Hello. My parents took out a seniors loan on their home approx. 15 years ago. They took 30k. Amount owed today is approx. 45,400k. The interest rate is compounded and it is variable, currently 3%. I have one sibling so the remaining balance when sold will be split between us both. Current value of the home is approx. 230k. Does it make any sense for me to pay off this loan now in full. I have 30k savings so I would have to borrow about 15,500k at a cost of 2,479k. My brother cannot contribute. He is fine with this approach and is aware that I will have to be paid back my contribution and its cost and we will draw up a loan agreement or something to that effect but as I asked above does it make sense. I am not financially savvy enough to know all the angles so want to make sure that it is mutually beneficial. My parents are 86 and 76 by the way and there is no charge for paying this off. Thank you.
Seniors Loan - pay off early?
- Thread starter Dudley
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Gordon Gekko
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I don’t see why you would do that.
You’d be exhausting your savings.
At 3%, I’d just leave it, or at most pay the interest.
You’d be exhausting your savings.
At 3%, I’d just leave it, or at most pay the interest.
Brendan Burgess
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Hi Dudley
1) You can pay off part of the loan. You don't need to pay off the full loan.
2) If you have €30k in a current account earning nothing which you will not need, then you should pay that off your parents' loan. It will save them €900 a year.
3) If you do that, then you should make sure that you do a written agreement on how the loan is to be repaid and whether you should get interest or not.
4) If you have your own mortgage on which you are paying 3% interest, it would make more sense to pay off your own mortgage first.
5) You should not borrow to pay off the remainder, unless you can borrow at a rate well below 2%, which I assume you can't.
6) While the break-even point is 3%, it's not worth the hassle for 1%.
Brendan
1) You can pay off part of the loan. You don't need to pay off the full loan.
2) If you have €30k in a current account earning nothing which you will not need, then you should pay that off your parents' loan. It will save them €900 a year.
3) If you do that, then you should make sure that you do a written agreement on how the loan is to be repaid and whether you should get interest or not.
4) If you have your own mortgage on which you are paying 3% interest, it would make more sense to pay off your own mortgage first.
5) You should not borrow to pay off the remainder, unless you can borrow at a rate well below 2%, which I assume you can't.
6) While the break-even point is 3%, it's not worth the hassle for 1%.
Brendan
Hi Brendan. Thanks for that. Yes 30k earning no interest. My own mortgage is a tracker at 1.25%. 5 yrs left on that. So if I pay off 30k what happens with the remaining 15k. Do I just leave it be, accruing interest? And say it's for another 15 years, you are saying that this works out better? That question may make me sound a bit dense but when it comes to financial matters I'm not the sharpest tool in the box