To knock lump off mortgage/rent out

[questionman]

Single Age: 26
Annual gross income 32,000 plus 15 in overtime.
Savings 20,000 in cash
Rough estimate of value of home €200,000+
Amount outstanding on your mortgage: 100,000
In general are you spending more than you earn or are you saving? Saver
What interest rate are you paying? 5%
Other borrowings – car loans/personal loans etc - None
Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? Zero
Do you have a pension scheme? Yes DB through work plus a private one to which I contribute a little (3,000) per year.
Kids: None
Life insurance: Yes
What specific question do you have or what issues are of concern to you?
Undecided what to do with the savings/mortgage repayments and property.
Factors, include I don’t see myself staying in place where property is, I’ll probably rent it out long term if property values continue to stagnate as opposed to trading up.
Option 1
Use the savings to reduce the amount I’m borrowing to 80k? If I do monthly repayment would fall from 530ish to 400.
Also further complicated by the fact that I'm currently living with herself and making a contribution which is far from massive, just a couple of hundred euro.
So rental income from the property I own would be 800ish per month to offset 400 odd mortgage repayment plus small rent of 250 I’m paying.
(800-650 = 150 ‘profit’)
I’d actually be breaking even from day one as it stands, obviously there’s management fees/depreciation etc.
Option 2
Live in apartment and rent room out, get 300 – 500 per month which would again offset the repayments when my current rent is taken into consideration.
(400 say from rental income of other room would balance off with my repayments of 400 or 520 as it stands).
So my main questions to recap?
Based on above
-Should I use savings to knock a lump off my mortgage and reduce monthly repayment?
-Should I live in or live out of apartment given the above plus any tax implications?
-Also should I reduce the term of the mortgage to ten years, it appears manageable.
-For the above which mortgage broker offers me the best deal?

 

[bamboozle]

well you can look at it 2 ways,
1; knock the money off, thereby reducing you loan to value which should put you in a strong position to negotiate a better mortgage rate (most likely with NIB)
2; if you're renting out the property you are liable to pay tax on the rental income - interest portion of the mortgage, so obviously the lower your mortgage is the less interest you are paying so the more of your rental income is liable for tax

if i was in your shoes i'd knock the money off the mortgage and also any 'profit' you make on renting the property i'd also knock that off the capital of the mortgage.

 

[webtax]

As the apartment is currently an investment property you should consider going interest-only to minimise your tax liability... search AAM for details (you should also seach for details on tax implications, stamp duty clawback, registering with prtb etc.)

On what to do with your savings - since you have a DB pension, contributing extra to it at this stage in your life shouldn't be your top priority. If you are not planning on staying where you are for the long-term you should save for a deposit using a high interest account or a low-risk fund where you will have access to your money when needed. Also, this will give you a safety net in case your overtime income declines.