First Active offset flexible mortgage - savings calculator

[Shaz]

I have a FA offset flexible mortgage of €255k for another 22 years. I pay €1482 per month. Current interest rate is 4.9%. Due to the nature of the mortgage account, I intend to save €1k per month so that I can reduce the interest paid. I have used the savings calculator and it shows that my loan will be paid off by in 10 years time with interest of €92k saved.

What I don't quite get is this... At the end of the 10 years, do I have still have the €1k savings left to do what I want or will the €1k savings (accumulated over 10 years) be used to pay off the mortgage?

Also, will I be better off using the €1k every month to invest in funds/buy a few shares directly?

Thanks.

 

[Brendan Burgess]

No you won't have the savings to do as you want with. You have a €255k mortgage today and €1k in savings. If you pay the €1k off the mortgage, you will have a mortgage of €254k.

Would you be better off buying shares with the €1k? Probably. Over the next 10 years or so, the stockmarket returns after tax should exceed the mortgage rate after tax. But there is a risk that it might not and you would be worse off.

It depends on your overall financial positon. Is the mortgage of €255k uncomfortably high in relation to your earnings and in relation to the value of your home. If so, reducing your mortgage is the best option.

If you have a comfortable mortgage and can handle the downside of the stockmarket returns being lower than the mortgage rate, then you should buy shares.

Brendan