pay down mortgage or regular saver at 4.5%?

J

jim

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Is it better to pay down the capital on my mortgage which is at a rate of about 4% or to continue leaving it and building it up each month in a regular saving account paying about 4.5% interest?

I know this has come up elsewhere a few times before but what is confusing me is the fact that the rate on the reg saver is slightly higher than my interest payment. Also the reg saver builds up from month to month.

Thanks.
 
You will be paying 41% DIRT on your deposit interest.

Is the 4.5% guaranteed or is it subject to meeting some minimum requirements.

Brendan
 
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I assume you are referring to the KBC Regular Saver account that currently pays 4.50% AER variable for those that have a current account? That rate is dropping in July 2015 to 4.00% AER variable and probably will drop further as it is a promotional rate.

I think you would be better off paying off your 4% debt.
 
Thank you both. Decision made!

Yes it is the KBC a/c and the rate is linked to current a/c but no other minimum requirements.

Jim
 
I'd think twice.

Is it on your home or a rental property? For the former, mortgage interest relief is gone or going. But for a rental property, interest is 75% deductible which means a 4% rate is more like 2.5%.

But separately, cash on deposit gives you great optionality. If you pay a chunk off the mortgage and something happens, you'll probably struggle to raise cash. Cash is king.
 
Fair point re cash however kbc allow me to overpay the mortgage and re-draw down those funds if I wish so I can easily access the cash.

It's my home also so it seems to be the right option to pay down.
 
jim said:
It's my home also so it seems to be the right option to pay down.
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Very hard to make a seemingly simple decision without full financials. People paying mortgages also need to understand it is in itself a method of saving, and good for people who would otherwise fritter the money away.
 
jim said:
Fair point re cash however kbc allow me to overpay the mortgage and re-draw down those funds if I wish so I can easily access the cash.
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Just be careful here. Make sure KBC are depositing the funds to lower the capital of your mortgage immediately and not just putting it into a holding account so you can use it as a rainyday fund.
 
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