/aggressive.
 
Is there anything close to Quinn Life with no entry/exit spread fees and a simple annual charge of 1% or less? I don't mind a med/high risk tracker? I would be looking at saving initially maybe €350 a month.
Click to expand...

As a rule I try to avoid blatant plugging of our own services on AAM but this is intended as a direct answer to a direct question. We have a low-charge savings plan with Eagle Star with 1% annual management charge on all Eagle Star-managed funds, provided that you kick start the plan with a lump sum of €7,500. No entry charges, policy fees, bid/offer spreads or any other form of charge. If you just want to save monthly with no lump sum kick-start, the annual management charge is 1.5%. There are early exit penalties but these only apply if you cash in during the first five years. See [broken link removed]

The question of whether is it better to pay off a mortgage or invest is a popular one, but one to which there is no definitive answer suitable for all. In simple mathematical terms, if you are paying an interest rate on your mortgage of 5%, this means that you are paying interest to the lender of 5% of the amount owed, each year, although often interest is calculated on a daily, weekly or monthly basis.

So by using capital to reduce or even completely redeem such a mortgage, you are saving the 5% annual interest that you would otherwise pay. So in a manner of speaking you are getting an effective return of 5% on money you employ to do this. The rate of interest on a mortgage will almost always be greater than the rate available on deposit, so if you don’t require access to your capital it is preferable to pay off a mortgage than to leave you money on deposit for an extended period.

However, paying off your mortgage is not a very accessible way of investing your money. If you need to access your capital, you will need to either apply for a new loan or sell the property. In addition, tax relief on mortgage interest must be considered as it reduces the effective rate of interest you pay on any mortgage.

It is possible to invest in a variety of Managed Funds which are likely to produce a return greater than prevailing mortgage interest rates but none of them will guarantee to do so. You have to be prepared to increase your level of risk. Investing in alternative funds may provide a greater return; it may not – indeed the value of your investment may fall as well as rise. In summary if you are prepared to accept a higher level of risk in return for the potential of higher returns over the medium-to-long-term, you should invest elsewhere; if you want a more secure rate of return that is nonetheless greater than bank deposits, you should pay off your mortgage.

Liam D. Ferguson
www.ferga.com
 
Thanks for the feedback Liam. At this point I'm standing still and looking at where I want to go from here. :)
 
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