How to plan next big expense

[Dublingirl10]

Personal details

Age: 42
Spouse’s age: 47
Number and age of children: none

Income and expenditure
Annual gross income from employment or profession: 35K
Annual gross income of spouse: 75K
Monthly take-home pay: €5,300 per month
Type of employment: public servants (both)

In general are you:
(a) spending more than you earn, or
(b) saving? saving about €1,200 per month together

Summary of Assets and Liabilities
Family home worth €385k with a €140k mortgage
Cash of €85K

Family home mortgage information
Lender: AIB
Interest rate: 2.35%
Type of interest rate: fixed until April next year
If fixed, what is the term remaining of the fixed rate? 3 months

Remaining term: 12 years
Monthly repayment: approx. €1,100

Other borrowings – car loans/personal loans etc.: none
Do you pay off your full credit card balance each month? no credit card
No other loans

Buy to let properties: none

Other savings and investments:
Do you have a pension scheme? Yes, Single Public Service Pension Scheme since 2017 (my spouse) and 2018 (myself); Additionally, my spouse is paying €950 monthly in AVCs and has income protection insurance.
Do you own any investment or other property? No

Other information which might be relevant
Life insurance: only the one required by the mortgage lender

What specific question do you have or what issues are of concern to you?
1. The term remaining on our AIB fixed rate is 3 months. We will likely be moving from 2.35% to about 5%. Some credit unions offer mortgage rates of 3.5% and 4%. Would it be risky to switch from AIB to a credit union?
2. We have a bigger expense coming soon of about €20,000 that needs to be paid upfront and was wondering whether to take it from our savings or apply for a credit union loan.
3. Our savings are not making much in interest. Should we use some of our savings to pay a lump sum into our mortgage before March 2023 when our fixed term rate ends?
4. We are not big risk takers. What would be the best way to invest our savings?

Thank you.

 

[Pinoy adventure]

The bigger expense in cash from savings and a good lump off the mortgage

 

[admin]

You don’t need to wait until the fixed rate ends.

Pay €65k off your mortgage now and use your cash for your expenditure.

You should not switch. Just overpay your mortgage each month and live mortgage-free.

Brendan

 

[admin]

With 2 public sector salaries and membership of the public service credit union you don’t need an emergency fund.

Save for anticipated expenditure but not unanticipated

 

[Dublingirl10]

Many thanks for your replies. I think we’ll need to overcome our mental block about spending a significant part of our savings.

 

[Dr Strangelove]

I would convert as much of savings as possible into AVCs over the next few years.

You are in a good financial position for your age except for your pensions where you won’t hit a full PS pension by retirement age.

 

[huskerdu]

Many thanks for your replies. I think we’ll need to overcome our mental block about spending a significant part of our savings.

Yes, thats important and part of doing that is realising that its not spending your savings. Its moving your savings to make them work for you and save you money.

 

[Brendan Burgess]

I would convert as much of savings as possible into AVCs over the next few years.

Sorry, I had missed this in my earlier reply (As "Admin")

Yes, this is what you should do. Max your AVCs.

Brendan