Should I pay a lump sum off mortgage?

P

PatrickSponge

Registered User
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I have a mortgage of 139K, I have 13 years left on it. I comfortably pay €1008 a month

My lender allows up to 10% to be paid off in a lump sum every calendar year. I can pay off just over 14K if I so wish without penalty. I have around 50k in savings that isn't really doing anything.

Should I do it?

Thanks for any advice.
 
Pinoy adventure said:
You may get a better return elsewhere so
Click to expand...
After DIRT?

Also, it’s the weighted average rate over the term of the mortgage that matters. The OP has a very good fixed-rate at the moment but who knows what rates will be available after the fixed-term period.

Personally, I would pay down the mortgage ahead of schedule.
 
PatrickSponge said:
My lender allows up to 10% to be paid off in a lump sum every calendar year
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Firstly your lender doesn't stop you overpaying so I wouldn't limit the decision to just 10%

The second question is should you.

PatrickSponge said:
Thanks, rate is fixed at 2.25% for the next 6 years.
Click to expand...

Based on your mortgage rate and prevailing deposit rates my first thought is no. You should save and and overpay when your fixed rate is up/deposit rates drop below 3.36% (pre-dirt break even rate assuming interest paid is less than €5k).

You can just about get better rates if you lock in for 2 years. It's marginal so would depend on the amounts you're talking about. It wouldn't pay for any longer.

Best Buy - Term Deposits (Fixed Lump Sum Savings)

Rates are frequently updated. Information last changed: 4 April 2024. Highest Term Deposit Rates 1 Year - BluOr (Direct) and A&G via Raisin - 3.50% 2 Years - BluOr (Direct) and TFBank via Raisin - 3.40% 3 Years - BluOr (Direct) - 3.30% 4 Years - TFBank via Raisin Bank - 3.25% 5 Years -...
www.askaboutmoney.com

There are higher variable rates. You could consider these but given they are not fixed you'd need to monitor them regularly.

Best Buy - Instant Access & Notice Deposit Accounts

Rates are frequently updated. Information last changed: 1 April 2024. Highest Instant Access Rate: €1 to €50,000 - Trading212 - 4.20% Selected Instant Access Variable Rate Accounts Trading212 4.20% on €1+ Access: Instant access. Interest paid: Daily. This rate requires opt-in inside the...
www.askaboutmoney.com

Have a look at the following post it might help you decide

Better to save than to overpay a low fixed rate mortgage in some instances?

A recent post got me thinking are we close to the point where it makes financial sense to save rather than to pay down debt i.e., for some borrowers the return on savings (net of DIRT & PRSI) is greater than overpaying a fixed rate mortgage. There was a point in the past where this strategy...
www.askaboutmoney.com
 
skrooge said:
Firstly your lender doesn't stop you overpaying so I wouldn't limit the decision to just 10%

The second question is should you.



Based on your mortgage rate and prevailing deposit rates my first thought is no. You should save and and overpay when your fixed rate is up/deposit rates drop below 3.36% (pre-dirt break even rate assuming interest paid is less than €5k).

You can just about get better rates if you lock in for 2 years. It's marginal so would depend on the amounts you're talking about. It wouldn't pay for any longer.

Best Buy - Term Deposits (Fixed Lump Sum Savings)

Rates are frequently updated. Information last changed: 4 April 2024. Highest Term Deposit Rates 1 Year - BluOr (Direct) and A&G via Raisin - 3.50% 2 Years - BluOr (Direct) and TFBank via Raisin - 3.40% 3 Years - BluOr (Direct) - 3.30% 4 Years - TFBank via Raisin Bank - 3.25% 5 Years -...
www.askaboutmoney.com

There are higher variable rates. You could consider these but given they are not fixed you'd need to monitor them regularly.

Best Buy - Instant Access & Notice Deposit Accounts

Rates are frequently updated. Information last changed: 1 April 2024. Highest Instant Access Rate: €1 to €50,000 - Trading212 - 4.20% Selected Instant Access Variable Rate Accounts Trading212 4.20% on €1+ Access: Instant access. Interest paid: Daily. This rate requires opt-in inside the...
www.askaboutmoney.com

Have a look at the following post it might help you decide

Better to save than to overpay a low fixed rate mortgage in some instances?

A recent post got me thinking are we close to the point where it makes financial sense to save rather than to pay down debt i.e., for some borrowers the return on savings (net of DIRT & PRSI) is greater than overpaying a fixed rate mortgage. There was a point in the past where this strategy...
www.askaboutmoney.com
Click to expand...
What would you thoughts be on Trading 212 and their rate of 4.2%?
 
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