Switch SSIA contributions to mortgage repayments?

[Unregistered]

Hello

Not being as regular a user as I would like, which I hope to change in the near future I was wondering if anybody could answer the following question for me.

I have a 150k Mortgage which runs over the next 15years, currently paying 3.3% interest (approx) I was wondering if I was to take the €250 euro I am currently putting to my SSIA, in 2006 and pay down my mortgage every month what would I save and how quickly could I expect to finish the term. (I hope the put the lumpsum away for my childrens education!!).

Would this be the most practical use of this money as I don't really miss the amount at present but fear it will get swallowed up in every day accounts if I don't account for it wisely. Finally is there any advise id dealing with my mortgage lender if I proceed down this route ie accounting for the additional sums being paid off my mortgage etc.

Thanks in advance
Leixman

 

[michaelm]

Re: Leixman

Go to http://www.jeacle.ie/mortgage/ bang in your details i.e. 150K, 15years & 3.3% then under 'Monthly Payment' put 250 and for 'Starting after month #' put whatever number of months your SSIA has to run; it looks like a 250 increase in payments would shorten the term by more than 3 years and save more than 8K in interest.

 

[DrMoriarty]

Re: Leixman

It's certainly a good idea to overpay your mortgage - have a look at Karl Jeacle's mortgage calculator to estimate interest savings/reduction in term. Also - depending on your lender - you may find that after a period of overpayments you're allowed take a corresponding 'mortgage holiday', which could be handy if some unusual expense arises in the future and you need to raise funds without borrowing... (€250/month overpayment = €3K p.a. 'saved', although you may not be able to leverage the full amount)

You say you're paying 3.3%. Depending on your situation, and particularly on your loan-to-value ratio, you could be eligible for a better rate (like the NIB tracker @ ECB + 0.79% for LTV < 60%), and the savings would exceed the costs of moving quite quickly...

[Edit: 'Great minds, etc., MichaelM! ]

 

[ClubMan]

Re: Leixman

might also be of interest.

 

[WizardDr]

With the Government giving you 25% on top of what you save; even with a low interest rate.. you would be a certified lunatic to encash your SSIA with the tax consequences that follow.
Whilst folk here can give help.. do the sums yourself. If you dont know them, then at least you will know that you have not got all the information that you need.

If, after all that, you still want to reduce your mortgage, go ahead. At least its on the basis of full information.

 

[ClubMan]

Why not do the obvious thing and stick with the SSIA (maximising contributions if at all possible) and put some or all of the maturity value to reduce your mortgage and/or your childrens' education? If you have a partner/spouse is s/he also saving (preferably to the max if possible) through an SSIA? The SSIA scheme is a once off bargain and, in general, there are few circumstances in which people who can afford to participate should not do so.

 

[NOAH]

From what I can gather he intends to stick with the ssia, until 2006, when it matures, then use the forgottten about €250.00 to up his mortgage payments and pay it off early. A very wise move and painless as well. And he can stop it at anytime.

BUT, and I have not read all the links, from my recollection it is sometimes better to pay off as a lump sum as the interest is calaculated annually on mortgages so eg put 250 into a saving account for 12 month and then go in and pay off that as a lump sum before the inerest is calculated.

noah

 

[ClubMan]

From what I can gather he intends to stick with the ssia, until 2006, when it matures, then use the forgottten about €250.00 to up his mortgage payments and pay it off early. A very wise move and painless as well. And he can stop it at anytime.

OK - maybe I misunderstood the original post so. I would agree that in general accelerating mortgage repayments (assuming that there are no other more expensive debts outstanding and the money is not needed for anything else in the short term) is a good idea.

BUT, and I have not read all the links, from my recollection it is sometimes better to pay off as a lump sum as the interest is calaculated annually on mortgages so eg put 250 into a saving account for 12 month and then go in and pay off that as a lump sum before the inerest is calculated.

Only Irish Nationwide still calculate interest on (some?) mortgages annually and all other institutions calculate it daily or monthly nowadays as far as I know.