What to do with 120k cash - mortgage, investment or extension?

Personal details

Age: 45
Spouse’s/Partner's age: 40

Number and age of children: 2 (age 5 & 2)


Income and expenditure
Annual gross income from employment or profession: 95k
Annual gross income of spouse: 30k (part-time)

Monthly take-home pay: 6200

Type of employment: e.g. Civil Servant, self-employed:
Public service

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


Summary of Assets and Liabilities
Family home worth €750k with a 20 year €280k mortgage, 240k remaining
Cash of 120K


Family home mortgage information
Lender BoI
Interest rate 3%
If fixed, what is the term remaining of the fixed rate? 1 year

(No need to tell us the monthly repayments or what term is left)

Other borrowings – car loans/personal loans etc

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?


Buy to let properties - None
Other savings and investments:

Do you have a pension scheme? Yes

Do you own any investment or other property? No

Other information which might be relevant

Life insurance: Mortgage protection only

What specific question do you have or what issues are of concern to you?
What should I do with the 120k cash which is earning no interest at the moment:
Should we make a lump payment on the mortgage? If so, how much of the 120k should be put into that?
What should we be doing now to look after the children's school/college expenses? What sort of saving product would be best to use?
We're looking at a house extension likely to cost us 150k. Is now the worst time to embark on this?

I will deal with the easiest one first:

lmurchu said:

Number and age of children: 2 (age 5 & 2)

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lmurchu said:

€280k mortgage,

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lmurchu said:

What should we be doing now to look after the children's school/college expenses?

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With such a long time to go before you need to pay for college expenses, you should be preparing for them by paying down your mortgage.

You need to take a holistic approach to your finances. Don't think of the college expenses as separate from the mortgage. Paying down your mortgage is a great risk-free, tax-free investment.

Brendan

lmurchu said:

Annual gross income from employment or profession: 95k

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lmurchu said:

240k remaining

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lmurchu said:

We're looking at a house extension likely to cost us 150k.

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You have to decide on whether you are going to do the house extension or not.
If you decide to do it, then you should keep the cash for it.

If you don't need the extension now and won't need it for at least 5 years, then you should pay down your mortgage.


You have a mortgage of €240k and plan to spend €150k and you have €120k cash.
That would leave you with net borrowing of €270k which is over twice your salary.

That just seems like a lot which you will be still be paying off when you need cash for the kids' college fees.

I would get the mortgage down and then if you still feel that you need an extension in 5 years borrow the money then.

Brendan

Thanks a million for this, Brendan.