40yo with 10yrs left on mortgage

Discussion in 'Money makeover' started by Boden78, 2 Feb 2019.

  1. Boden78

    Boden78 New Member

    Posts:
    3
    Age:
    41
    Spouse’s/Partner's age:
    41

    Annual gross income from employment or profession:
    E76k
    Annual gross income spouse:
    E0

    Type of employment:
    private sector

    Expenditure pattern:
    We are both generally 'savers'

    Rough estimate of value of home
    E260k
    Mortgage on home
    E120k - 10yrs left
    Mortgage provider:
    EBS
    Type of mortgage: Variable 3.7%

    Other borrowings – car loans/personal loans etc
    None

    Do you pay off your full credit card balance each month?
    Yes

    Savings and investments:
    E100k

    Do you have a pension scheme?

    Yes. Current value E130k. Pay 6.375% roughly E420pm with employer paying 10%.

    Wife paid pension for about 10years before becoming homemaker.

    Do you own any investment or other property?
    No.

    Ages of children: 5 year old

    Life/health insurance:
    - mortgage protection
    - health insurance
    - company pension includes death in service

    What specific question do you have or what issues are of concern to you?

    Savings all currently available immediately in savings account. So earning next to nothing. Have begun to overpay mortgage. Not sure whether to redirect some of the savings into making a dent in mortgage, continue just overpaying, or if I should be contributing more to pension, or keep saving away.

    Thanks for your time.
     
  2. luckystar

    luckystar Frequent Poster

    Posts:
    90
    Step one would be to switch your mortgage!! Far better rates out there esp with a <50% LTV!

    Any plans to move or do work on the house?

    I'd be very tempted to be mortgage free, but personally I'd like to keep a decent portion of money to hand but that's me.
     
  3. Boden78

    Boden78 New Member

    Posts:
    3
    Thanks! No plans to move, & not planning to do any major renovations.
     
  4. moneymakeover

    moneymakeover Frequent Poster

    Posts:
    420
    Why not just pay down 100k on the mortgage

    Then you'll be mortgage free in about 1 year
     
  5. HollowKnight

    HollowKnight Frequent Poster

    Posts:
    89
    Switch to Aib to get their lowest variable rate.
    Then pay lump sum off the remaining mortgage.
     
  6. RedOnion

    RedOnion Frequent Poster

    Posts:
    2,700
    Why wait until after switch?
     
  7. HollowKnight

    HollowKnight Frequent Poster

    Posts:
    89
    Unlikely to get a switch on small balance.
     
  8. RedOnion

    RedOnion Frequent Poster

    Posts:
    2,700
    From AIB switcher guide:
    "Minimum loan amount is €25,000."

    Specifically in relation to mortgage.

    You're a single income family with a young child. So you need a bit of a cash safety net.
    General consensus is about 6 months worth of expenses.
    I'd be looking at 25 to 30k left in easily accessible funds.
    Take 70k and immediately pay off mortgage. Now you've a 50k mortgage.
    Keep term the same, but fix the rate at 3%, or switch to another lender for a better rate. At 3% your mortgage is a very manageable 480 per month.

    That frees up a lot of cashflow each month to either pay mortgage quicker, or increase pension contributions.

    In similar circumstances, I realise my wife isn't building a pension pot while at home. I'd be increasing pension contribution substantially, so that you build a decent pot. If your wife returns to work in future, you could decrease your contribution rate to allow her build up her pension if you can't afford to both pay in top rates.

    Remember you can get tax relief on up to 25% of salary paid into pension. You can make a single contribution before October, and allocate it to last year to get tax relief. I'd be doing that as well.
     
  9. HollowKnight

    HollowKnight Frequent Poster

    Posts:
    89
    Thought it was more. :oops:
     
  10. RedOnion

    RedOnion Frequent Poster

    Posts:
    2,700
    I know you didn't ask, but you should consider income protection. Financially, your family are well covered if you were to die, but you'd struggle if you couldn't work.
     
  11. RedOnion

    RedOnion Frequent Poster

    Posts:
    2,700
    Ah, to be fair, most banks have a minimum of 40k or 50k for mortgages.
    They're not going to be chasing business at 25k - it wouldn't cover the underwriting costs in most cases.
     
  12. Boden78

    Boden78 New Member

    Posts:
    3
    Thanks so much for comment so far.

    I feel the savings should be working for me more then they are currently. And whether I need that amount sitting around when it could go to mortgage or pensions.

    Great point on income protection. Work sick leave scheme is good but something I should look into. I feel I should investigate life insurance in general - or is death in service sufficient typically?

    On mortgage payment. Is it going to be worthwhile moving providers once factor in legal fees etc - or am I better reducing the balance with some of my savings, & then fixing at 3% for a couple of years where I am?
     
  13. RedOnion

    RedOnion Frequent Poster

    Posts:
    2,700
    UB, KBC and AIB will all pay you a set amount to switch, which will more than cover all your costs. And the all have better rates.

    I'm reviewing my own situation at the moment. If something happens to me, my wife's finances would be ok. But the other way around I've put a policy in place for. 2 young children - if anything happened my wife, I want to be there for our children, and not worrying about money.
     
  14. Laughahalla

    Laughahalla Frequent Poster

    Posts:
    50
    As there is just one income i'd set aside four to six months worth of expenses as an emergency fund.
    Set up a savings account for your childs college education
    Pay 15% of your income into a pension and with the remaining agressively pay off your mortage.
    KBC (3k contribution) and Ulster bank(1.5k pays for solicitor) have lower rates.

    Having your home paid and being debt free gives you and your family alot of freedom. Can you imagine what it would be like if you didn't have the mortgage payment and had 12k to invest each year compunding at 7%. You'd have a very comfortable retirement.