Pay off investment mortgage?

C

cavanMan

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Some advice most welcome....

Rented property with outstanding mortgage of 30k at a rate of 3.6% variable, current rental income €900 per month.

Should i pay of this mortgage altogether?? I have 30k sitting in the bank only making 1%.

Or should I continue to claim 75% of the loan interest paid against my rental income.

Thank you for your reply.
 
75% of the interest is deductible, i.e. 2.7% in simple terms. Applying a 52% rate of total tax, your deduction for the interest is therefore worth 1.4%.

So the interest rate is notionally 2.2%.

You're getting 1% on your deposit, which nets out at 0.59% after DIRT.

So repaying the mortgage wins.

However, it is prudent to have a "rainy-day fund". If you already have one separate to the €30k, repay the mortgage in full. If you don't, reflect on things as in reality, the rate differences are large but the amount of money is small. I would be inclined to keep the cash just in case.
 
Would you need a rainy day fund of €30k? Unlikely, so pay it off. You are obviously building up savings a fair bit.

You gave no other information, but if you have a home mortgage on a non-tracker rate, that should be paid off first.

If you have scope to contribute to your pension fund, that could well be a better use of your money. But an after-tax return of 2.2% which is guaranteed, is hard to beat.

Brendan
 
While I agree with Gordons figures. I would look at it from a slightly different angle. If you repay the mortgage you will save yourself on average €330 pa after tax over the remaining term.

With €30k in the bank, that is not a big saving. Try to find a better use for the money. Pension or home mortgage are good suggestions, or just buy a boat.
 
Brendan Burgess said:
Would you need a rainy day fund of €30k? Unlikely, so pay it off. You are obviously building up savings a fair bit.

You gave no other information, but if you have a home mortgage on a non-tracker rate, that should be paid off first.

If you have scope to contribute to your pension fund, that could well be a better use of your money. But an after-tax return of 2.2% which is guaranteed, is hard to beat.

Brendan
Click to expand...

Thanks for your reply Brendan no I doin't need the 30k as I have other savings.

going by the replies I got so far it looks like paying it off would be the best option at the end of the day!!
 
Can you lodge the money against the mortgage and have the ability to redraw? Some mortgages/banks allow that, super facility as best of both worlds. You get the saving in lower interest while also not losing access to the money if you needed to take it back? Make sure to get any commitment from the Bank in writing and ensure its crystal clear.

Otherwise I am leaning slightly towards not paying the mortgage off, however as you seen to have other resources its a marginal decision in my mind. I like the boat option!!
 
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