20k, lump sum off mortgage or get a car?

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random10

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So basically I've been gifted 20k from a relative who passed away. We are currently coming to the end of a fixed rate of 3.6% on our mortgage. We have 249k and 27 years left on mortgage so based on BOI overpayment calculator if we pay a lump sum of 20k we will save 29,668 euro and knock 3yrs 5 months off our mortgage.

We also need to upgrade our car and were looking at spending approx 15k on this. To get a 15k loan over 3 years would leave us paying interest of 1,560 euro.

So is it better to pay 20k off mortgage and get a car loan which is what we had intended to do anyway??

Apologies if this seems like a daft question.
 
Buy car outright and use what would have been loan repayments to overpay mortgage monthly.
 
random10 said:
if we pay a lump sum of 20k we will save 29,668 euro and knock 3yrs 5 months off our mortgage.
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I say it again and again, this is a meaningless statement.

At it's simplest, if you pay €20,000 off a mortgage which is costing you 3.5% - you will save €700 a year.

If you borrow €20,000 at 9% to buy a car, it will cost you €1,800 per year.

So the correct thing to do, most of the time, is to buy he car with cash.

What might the exceptions to this be?

Of course, if you can borrow €20,000 to buy a car at less than 3.5%, then you should do that.

If the €20,000 will bring you down into a new LTV band, you might save a further 0.2% say on €230k, so that would be an additional €460.

A subset of this is that paying off the €20,000 might make it possible for you to switch to a cheaper lender who gives you cash back.

random10 said:
Only thing is we want to fix again because the SVR with BOI is too high
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Maybe switch to another lender where the SVR is lower than the fixed and there is cash back? For example, EBS.

Does the Bank of Ireland not allow you to repay 10% of the capital each year on a fixed rate mortgage? So you could pay off up to €25k a year. I am not sure of this, so check it out first.

Brendan
 
random10 said:
So basically I've been gifted 20k from a relative who passed away. We are currently coming to the end of a fixed rate of 3.6% on our mortgage. We have 249k and 27 years left on mortgage so based on BOI overpayment calculator if we pay a lump sum of 20k we will save 29,668 euro and knock 3yrs 5 months off our mortgage.

We also need to upgrade our car and were looking at spending approx 15k on this. To get a 15k loan over 3 years would leave us paying interest of 1,560 euro.

So is it better to pay 20k off mortgage and get a car loan which is what we had intended to do anyway??

Apologies if this seems like a daft question.
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20 k off mortgage is a drop in the ocean but its a substantial sum when buying a new ( newer ) car

buy car !
 
Brendan Burgess said:
Does the Bank of Ireland not allow you to repay 10% of the capital each year on a fixed rate mortgage? So you could pay off up to €25k a year. I am not sure of this, so check it out first.
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Contractually it's only 10% of the monthly repayment, but capped at EUR 65.
 
Thanks for the clarification.

So if I have €200k over 20 years fixed at 3%, the monthly repayment is €1,100.

I can overpay by €65 a month or €780 a year so it's only 1/2% of my mortgage?

Is the only way to do that to increase my repayment? I can't pay off a lump sum without being subject to penalty?

Of course, the charge for breaking out of a fixed-rate may well be zero.

Brendan
 
RedOnion said:
Contractually it's only 10% of the monthly repayment, but capped at EUR 65.
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Just on this - we are currently on a 3 year fixed rate with BOI and are overpaying 10% of the repayment - (around €130 a month) - they never mentioned anything about the €65 cap and were happy for us to overpay the full 10%
 
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