Keep savings or put into mortgage?

A

anniek

Guest
Hi all,

With increasing mortgage percentage rates I am starting to get worried. Should I put money into reducing the mortgage amount or keep it for a rainy day. Here's my situation:

Mortgage: 289,000 outstanding PTSB rate of 5.5 fixed to July 2011
Value of house: God knows, perhaps 180,000 if we were lucky - we don't want or need to sell
Savings: 70,000 joint savings plus 3,000 (me) 2,000 (partner)
Other loans: Car loan (me) 350 p.month Car loan (partner) 550 p.month
Credit card (me) 0 balance Credit card (partner) 2,500 approx
Income: 2,600 per month (me) 3,100 per month (partner)
No kids yet but hope to have at least one if we can afford it

My gut says to hold on to savings to set against increased mortgage payments if needed. My partner wants to put money into the mortgage (about 15,000) Any advice would be appreciated.
 
What rate are you getting for your savings and what rate are you paying on your mortgage?
 
Hi Paddy,

We're at 5.5 fixed with PTSB at the moment. This is up in July and from news reports we will have no choice but to go with their variable from then on.

With regards to savings we're being very silly at the moment. 55,000 of the money is in an account earning about 2%, 5,000 and 10,000 are sitting in current accounts earning zero probably. It is something we have meant to attend to but we are faffing about a lot wondering what to do with the mortgage.
 
What I did was made a little spreadsheet with the mortgage repayments per month, the interest applied per month, and then used it to plot various scenarios (such as - pay off 10K now, or invest the 10K and pay off the invested amount + interest received later). I also played around with the interest rates (although I dont have a crystal ball - just guesstimates).

Anyway I used it to formulate a plan - if the interest rates change I will use it to formulate the next best plan etc...

At the moment it makes sense for me to leave my savings where they are - if the interest rates go up it may make more sense to use the savings to pay off what I can of the mortgage.
 
I would pay 50K off the mortgage, and with the reduced repayments start overpaying to get down the negative equity and get out of the negative equity trap, even if you don't plan to sell nothing worse than being without choices.

Your partner who is on a good income should be figuring out why he has any credit card debt. Not good.

On an income of circa 70K a year cannnot understand the reference to being able to afford one child.

Well done on the savings.
 
We're at 5.5 fixed with PTSB at the moment. This is up in July .
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So, can you pay off some capital if you want to? PTSB may well impose an early repayment penalty. It's worth asking them as they are desperate for cash and may waive the penalty.

from news reports we will have no choice but to go with their variable from then on
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What happens then is determined by your mortgage agreement, and not by news reports. Many fixed rate mortgages had a price promise. It's possible that you will be put onto a tracker mortgage. Check it out before making a capital repayment. If you have a cheap tracker, then you are probably better off keeping the money on deposit.

Brendan
 
anniek said:
Other loans: Car loan (me) 350 p.month Car loan (partner) 550 p.month
Click to expand...

Everyone seems to have missed the elephant in the room in their responses.

Generally the thing to do is pay off the highest rate loans first. Credit cards followed by overdrafts followed by unsecured personal loans followed by car finance. Mortgages come after these.

If you used the money to pay off your car loans then you'd have ample room to soak up increases in mortgage rate.

According to drcalculator.com 289k is 1640 pm @ 5.5% (relief and exact calculations aside). You'd need mortgage rates to increase to by 4.5% (i.e. to 10% which = repaymtns of 2540 pm) to swallow up that 900 pm your paying on your car loans.

Unless of course you've some super special offer car loan rates below 5.5%.
 
Bronte said:
On an income of circa 70K a year cannnot understand the reference to being able to afford one child.
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I guess I'm a little paranoid to say that alright but I'm concious that we would have to pay for childcare as we both live very far away from our parents and we both want to keep working. Plus everything seems to be going up in price, not just mortgage interest rates!
 
Brendan Burgess said:
So, can you pay off some capital if you want to? PTSB may well impose an early repayment penalty. It's worth asking them as they are desperate for cash and may waive the penalty.



What happens then is determined by your mortgage agreement, and not by news reports. Many fixed rate mortgages had a price promise. It's possible that you will be put onto a tracker mortgage. Check it out before making a capital repayment. If you have a cheap tracker, then you are probably better off keeping the money on deposit.

Brendan
Click to expand...

Thanks Brendan for that valuable advice, I had no idea that that might be the case.
 
robd said:
Generally the thing to do is pay off the highest rate loans first. Credit cards followed by overdrafts followed by unsecured personal loans followed by car finance. Mortgages come after these.

If you used the money to pay off your car loans then you'd have ample room to soak up increases in mortgage rate.

According to drcalculator.com 289k is 1640 pm @ 5.5% (relief and exact calculations aside). You'd need mortgage rates to increase to by 4.5% (i.e. to 10% which = repaymtns of 2540 pm) to swallow up that 900 pm your paying on your car loans.

Unless of course you've some super special offer car loan rates below 5.5%.
Click to expand...

Thanks - that makes a lot of sense when you spell it out like that.
 
robd said:
Everyone seems to have missed the elephant in the room in their responses.
Click to expand...

You are absolutely right. I had thought of it when I read the post, but forgot about it in my reply as the assumption that she had to revert to the SVR was an even bigger elephant:)

Brendan
 
I have a PTSB mortgage (tracker,not sure if this makes a difference). They allow for overpayment on it, either monthly or lump sums. Once paid in, it cannot be withdrawn, but it can be used to take a payment holiday at a later date. A combination of using some of your savings for paying off the high interest borrowings, and this might appeal to you.
 
you are in a great financial situation.............your having some worries and you are acting on them.

have that baby and watch your world turn on it's head with happiness!
 
I also missed the car loans, but watch out there is no penalty in paying them off early. Some loans have penalties if you pay them early.
 
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