Paying Tracker mortgage early or leave on deposit

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GoldDigga

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I was fortunate to be one of the 214 affected AIB customers to be offered a tracker last month as I should have been when i came off my fixed rate mortgage in 2007

http://www.independent.ie/business/...sation-after-error-with-trackers-2878978.html

I currently have 22/30 years left on the mortgage 1.1% above ECB 2.6%

We currently have savings of approx 50k and were considering using a large proportion of this to pay a lump sum off the mortgage.

However, upon reading the excellent sticky below, i have reconsidered doing this as i can apparently earn more interest on deposit than i would save by paying the mortgage early
http://www.askaboutmoney.com/showthread.php?t=101819

One thing i need some clarification on though. From using this calculator
http://www.drcalculator.com/mortgage/ie/
it tells me that when the mortgage begins i am paying a much greater proportion of interest to principal at the start of the mortgage and as time goes on , the ratios change. Then in the later stages i am paying more principal than interest.

So currently i am year 8 of my mortgage. It looks like roughly 40% of my monthly payments are purely interest. My question is how does it make more sense to put my savings on deposit at this stage of my mortgage when it appears i am paying so much in interest payments?
 
It stands to reason that the interest element decreases over time because the earlier it is in the mortgage term, the more money you owe and therefore the more interest that arises.

If you can get more than 2.6% after DIRT (which you can), you're in the money. And given how difficult it is right now to obtain credit, you shouldn't discount the advantage of having cash to hand.
 
It stands to reason that the interest element decreases over time because the earlier it is in the mortgage term, the more money you owe and therefore the more interest that arises.
Click to expand...

That's the bit i don't understand. If more interest arises now at this stage of the mortgage, how am i not saving more by using this money against the mortgage, rather than putting it on deposit?
 
GoldDigga said:
That's the bit i don't understand. If more interest arises now at this stage of the mortgage, how am i not saving more by using this money against the mortgage, rather than putting it on deposit?
Click to expand...

If you pay €10,000 off the outstanding capital then interest of €260 won't accrue but you won't earn interest of (say) 4%.

Broadly speaking it's that simple.
 
If you pay €10,000 off the outstanding capital then interest of €260 won't accrue but you won't earn interest of (say) 4%.

Broadly speaking it's that simple
Click to expand...

when you put it like that, it does sound simple. Thanks Gekko
 
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