Invest or pay off mortgage

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pinkyBear

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Hi there,
Some advise required, mr. bear and I have about €25k to spare from the SSIA, we have quiet a substantial mortgage (above 400k) - with the new tax refief for first time buyers we do benefit, the question is this: should we pay the money in to our mortgage or should we invest it?

If we do invest, are there many funds outside of a pension (we are both doing max AVC's) that will let us invest the above amount.

Many thanks and regards
 
unless you can get a return on the investment greater than the rate you are paying on the mortgage, then the maths say you should pay off the mortgage.

how much time is left on mortgage and how much per thousand are you paying. now multiply the emount per thousand by 25 and then by the number of months left to pay, to see how much you will save over the period of the mortgage by reducing it by €25K.

also, by paying it against the mortgage now, you will have 25 x amount normally repayable per thousand to spare every month. You can either use that to spend on luxuries to treat yourself or continue to pay the original amount to bank, thus reducing mortgage term even further.

always remember however, you deserve teh best and nothing is too good for you, so don't forget the odd luxury!
 
Hi there Ravima - used a mortgage calculator and we stand to make a saving of €114 per month :)

So I guess thats what we will do then:) Many thanks for the advise:)
 
Dont forget it may make more sense to pay off other more expensiev debt first, if you have any that is.
 
Hi J,
Small short term loan paid off, visa - paid monthly - so no other debt other than mortgage.

I suppose when I read of people being adventurous with their SSIA money it made me think am I doing the right thing?
 
Getting levels of debt down is the order of the day for me.

We are paying off our car loans and using the monthly savings to go against our mortgage.

We were able to reduce our mortgage by 7 years doing this.
 
Pinkbear,
You do not state if you have rainyday money beside the €25k, and that's definitly needs to be taken in consideration..

If this €25k is your rainy day money, don't spend it on your mortgage (or at least in full) but invest it (or a least part of) wisely, e,g, capital guaranteed and money easily available on demand.
 
Hi Bacchus - we have about 2.5K rainy day money, in a deposit account - I know it isn't much but we put away a few hundred every month into it just in case.

I suppose the real question is by putting the money off the capital and not reducing our payments, would we save more money than we would make by investing it.

I am aware that there are investment funds linked to commercial property however alot of those funds require a minimum of €50k - Some of the others I have looked into like EBS/ BOI - by the time inflation and fees are taken into account these savings accounts would lend us to break even.
Are there other savings/investment options that would give a person as good a return on their savings - like the savings I would make if I pay off a lump sum from my mortgage?
 
You could probably get a better return from investments rather than paying off your mortgage but with some risk. Given the size of your mortgage, however, in your position I would not take on more investment. I would probably add something to the rainy day account and put the rest into mortgage.
 
pinkyBear said:
Hi Bacchus - we have about 2.5K rainy day money, in a deposit account - I know it isn't much but we put away a few hundred every month into it just in case.
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Better than nothing, but very low for rainy day money. Think about how long you can live with 2.5k once you have made your mortgage monthly payment. Few weeks?
Rule of thumb for minimum rainy money is 3 to 6 months of income.

Agree with Noel . I would think twice before spending the 25k into the mortgage now. May be contributre half max on it.
 
What rate are you paying on your mortgage and is this the best you can get based on your current house value ?

for example if paying the 25K into the mortgage got you under 80% loan to value you could transfer to a more competitive rate.

If you are on the best rate available leaving the money on deposit with someone like northern rock would be nearly the same thing as paying it into your mortgage 25K on deposit 4.15% is the same as paying 25K into a 4.17% tracker mortgage with NIB. (DIRT applies to the NR a/c but you get tax relief on the Mortgage).

If you were prepared to take a risk you could buy an ETF(low cost) linked to an index , for example the Eurostoxx50. This may provide greater growth in long run as opposed to leaving the money on deposit with NR but may not be the best place for an emergency fund. (if you had to cash in when the markets were down because you needed to replace your car you could take quite a hit)

maybe a half and half scenario might suit your particular tolerance for risk
 
Hi MFS,
At the moment we are pretty stuck, we are with EBS who are mid range - however Mr Bear is on probation as he moved jobs 2 months ago so we are unable to switch right now. That is something we are going to do once he is off probation.
 
Some discussion of using Regular saving accounts vs. paying off mortgage here.. http://www.askaboutmoney.com/showthread.php?t=41034

The RSAs (regular saver accounts) provide a risk fee return so not taking the risks of equity investments etc.
Havn't had a reason (or the spare time to do it out of interest) to crunch the numbers but seems a valid look at the situation.
 
pinkyBear said:
Ta Satanta - will have a good read:)
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Nothing to do with me, I just pointed it out, thank Ronaldo if it works out for you (couple of his other posts well worth looking through, some interesting looks at potential systems for profit).

Do do your own analysis to make sure you agree with the theory, I'm not saying it is a good move, but it does seem it.
 
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