In good position but save more or pay off mortgage?

L

leia

Guest
Age: 38
Spouse’s/Partner's age: 44

Annual gross income from employment or profession: 88k
Annual gross income of spouse:95k

Type of employment: e.g. Civil Servant, self-employed both PS

In general are you:
(a) spending more than you earn, or
(b) saving?
saving-approx 1500 per month

Rough estimate of value of home 450k
Amount outstanding on your mortgage: 218k
What interest rate are you paying? 1.6% (tracker)

Other borrowings – car loans/personal loans etc none but childcare of 1800 p m

Do you pay off your full credit card balance each month? yes
If not, what is the balance on your credit card?

Savings and investments:

three reg savings accounts-1500 p m

65 k in savings in bank accounts

Do you have a pension scheme? yes, both PS and should have full service at 65

Do you own any investment or other property? No

Ages of children: 8,5 and 2

Life insurance: yes


What specific question do you have or what issues are of concern to you?
We are inclined to pay off our mortgage early-before college fees for the kids etc, and are on track to do so within 10 years(2,000 per month). Undecided whether to put away some of the savings for a long term-5, 10 years say, as the rates are low at present. However with the very low mortgage rate are we mad to pay off early(could put an extra 200 or so against the mortgage per month) ? We have a good standard of living but don't go mad and have been financially carefull for the past 10 years. What is a good savings amount for a family of this size and income, we save about 15% of our income as it is ? I know we are lucky to have this issue!

I am also paying into an AVC to retire early but am not sure if this is good value or not. Again, I realise we are in a good position but would welcome any views.
 
I wouldn't pay off the mortgage early as having the extra cash gives you flexibility and options should you need it. As you say the low tracker rate is worth keeping as you can save the extra money at higher deposit rates.

I think you have a good level of savings as you have big childcare costs plus the cost of 3 kids so saving 15% looks good to me.

Not a lot to say really, just keep it going the way you are. You could start looking into investing say 10-15% of your montly cash savings into equities if you want.

Even with your incomes its no harm to review all your outgoings to see if you are overpaying on anything (phones, insurances, etc).
 
Also, if you are paying AVCs with a view to retiring early but are not sure on on whether its good value or not then I would suggest you get some advice from an independent pensions expert. Or from a financial advisor who can address that for you plus a review of all your financial matters. Just make sure they are independent.
 
What's your net incomes each month combined? To be honest €1,500 doesn't seem like an awful lot to me. Say mortgage is €2k, childcare €1,800 that's €3,800 and if you get net income of say €9,000 (I'm not sure how much it is) then that means your living expenses are over €5k which seems high. Is €1,500 the most you could save? Have you done a monthly expenditure to see where you cash goes? Even in a good position it's good to know and be aware.
I just want to add I don't have experience of how much 3 children cost so perhaps it's unrealistic of me to think €1,500 is too low. But I aim to save about a third of my net income each month. Also I think most 3 children families would live on a lot less than €5k after mortgage / childcare.....
 
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Not worth paying off your mortgage if you are only paying interest of 1.6%. There are savings accounts paying double that.
 
Hi,

Thanks for the responses. Our net income per month is approx 7500, living expenses (including everything, groceries, insurance premia,petrol, heating oil etc) with mortgage and childcare and savings come to just under 6k per month. Saving one third of our income with three kids is not realistic I think but the monthly spend does seem high to me. We have basic TV/phone packages and do not drink or smoke so v. small spend on socialising/lifestyle :) . We're also lucky not to have other debt.

We do still have some left over at the end of most months and this tends to accumulate in the current account so should probably save this, at the moment it tends to be used once a year for home improvements, changing car etc. or a holiday. Looking at the mortgage issue, we would be better off putting it into a deposit account than overpaying at present, then could knock a lump sum off if interest rates shot up.
 
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