gnf_ireland
Registered User
- Messages
- 1,441
Gnf why don't you post your details on here so we can have a look and maybe spot something you are missing.
This will include determining a replacement 'investment' for my children's education fund - currently monthly contributions with Rabo-direct but this is coming to an end from April.
And then compare the advice you get free here with the advice that your broker gives you. At the least you can keep the broker on her toes !
You have a mortgage with KBC which is on 3%. So you can get a guaranteed, risk free, tax free, return on your money of 3% by paying down your mortgage.
So cash in your education fund and pay down your mortgage.
As you are, in ten years' you will have a mortgage of say €200k and an education fund of, say, €50k.
Assuming the same returns, if you pay down your mortgage, you will have a mortgage of €150k which is the exact same net result.
But it's very likely that the net return on your fund will be less than the interest you pay on your mortgage, so you will probably end up with a mortgage of, say, €145k.
And then compare the advice you get free here with the advice that your broker gives you. At the least you can keep the broker on her toes !
Many people on askaboutmoney give questionable advice. But it's usually quickly challenged. Alternatives are offered. Conventional ideas are challenged.
Many professional advisors give questionable advice and there is no scope for challenging them
In my particular case, it is highly likely that my children will be attending a fee based secondary school, which means access to the funds would be needed in 8 years time.
There is not much benefit in having a lower mortgage, if the funds are not available when needed.
That is the general advice. But you have referred previously to the KBC redraw mortgage. So can you not overpay your mortgage and then withdraw the money when you need it?
I am not suggesting saving the education fund in a deposit account making minimal interest. Currently this is invested in equity funds with Rabodirect, which to be fair has made a reasonable return over the last 4 years since they were commenced. That is before the taxman gets his hands on them of courseIn general, I think that saving in poor performing product for 8 years is too long. If your kids were due to start school next year, or maybe in 3 years, I might go along with that.
I have an overarching aim to be debt-free and to have a meaningful cash reserve at age 50 (15 years from now).
My resolutions for 2017 have one eye on those longer term goals. 2017 is all about deleveraging and building up cash.
Currently this is invested in equity funds with Rabodirect, which to be fair has made a reasonable return over the last 4 years since they were commenced. That is before the taxman gets his hands on them of course
I have agreement from KBC that a reasonable level of the funds paid to date are available for redraw, but future over payments are not. This means any extra funds I pay into it would not be available.
- My resolutions for 2017 have one eye on those longer term goals. 2017 is all about deleveraging and building up cash.
It will be difficult to get a return of 3% after tax over the next 8 years. And to get anywhere close to it, you will be taking a significant risk.
Let me put it another way, would you take out a mortgage at 3% interest to invest in a heavily taxed and heavily charged fund?
I suspect not, but that is what you are doing.
Agree with you on the above, but things are never as black and white as that.
Well your name is appropriate. As your eyes are in different directions.Building up cash and deleveraging are opposing ideas. Use the cash to deleverage, subject to an emergency fund, if your income or expenditure is volatile and unpredictable.
Brendan
Having €100k and owing €300k can be better than having no cash and owing €200k.
- Some towards building an emergency liquidity fund of €60k.
Completely understand the merits of this approach. That said, I am not 100% sure I want to 'declare' my financial status on the web, but I will see how I can summarise it and what the broker says to get others people's view on it. Lots of people are 'cautious' in this area, and I would fall into that category to a degree.
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