Open regular savings account or top up mortgage payments??

Income:

Self: c 50,000 pa
Spouse: Unemployed (not entitled to social welfare)

Mortgage:
€210,000 remaining, 30 years to go! current rate 4.68%

Savings:
National Solidarity bonds: 10,000
Credit Union: 15,000
Prizebonds:11,000

Hi, looking for some advice please. I'm wondering if I should I open a regular savings account - which I would be planning on putting about €100-€150 per month into or should I top up my monthly mortgage payments while I can afford to do so-is it even possible to do so?

Thanks in advance.

A regular savings account will pay a lower rate of interest after DIRT tax than your mortgage interest rate. So paying off the mortgage is more efficient than a deposit savings account. But paying off the mortgage means you're unlikely to have access to these fund again, while a savings account leaves you with access.

I have written a Key Post Should I use a lump-sum to pay off my mortgage?

You are taking some risk that you may lose your deposits if the Credit Unions or the State goes bust. Unless you need the cash, you should probably pay it off the mortgage.

Assuming your Credit Union pays you 1% dividend on your savings with them, you are paying €550 a year for the privilege of borrowing from your mortgage lender to put money on deposit with the CU.

You can specify that the payment is in advance and that you have a right to take a payment break in the future if you need the money.



Brendan

You are paying a high rate of interest, you have a long mortgage term, I recommend you overpay instead of saving as the savings rate is not going to outdo your interest rate. If you are in negative equity it is even more of a reason to overpay.

Bronte said:

If you are in negative equity it is even more of a reason to overpay.

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Not sure about this. There is very little difference between having negative equity of €100k and no savings and having negative equity of €135k and €35k savings.

There is a potential that the bank might do a deal to get rid of a loan with negative equity at a later stage.

But overall, the key thing is to pay off expensive borrowings, whether in negative equity or not.

I think in normal circumstances it makes sense to overpay on a mortgage if your interest rate is lower than the deposit rate. However, I think for people in NE, like myself it makes sense to save the money and wait (with fingers crossed) for some kind of deal offered by the banks down the line.

This is why for the moment I am willing to lose a bit by saving rather than overpaying but in the long run it might turn out to be a good option.

Possibly banks under govt directon may over some kind of % write off for lump sum payment?

I would advise you to save the money. 50k while a good salary on its own, is not a massive income for two people to live off. I know that you have savings and prize bonds but saving 150 a month will get you a nice holiday per annum, a new car, you never know what expenses might crop up. I don't know your circumstances, whether there will be kids in the future etc. All things to consider. Save the money and live for the now, while having a nice little pot of cash in the bank

chopper53 said:

I think in normal circumstances it makes sense to overpay on a mortgage if your interest rate is lower than the deposit rate...

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Did you mean to say "...if your interest rate is higher than the deposit rate..."? If so, I agree and I also agree with the sentiment that if you have a large mortgage or are in NE, then save the money for othe rexpenses etc.