Using SSIA to pay off a mortgage

[theoaks]

Myself and my wife have €40,000 as a result of our SSIA's maturing.
We have €95,000 owing over 13 years left on our PPR,and €152,000 outstanding on an investment property on a 2yr fixed interest only mortgage.
We were thinking of investing this €40,000 into reducing the mortgage on our PPR bringing the capital repayment owed to €55,000.
Would this make sound financial sense. We have no outstanding car or credit card loans

 

[GeneralZod]

If you put all 40k against the PPR mortgage and maintain your repayments at the existing level afterwards it will half your term remaining and save you about 20k in real terms (inflation adjusted).

Assumed no fixed rate term breakage penalties on PPR mortgage.

See Karl Jeacle's Mortgage Calculator to do the calculations yourself.

If you want a guaranteed return at the level of prevailing interest rates it makes sense plus you'll have the satisfaction of owning your PPR sooner.

 

[Gulliver]

An alternative view is that the mortgage is the cheapest money that you can borrow - and you can get guaranteed interest rates equal to the mortgage rate.

But if you look back through history, you would almost always get a return on equities which is higher than the mortgage rate. For example, for the year 2006, you could get over 25% on your 40k by investing on the Irish Stock Exchange. 2006 was a good year, but not exceptional. And over a longer period, equities are always a good bet. So if I had that much spare cash, I'd put it in the ISEQ20ETF - but would advise that equities can go down as well as up.