High mortgage with big redundancy payment

[Michele OB]

High mortgage with big redundancy payment

I have a €430k mortgage on a property worth about €1.1 - €1.2 million - present mortgage about €2700 per month which I am paying out of my redundancy lump sum.

Should I pay min of €100k off my mortgage and reduce monthly outgoings by about €700/800 or invest about €100k with partner in another property which would eventually be for 1 year old child when he grows up? Would probably put this on interest only mortgage which my partner would pay.

No other loans. Looking for new job at present and presume I will get same in next couple of months but still have cushion for another few months if this doesn't happen.

Any advice?

 

[ClubMan]

Should I pay min of €100k off my mortgage and reduce monthly outgoings by about €700/800 or invest about €100k with partner in another property which would eventually be for 1 year old child when he grows up?

Is concentrating even further in domestic Irish property (your PPR and now this) the most appropriate investment option for your specific circumstances?

Can you post more details about your overall household financial circumstances? When you say partner do you mean spouse?

 

[Michele OB]

Not too sure what you want to know but here's some more info - Partner is not spouse but is really apart from on paper. Have 1 child - one year old - now in creche while I am looking for job.

Have about 150k but would probably pay off only €100-120k so I have money cushion until I get job and then perhaps I could pay off a little bit more.

Paid one years contribution in to pension so that's ok for the next couple of months.


Mortgage is on tracker 4 + 0.95% with ICS. Will move to National Irish when I have new job - had made application but they took over a year to process as they lost documents, staff turnover etc so had to put mortgage change on hold as obviously nobody will give me mortgage when I have no job.

No loans - don't drink or smoke and am pretty good with money etc and seek out deals on everything from insurance to phones and everything in between.

House is in my name - I am main breadwinner. Partner does not have property so could get small mortgage - his salary is about 40k - was thinking if we combined his savings, my redundancy and his mortgage capability that we could buy somewhere to rent out but if I will save more on interest than probable gain on other new property I would rather pay off some of the mortgage but of course that is the fifty million dollar question!

 

[ClubMan]

Not too sure what you want to know

I just meant overall houshold income, existing debts/savings/investments, outline budget etc.

Will move to National Irish when I have new job

Many lenders will not process loan applications until you are permanent in the new job.

House is in my name - I am main breadwinner. Partner does not have property so could get small mortgage - his salary is about 40k - was thinking if we combined his savings, my redundancy and his mortgage capability that we could buy somewhere to rent out but if I will save more on interest than probable gain on other new property I would rather pay off some of the mortgage but of course that is the fifty million dollar question!

But why are you focusing on property when you already have c. €1M+ (€500K equity) in it! Should you not be thinking of diversifying a bit?

If it was a straight choice between reducing the mortgage (and maybe also reducing the term by not availing of the full drop in regular repayments that the capital repayment would normally mean) versus investing in rental property I would be inclined towards the former but that's me and this may or may not be the best choice for your specific circumstances. At least you can estimate the potential savings attributable to knocking a chunk of capital off the mortgage using Karl Jeacle's mortgage calculator and then compare that to the likely returns from alternative investment strategies.

 

[bamboozle]

If I was in your shoes, I would knock 120k immediately off the mortgage, as your loan to value ration is very low I would approach your bank for an improved interest rate on the mortgage if they are not forthcoming switch to NIB.
At this point you will be paying about 700-800 less on your mortgage plus you will also have 30k left from your lump sum. You could do 2 things, firstly open a savings account in the childs name & put 10k into it. Secondly, with the additional saving you are making of 700-800 you could make an split this saving 3 ways, into your pension, as an additional payment against your mortgage and finally into the childs savings account.
No point rushing into buying a property now for the Child & putting yourself under extra pressure, who knows where’s the child will end up in college or living!

 

[Purple]

If I was in your shoes, I would knock 120k immediately off the mortgage, as your loan to value ration is very low I would approach your bank for an improved interest rate on the mortgage if they are not forthcoming switch to NIB.
At this point you will be paying about 700-800 less on your mortgage plus you will also have 30k left from your lump sum. You could do 2 things, firstly open a savings account in the childs name & put 10k into it. Secondly, with the additional saving you are making of 700-800 you could make an split this saving 3 ways, into your pension, as an additional payment against your mortgage and finally into the childs savings account.
No point rushing into buying a property now for the Child & putting yourself under extra pressure, who knows where’s the child will end up in college or living!

Good advice.