50k...invest or put onto mortgage?

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toby2111

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My wife is due to get about 50k from a house sale in the next few months. What's her best options? We're currently on a fixed rate of 3.25% with PTSB but hope to start switching process soon and go somewhere else,there's no break fee(as of last month)
Should we pay off a lump off mortgage,22 years left on it. Or is there a better way to invest or deposit it? She's leaning towards some sort of account that can be accessed quickly (say within 10 days) if we need to get our access to it.
So thought I'd look for advice from people here who are way more knowledgeable than me!
 
Do you have an emergency fund already?

And what’s your pension provison like?

There are too many other variables.

You need to provide a ‘money makeover’ style summary of your financial position.
 
Hi toby

Here is a systematic treatment of the issue.

Have a read of this and then maybe do the Money Makeover

Key Post - Overpay mortgage or contribute to pension or do something else?

This comes up in a lot of different threads, so I will set out some principles here to kick off the discussion. I will edit it in the light of feedback. There are many options with your savings in excess of your emergency cash fund Pay down your mortgage Build up a fund to enable you to trade...
www.askaboutmoney.com

Brendan
 
Thanks everyone. Is there a Money Makeover template with questions? Might make it easier for me to fill in and for you guys to give an answer.
 
Age:
47
Spouse’s/Partner's age:
43

Annual gross income from employment or profession:
€70000
Annual gross income spouse:
€18000 (left job in March,now works 3 days a week)

Type of employment:
Both public sector

Expenditure pattern:
I tend to try to save while she is more of a spender

Rough estimate of value of home
€385000
Mortgage on home
€208,000
Mortgage provider:
Permanent TSB
Type of mortgage: Tracker, interest only, fixed rate
Took out 5 year fixed in Sept 2018 at 3.25%
Interest rate
3.25%.....enquired about break fee 2 months ago,was told it would be €0. Looking to switch when she gets this lump of roughly €45k from house sale

Other borrowings – car loans/personal loans etc
She has car loan of €10k

Do you pay off your full credit card balance each month?
I do,she owes about €3k

Savings and investments:
I've just recently cleared off 2 loans and am now saving about €150 a week

Do you have a pension scheme?
I have a primary teachers pension.
She had a very small one from previous employment,has only statred new part time job in March and is on another tiny pension.

Do you own any investment or other property?
No.

Ages of children:
9 and 7 (7 year old recently diagnosed with Autism,part of reason why she left previous job and started new one)

Life insurance:
To cover mortagage with Irish Life

What specific question do you have or what issues are of concern to you?
She is due to get about €45k from a house sale. Will obviously pay off loan and credit card,leaving her with about €30k.
I also might be getting about €50k later this year. She wants to do a few jobs around the house,go on holidays etc. She also wants to put some aside so to have quick access. So looking at about €50k to either pay off mortgage,invest or something.
Is paying a lump off mortgage the best option?We would possibly like to sell and move maybe in 5 or 6 years time but who knows what way the market will be then.
Her pension is extremely low so would that be a better option?She's more of a spender,I'm more of a saver.
Are Prize Bonds anyway decent? She likes an account that might pay interest on savings(of which there's probably no such thing) and we can access so thats why Prize Bonds may interest her.
 
toby2111 said:
Other borrowings – car loans/personal loans etc
She has car loan of €10k

Do you pay off your full credit card balance each month?
I do,she owes about €3k
Click to expand...

toby2111 said:
Will obviously pay off loan and credit card,leaving her with about €30k.
Click to expand...

toby2111 said:
Is paying a lump off mortgage the best option?
Click to expand...

It sounds as if money burns a hole in her pocket. So the best practical thing to do is to put it out of reach.

If she has an emergency fund, she will use it for holidays.

So you need to operate without an emergency fund.

So the choice is whether to pay it off the mortgage or contribute to a pension?

With an income of €18k, I don't think that there is much value in contributing to a pension.
And given that you might like to trade up in a few years, then I think you should pay it off the mortgage.
 
toby2111 said:
Interest rate
3.25%.....enquired about break fee 2 months ago,was told it would be €0. Looking to switch when she gets this lump of roughly €45k from house sale
Click to expand...
ptsb is a very expensive lender. You got your cash back, but you will now be paying very high interest for the rest of your mortgage.

A 5 year fixed with ptsb is 3%
A 5 year fixed with AIB is 2.45%
A 5 year fixed with Avant is 2.15%

ptsb exploits the fact that customers are reluctant or are unable to switch, so switch immediately.
 
Yes,we hpe to start the switching process shortly.
One quick question-when we do switch,it will probably be to another fixed rate...I dont think they allow a down payment off a mortgage. So should we just look for a mortgage thats 50k less....so we look for a mortgage for 168k (instead of 208k currently). I presume the repayments will be less then?
 
Pay off car loan.
Pay off her credit card and have available credit reduced to 1500

Immediately start switching process (as in tomorrow, not next month as rates are starting to rise).

Avant have a 15 year fixed rate. If you bring mortgage to 180k after putting part of lump sum in, this will be €1191 a month for the next 15 years no matter what interest rates are and you will be mortgage free at that point. You can also overpay by 10% a year and they don't penalise you if you sell and take a new mortgage with them.

Their 5 year rate is 2.15 as Brendan shows above and their 7 year rate is 2.25% (The switch will save you about €1300 - €1400 a year)
 
Thanks everyone. So how long will a switch take? I'm guessing if we start tomorrow,we only get the rate they have when we're ready to drawdown? So that could be 8 weeks and rates will definitely gone up.
 
Lots of people are switching at the minute so expect it to take three months assuming you have all the information the bank asks for.

Regarding what to do with the money. J.L. Collins in his book the simple path to wealth suggests the following.
  • Debt at less than 3%: Pay it off slowly and invest
  • Debt between 3% and 5%: Use your best judgment to determine when and how you want to pay it off
  • Debt with an interest rate of more than 5%: Pay it off as soon as possible
Personally I would pay off any/all consumer debt as soon as possible regardless of the rate. Reading between the lines it sounds like any money left over will be spent on things/stuff. In that case, I would remove the temptation and put it against the mortgage.
 
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J..L. Collins is writing from a US perspective.

Because of our tax code, I take the view that it rarely makes sense to invest outside of a pension wrapper while carrying debt - including mortgage debt.
 
Sarenco said:
J..L. Collins is writing from a US perspective.

Because of our tax code, I take the view that it rarely makes sense to invest outside of a pension wrapper while carrying debt - including mortgage debt.
Click to expand...
I would say it's hard/almost impossible to beat a pension in Ireland. What even comes close apart from paying off high interest credit card debt/pay day loan debt interest.
 
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