Prioritising pension or mortgage

[Snoopy]

Personal details

Age: 40
Spouse’s/Partner's age: 38

Number and age of children: 2 (8 & 9)


Income and expenditure
Annual gross income from employment or profession: 41.5k
Annual gross income of spouse: 47k

Monthly take-home pay: 5,150 month

Type of employment: e.g. Civil Servant, self-employed - Civil Servant/ Public service

In general are you:
(a) spending more than you earn, or
(b) saving? Saving


Summary of Assets and Liabilities
Family home worth c. €280k with a €95k mortgage (we overpay with irregular amounts and irregular frequency and have benefited from buying in 2013)
savings of €60k (split between prize bonds and credit union). Separately the children’s allowance is put into credit union / prize bonds for the kids.

Family home mortgage information
Lender: Ulster Bank
Interest rate 3.3% fixed to March 2023

Other borrowings – car loans/personal loans etc none

Do you pay off your full credit card balance each month? N/A


Buy to let properties N/A

Do you have a pension scheme? CS since 2017 / PS since 2019

Do you own any investment or other property? No

Other information which might be relevant

Life insurance: for mortgage.


What specific question do you have or what issues are of concern to you?


We are considering remortgaging to extend (c. 70k), but I also have concerns about our pensions. Would love some thoughts from others re pension or prioritising paying off the mortgage.

 

[Brendan Burgess]

savings of €60k (split between prize bonds and credit union). Separately the children’s allowance is put into credit union / prize bonds for the kids.

We are considering remortgaging to extend (c. 70k),

Why don't you just use your cash to pay for the extension?

It makes no sense to borrow €70k at say 3% to put the money into prize bonds or the credit union earning nothing.

Brendan

 

[Snoopy]

Thanks for your response Brendan. It’s more a fear of not having a cash backup. However it makes sense when it’s spelled out.

 

[Brendan Burgess]

If you are not making the additional payments on €70k, then you will be able to build up your savings again.

With two people in secure public service jobs, you don't really need a huge rainy day fund.

Brendan

 

[Clamball]

I agree, use the savings and the Childrens allowance money to do the extension. You are creating a nicer home for you family so it is good use of the money. In another 10 years when the kids are in college you will have plenty of savings to help them.

 

[NoRegretsCoyote]

Interest rate 3.3% fixed to March 2023

At your LTV you can save a lot on your mortgage. Talk to a broker to see if you can fix with Avant for 1.95%.

Do you have a pension scheme? CS since 2017 / PS since 2019

I think you are a bit underprovided if your only pensions are single scheme pensions started in your mid-30s. I think you should both consider AVCs, balancing of course other needs such as the house extension. To me AVCs should be more of a priority than overpaying your mortgage which is very comfortable for people of your age and income level.