Increase repayments or save?

N

nessonline

Guest
Hi folks,



My mortgage is coming up for renewal in November. I am on a two year fixed at the moment with 33 years left. My wages have increased since I bought the house and I now have an extra e500.


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[FONT=&quot]What I’m wondering is what would be the best thing to do? [/FONT]
[FONT=&quot]Is it a good idea to increase my repayments on the mortgage? And should I stick with fixed then or go tracker?[/FONT]
[FONT=&quot]Or is it a better idea to save the money with a bank and then invest a lump sum onto the mortgage in a couple of years.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]Long term I would like to sell this house in 3-5 years and buy a home with my boyfriend. And at this point would it be better to have more paid off more on the mortgage or to have savings for the deposit? Or am I on the wrong track altogether. Is it a bad idea to put my money into the house if interest rates are high?[/FONT]
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[FONT=&quot]Thanks would really appreciate some advice I’m so confused by all this![/FONT]
 
To maximise your return put your €500 in a regular saver account such as Anglo-Irish's. The interest rate for this is higher than the interest rate on the mortgage. Your net return will be more that way and you will not be forgoing any mortgage interest relief.

Having the savings on deposit gives you flexibility as well as a greater return. You just have to exercise discipline by not blowing the savings on something else unrelated to your future house purchase. If there's a risk of that happening you'd be better off just adding the €500 to your monthly repayment to "bank" the smaller but permanent gains achieved from that.
 

Hi Nessonline.

In relation to your mortgage. What rate are the bank offering after the fixed rate period. It might be prudent to shop around then as you may have been on an excellent rate at the time of you purchase. If I knew the lender and the rate they are offering along with the mortgage amount I could give you a good indicator of what you might be paying then. The only reason for saying this is that your extra 500 could be effected by the outcome
 
I'm wondering the same thing, though my fixed rate goes to November 2009. My thinking so far is that the best thing to do would be to sell the house now, rent, and put as much as possible in a high interest savings account for the next 2/3 years. Your present house will be unlikely to hold its value over that time (especially as you seem to have bought in 2006), and may be worth quite a lot less. That €500 extra will no longer exist in any form IMO if you put it towards the mortgage. If you end up in negative equity you may have to give it to the bank anyhow I suppose, but I'd hang onto it for as long as possible. If you'd consider not moving, then chuck the €500 at the mortgage?

For various reasons I think I'll hang onto my house for the long term, try to buy another in 2/3 years as well, and rent out this current one. I have very little equity in this one, it's too small for the family now, but on the plus side I'm not mortgaged to the max and my repayments are a little lower than I would spend on renting a bigger place. Also, as a last resort there's plenty of room for an extension and/or I can see myself living in it again when the kids are grown up as it has a lot of good points. So I'll make do, and save as hard as possible for a deposit for the new house.

I'm a bit worried about interest rates though, so I'm considering switching to a 10-year fixed rate of 5.7%. Would that be crazy? Can I do it now with the same lender without penalties? I would obviously have higher repayments (my rate now is 4.79%) but they wouldn't be crippling and I could still save, though they would take the costs over the current rental value of the house - but where will rental values be in 2/3 years? I'd be happy just to cover the mortgage.

Sorry, OP, I hope this is relevant to your situation and I haven't hijacked your thread!
 
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