Mortgage payment savings

[Aimee]

With the recent rate cuts we are saving approx €200.00 each month.

I am trying to decide what is best to do with this money, as I feel we were able to afford to pay it off the mortgage, so can do something useful with it now.

I have considered :-

1. perhaps paying it off our mortgage and reducing the term. we have a tracker mortgage with AIB - I will have to ring them of course to see if we can do that

2. saving the money and at the end of the year deciding to do something with it as a lump sum

3. putting same into an account monthly - but don't know with whom or what kind of an account!

I am just wondering what you guys think would be best.

One worry I did have was if I was to pay it off our mortgage to reduce the term and god forbid, one of us lost our job this year - we would obviously not be able to afford it at that point - is it possible to stop extra payments on a mortgage if you have started? I am totally green as to how that works.

Thanks in advance for any advice, A.

Just looking back now 2 & 3 above could really go together - save it into an account and then decide later on what to do with a lump sum!

Sp i suppose its a matter of pay it off mortgage or save it?????

 

[ClubMan]

1. perhaps paying it off our mortgage and reducing the term. we have a tracker mortgage with AIB - I will have to ring them of course to see if we can do that

If you do this then get written agreement of your intentions from the lender. If you are thinking of accelerating the mortgage repayments then making lump sum and/or regular overpayments while reducing the effective term will yield the maximum savings. You can crunch the numbers to estimate the possible savings using Karl Jeacle's mortgage calculator.

2. saving the money and at the end of the year deciding to do something with it as a lump sum

3. putting same into an account monthly - but don't know with whom or what kind of an account!

A high rate regular saver account might be an option. See the Financial Best Buys forum and www.itsyourmoney.ie lists. You can get up to 8% APR on such accounts. Again you'd need to crunch the numbers to compare the potential savings attributable to saving a lump sum and paying it off at the year end versus just making the regular mortgage overpayments.

One worry I did have was if I was to pay it off our mortgage to reduce the term and god forbid, one of us lost our job this year - we would obviously not be able to afford it at that point - is it possible to stop extra payments on a mortgage if you have started?

Yes - you should be able to revert to the normal scheduled repayments. You should make sure that you first have an emergency rainy day fund of a few months living expenses.

 

[Aimee]

Thank you Clubman for your reply.

I will get to work as I want to start putting this money to good use straight away.

A.