lump sum off Mortgage advice

T

tennisnuts

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First timer! No great dilema but any advice greatly appreciated: outstanding mortgage 66K been overpaying since start currently paying 1200pm (only 600 reqd): at these payments leave 5yrs til clear: can afford to increase this by approx 200pm decreasing term by about 9mths: We have savings of about 30k on deposit not earning much: Also have 'investment' property with outstanding mortgage 165K worth prob 200K (we purchased for 250K had 80k own to purchase with so not in neg equity)...yet! repayments about1000k pm rented for 850 so supplementing by 150.... we cud prob get more but have super tenant from start... single mom there for long term (she wants to redecorate sitting room at own expense!). Always intended this as long term so dont mind supplementing rent at present.
So Question is shud we just use our 30K to pay off outstanding mortgage and be done in 3 years but have zero savings left? Me and wife in secure jobs (me approx 120k her 60k) We on variable rate so poss big increases in future possibly... Me keen to fling everything at mortgage while expenses at minimum (kids 8 & 3) her likes having money in bank!
This prob trivial compared to some posts here but i hate making decisions (last one was buying 2nd prop..... if had my way wud have bought 2 or 3!! thank god for cautious wife!!)
 
Hi tennisnuts,

What rates are you paying on your PPR mortgage and that on the investment property ? Do you have any other short term debt at higher interest rates ?

Personally speaking I would partly agree with your wife and want to have a just in case / rainy day fund of some description.

However, saying that 30k is a sizable sum to have saved. I would look to pay 10k-20k off my mortgage or loan with the highest interest rate, and keep the remainder for my rainyday fund.

It may be worth bearing in mind that a reduction of the loan on your investment property will reduce the interest on that loan, hence potentially exposing you to a larger taxable amount on the rental income received.

Depending on your ages and current payments, if not maxed making once off AVC contributions may provide a much better return on your excess cash, as you both presumably pay tax at the higher rate.
 
Hi Fitzer.... we pay 3.8% and 4.6% respectively. We have no other loans... car etc and no outstanding cc bills. Really we are VERY fortunate compared to most but guess we all a bit jittery in current climes and want to reduce our debt exposure where poss. Thought about selling other prop.... and taking the hit on our initial 80k investment but i think that wud be a little premature as it currently not a burden ( also every year after returns have not been liable for tax (no net profit) and in fact uhave got 1800/2k tax back (incl med bin etc) so that pretty much cancels out our supplement pa although this will reduce going forward). Also i wud be afraid we cud lose a great tenant if she thought we were even thinking about selling... then possibly left with no tenant and a house we cant sell so for mo think happy with status quo there. Funny you mention AVC (not app for me) but my wife currently max payments was thinking of reducing and diverting funds to mortgage... seems like great idea short term but..... I have v good pension conditions so we trying to strike a balance between planning for future and living in present!!
 
Hi there. First of all congrats on being in a very healthy position. I don't think I would be in too much of a rush to knock a lump sum off mortgage. I would continue doing what you are doing and you will clear the mortgage in no time.

Is the house you are currently living in your house for life or would you consider selling at some stage and trading up? This may mean you may have to consider selling investment property.
 
No this is house for foreseeable future traded up to get here and extended after... i just dont like idea of having savings being eroded by inflation if it can help us get closer to the ultimate dream of mortgage free living!!!
 
wll if it's the house you are happy with and your good jobs are secure then maybe you should clear it off mortgage and get closer to being mortgage free.
 
Tennis, I was you I'd leave that money where it is. There's a lot of comfort to be had from having some money in the bank, a rainy-day fund. You never know what's ahead.
 
With no other debt to speak of, you are indeed in an enviable position.

As you say I think it would be premature to consider selling the investment property esp since you have such a good and reliable tenant. Leaving an amount you both are comfortable with to one side for a rainy day fund, I do think it's a good idea paying a lump sum off one of the mortgages. Work out the preferred property to pay off against by taking into account the interest rate of each loan / potential for taxation on the investment property income.

All the best
 
Thanks guys..... yeah guess a bit of both best option poss 20k to ppr mort and keep 10k for unforseen events..... guess am more cautious these days.. always thought myself smart and wise but 5 yrs back when came into a lump sum even i got caught up in property obsession ans as i mentioned if not for cautious other half would have done like my colleagues and others and bought 2/3 properties!! Herself was keen to just payoff mortgage.... i thought that a waste!!!! Guess we lucky now... am glad we bought one i still think good long term investment but have cold sweats at where we could have been. I see so many i work with who on paper have great secure jobs with high salaries but are crippled with debt and no quality of life.... easy for people to be smug and say their own fault but as i said was so nearly me mister wise and smart!!! Thank god for cautious missus!! Thanks for taking the time to reply
 
Seeing as you are so thankful to the misses for being in the fortunate position, why not treat her to something really nice.

I personally like to clear debt and am working towards paying my 30 year mortgage over 12-15 yrs. I don't see the whole thing of working out what it best interest etc, as it can all get wiped out with inflation. Just as long as ye are enjoying life, taking the holidays and paying down on the mortgage is great. I would be inclined to pay off about 20K.
Before you do just think do you need to change a car, doing any work on the house or make any other big purchases and do them first.
 
I can cope with the debt, my mortgage is 150k, 600 per month and I should work at paying more per month instead of wasting money, but I like my lifestyle too much....will work at budgeting a bit, I think.

However, I did not rest until I had 50k in savings, so it is a bit of a cushion for me and would give me a bit of leeway in case of the dreaded redundancy.

I would keep the 30k if I were you.
 
Hi Tennis, You didn't mention the name of your lender but something which may be of interest to you is that KBC have an "overpayment and Redraw" option on their mortgages.
This allows you to pay a lump sum off your mortgage which is knocked off the capital thus saving you interest and should you for any reason need the funds back they will transfer it to your current account within 3 working days.
I had a bit of savings and was waiting for Planning for an extension which was delayed for 18 months, I knocked the money off the mortgage and drew it down as i needed it.
D
 
Hi Danow... we with EBS will check out that idea... sounds interesting not sure if they operate a similar system but that would cover all bases... not getting much return on deposit.... tks for heads up
 
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