Split mortgage - keep or exit?

[MrsSummertime]

Age: 40
Spouse’s/Partner's age:42

Number and age of children:2 (7yr old & 3yr old)

Income and expenditure
Annual gross income from employment or profession: €45k
Annual gross income of spouse: €50k

Monthly take-home pay: €5k

Type of employment: e.g. Private Sector

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


Family home mortgage information
Lender: EBS
Interest rate: 2.9%
If fixed, what is the term remaining of the fixed rate? 3yrs

Mortgage: Approx €159k active €83k warehoused
House Value: approx €240k
Car loan: none
Other loan: none
Savings: 12k
Pensions: aprox €1,000 less than a year old


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

The big question is to exit the split mortgage or keep going as I am. I would like to continue saving and in 5 years trade up but that will mean exiting the split loan now and i'm looking for advice on whether that's financially the best option or if there's option "c"? Also would a bank even look at me in 5yrs tme?

Thanks in advance

 

[Brendan Burgess]

Hello Mrs S.

No, you have little chance of getting a mortgage in 5 years time.

Assuming the house would cost €300k at today's prices, as a second time buyer, you would need a 20% deposit which would be €60k. You have no equity in your home at the moment.

So do not exit the split mortgage. Put your savings into paying down the active mortgage as that will save you 3% a year. €12k @ 3% = €460. With two jobs, you have to decide if you need this level of savings. Or maybe you are saving up for something. If not, pay it off the active mortgage.

Check your split agreement. AIB gives a 20% reduction on any capital paid off the warehouse within 10 years. Are you within 10 years. You could pay it off the active mortgage and save 3% a year. It would take you 6 years to achieve that.

You could have the warehouse and your active mortgage for a very long time. So, all in all, I think paying it off the active mortgage is better.

By paying down your mortgage instead of saving it in an account which pays no interest, you are building up equity in your home. So if your finances improve dramatically over the next 5 years, you will find it easier to trade up.

 

[Brendan Burgess]

If you switch €83,000 from an interest-free and repayment-free mortgage to an active mortgage at 3%, the repayments will be €460 extra per month. I don't think you have that to spare at the moment. If you have, pay it off the active mortgage.

But keep everything under review. If your financial circumstances change, then come back again for another review.

Brendan

 

[MrsSummertime]

If you switch €83,000 from an interest-free and repayment-free mortgage to an active mortgage at 3%, the repayments will be €460 extra per month. I don't think you have that to spare at the moment. If you have, pay it off the active mortgage.

But keep everything under review. If your financial circumstances change, then come back again for another review.

Brendan

Thanks Brendan, it gives me something to think about. I'll be back