Payoff BTL or OPen Investment Fund?

[Slim]

Hi. I am debating this with myself and perhaps you can help?

We have a buy to let on which we are paying principal and interest since last May. Balance is about 130k and market value would be about 100k. We can afford the repayments but I would have preferred to remain on interest only and sell when prices recover to exit the investment. It's rented at the moment but rent does not come near the repayment so we add approx €800 pm. We are lucky to be on a tracker, ECB + .9%.

I plan to retire in 5-7 years time and would like to have this paid off by then. Dilemma - Should I pay off the BTL with extra monthly payments of, say, €500 towards the principal, thereby earning a return of 1.15% guaranteed or open a Rabodirect type account and invest €500 pm to try and get ahead of the 1.15% return? By my calculations, at current rates, the BTL would expire about late 2020. That would be ok for me. Adding to pension PRSA or AVC is not really a viable option for me or Mrs Slim.

I can accept some short term risk as long as the rollercoaster would come good in the timeframe set out but I know there are no guarantees.

Any thoughts?

 

[44brendan]

If you are looking purely at return the best option would be to accelerate repayments on the loan. Savings with any institution will not achieve a similar return. The downsize is that you can access the savings in an emergency but not the loan repayments!!

 

[Slim]

If you are looking purely at return the best option would be to accelerate repayments on the loan. Savings with any institution will not achieve a similar return. The downsize is that you can access the savings in an emergency but not the loan repayments!!

Thanks, but surely returns from a managed fund should well exceed 1.15%? Anyway, I did a very crude calculation, estimating a 6% return, management charges of 1.75% pa and entry/exit charges of .75%, finally tax of 41% on exit(USC?). It comes out at approx. €4k net which is only slightly more than the interest saved by pumping the cash into the mortgage and carries with it the volatility of return/risk to capital etc, plus the control, as you point out, over the injection of cash.

Thanks for your reply.