Moneymakeover Looking for reassurance on Mortgage decision

I

IAmHidden

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Personal details

Your age: 45
Your spouse's age: 43
Partner's age if not married:

Number and age of children: 2 - 9 and 11


Income and expenditure
Annual gross income from employment or profession: €128,000
Annual gross income of spouse/partner:€0 (stay at home parent)

Monthly take-home pay: €5,600

Type of employment - Employee
Employer type: private company

In general are you:
(b) saving


Summary of Assets and Liabilities
Family home value: €450000 (guesstimate)
Mortgage on family home:
Mortgage1: €182,000
Top-up: €73,000
Net equity: €195,000


Family home mortgage information
Interest rate: 3.95% on both
Type of interest rate: variable
Remaining term: 24 years on both

Repayment 1: €950 plus €25 protection
Repayment 2: €380 plus €11 protection



Other borrowings – car loans/personal loans etc
No loans

Do you pay off your full credit card balance each month? Yes

Pension information

Value of pension fund: €225,000
Spouse: Two old pensions €8,000/€30,000


Other savings and investments:
Prizebonds €75,000
Child Benefit 2% savings acc. €9,000
Holiday/Insurance/Emergency etc €3000 1.5%

Company shares €60,000 (can access 13.700 tax free now)
Savings acc 1.2% €10,000
Savings acc 1.5% €15,000


Other information which might be relevant

Life insurance:
Death in service - 10 x base salary
Personal policy first and second life €200,000
Plus serious illness €50,000


What specific question do you have or what issues are of concern to you?

We are considering paying off the top-up mortgage with our savings and are wondering if it’s the right move given our circumstances. If we do pay it off what would be the best use of the extra money from the repayment - overpayment of the other mortgage, investment, other?

Thank you
 
Well you'll get a much better effective return on your money by paying down your mortgage(s) than on deposit at the rates quoted and in Prize Bonds.
 
IAmHidden said:
Mortgage1: €182,000
Top-up: €73,000
Click to expand...

IAmHidden said:
Prizebonds €75,000
Child Benefit 2% savings acc. €9,000
Holiday/Insurance/Emergency etc €3000 1.5%

Company shares €60,000 (can access 13.700 tax free now)
Savings acc 1.2% €10,000
Savings acc 1.5% €15,000
Click to expand...

Your total savings seem to be €112k and you have a further €13,700 of shares available now?

So as ClubMan suggested, just pay down your mortgage unless you have a short term or medium term large expenditure.

As you have shares, you don't need an emergency fund as you can cash them if an emergency arises.

But your mortgage of €255k is not high compared to your salary - Loan to Income is 2 or the value of the property - LTV is about 50%

So you may like to max your pension instead.

But either of these is much better than having lots of cash doing very little .
 
IAmHidden said:
Death in service - 10 x base salary
Personal policy first and second life €200,000
Plus serious illness €50,000
Click to expand...
I'm conscious it's not the question you asked, but.....while your partner would be well covered in the event of your death (mortgages paid off and 10 times salary plus 200k if i'm interpreting it correctly), it may be worth considering whether there is adequate life cover in the event your partner died. It might still be sufficient with the house paid off plus 200k, but as they are the stay at home parent obviously there will be substantial additional childcare costs, and potentially questions like whether you could continue working at the same level you currently are or whether you'd need to take a lower salary role in return for less stress/more flexility that you might need in that circumstance.

Not suggesting you definitely need it, but worth just thinking through that scenario and whether mortgage free with 200k and two young-ish kids would be comfortable enough. Being stressed over your financial situation is an additional challenge you don't want if the worst was to happen.
 
Thanks neo123, definitely worth considering. We have it a few years, and there is a bit more room to increase it now.
 
This all really comes down to what do you value - for me I really value a pension that is maxed out, that I feel is getting me towards a goal of work optional / early retirement. I have a very similar mortgage and house value, my mortgage doesn't bother me at all - and I'm also a one salary household. I sleep easier knowing my pension is looked after than my mortgage being paid off. What age would you like to retire by? What are you plans for the next few years? I'm not saying you need to answer these here but I would spend time asking them of yourself and seeing then if you're using the money you have to get you closer to those goals. Retirement age is No 1 for me - if you want to go somewhat early I would be taking out those prizebonds and maxing out this year and last year.
I have an Excel where I keep track of all of my money that is working hard for me, and money doing nothing. The €75,000 is too much to be doing nothing, in my opinion.
 
Thanks for the input - as far as I know my pension is at the maximum. I add any bonus received as a AVC. But I will double check to make sure.
 
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