Okay, let's say your someone around the age of 25. You are earning €2,000 per month after tax. You already own your own house and are debt-free (apart from your mortgage). Your house is worth €350,000 and you have a €200,000 mortgage on it.
What proportion of your salary would you consider diverting to a pension? Would you consider switching your mortgage to interest only and contributing a large proportion of your salary to a pension. I have read that you should get your mortgage down to a comfortable level first. Obviously, a repayment mortgage on the above amount wouldn't be considered as comfortable but, at a LTV of 57%, you wouldn't really need a repayment mortgage as you already have adequate equity in your home.
At current NIB rates of 3.85% + an additional 0.25% to allow for the potential December increase, your mortgage would cost you €8,300 on an interest only basis. Detuct TRS from this and it would really cost you €7,792 - 32.5% of your net pay. I've read from various sources that a comfortable mortgage payment would take up proportions ranging from 20% - 35% of take-home pay. What is your opinion on this?
Which of the following would you consider to be the best approach in the above scenario:
The reason I am asking is that I've read an article (see link at bottom) that highlights how, if someone starts saving in a pension at 20 years old and saves €100 per month for 10 years and then stops competely, they will have more at age 60 than someone who started at 30 years old and saved €100 per month for 30 years.
[broken link removed]
This means that, the person in the scenario above were to save 15% of their pay into a pension, in addition to paying the 32.5% of their pay to a mortgage, they would be left with 52.5% of their net pay - €1050 per month.
It seems to be a reasonable strategy since your pension investments should increase above the rate of inflation and your mortgage value will be ate away with inflation.
What proportion of your salary would you consider diverting to a pension? Would you consider switching your mortgage to interest only and contributing a large proportion of your salary to a pension. I have read that you should get your mortgage down to a comfortable level first. Obviously, a repayment mortgage on the above amount wouldn't be considered as comfortable but, at a LTV of 57%, you wouldn't really need a repayment mortgage as you already have adequate equity in your home.
At current NIB rates of 3.85% + an additional 0.25% to allow for the potential December increase, your mortgage would cost you €8,300 on an interest only basis. Detuct TRS from this and it would really cost you €7,792 - 32.5% of your net pay. I've read from various sources that a comfortable mortgage payment would take up proportions ranging from 20% - 35% of take-home pay. What is your opinion on this?
Which of the following would you consider to be the best approach in the above scenario:
- Continue your mortgage on a repayment basis whilst paying off lump sums as regularly as possible until your mortgage is:
- 50% of the value of your home,
- Repayments are 25% of take-home pay (mortgage of €150,000),
- Switch to interest only now and pay as much as possible into your pension.
The reason I am asking is that I've read an article (see link at bottom) that highlights how, if someone starts saving in a pension at 20 years old and saves €100 per month for 10 years and then stops competely, they will have more at age 60 than someone who started at 30 years old and saved €100 per month for 30 years.
[broken link removed]
This means that, the person in the scenario above were to save 15% of their pay into a pension, in addition to paying the 32.5% of their pay to a mortgage, they would be left with 52.5% of their net pay - €1050 per month.
It seems to be a reasonable strategy since your pension investments should increase above the rate of inflation and your mortgage value will be ate away with inflation.