Mortgage pay off or pay down?

Paulie74

Registered User
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Age: 41
Spouse’s/Partner's age: 41

Annual gross income from employment or profession: 29000
Annual gross income of spouse: 160000

Monthly take-home pay 8000

Type of employment: e.g. Civil Servant, self-employed Public Sector/Private

In general are you:
(a) spending more than you earn, or
(b) saving? Saving €1000 per month, overpaying mortgage by €630 per month.

Rough estimate of value of home 250k
Amount outstanding on your mortgage: 70k/17 Years remaining
What interest rate are you paying? 1.1%

Other borrowings – car loans/personal loans etc: car loans €8k outstanding, the other car loan is paid in larger salary, car allowance.

Do you pay off your full credit card balance each month?
If not, what is the balance on your credit card? Small balance €500

Savings and investments: Liquidated shares, taxes paid, hence the windfall.

Do you have a pension scheme? Yes.

Do you own any investment or other property? Holiday home, balance 145k, value circa €145k, rate 3.4% 17 years remaining

Ages of children: 0

Life insurance: Death in services benefits with employers, final salary x3.

Separate life cover for primary earner.

Mortgage protection policies on both properties.


My question, a windfall of €55k is imminent. Would you guys suggest?

(1), with some savings pay off the balance on a mortgage currently with €70k remaining. Tracker 1.1%

Or

(2) Pay down the second mortgage for 145k to 90K, variable 3.4% possibly move to a lower LTV 3.1%!

Or

(3) Invest elsewhere, add to pension pot etc.


I know logically the more expensive debt should be the first to be dealt with, but there is the psychological goal of having paid off one’s own home mortgage, and that’s finalised, also there is no requirement to pay mortgage protection premium currently €47 p/m.

I’m not concerned about the car loans, as one is paid for by an employer the other is very manageable.

The idea of doing a little bit of everything isn't appealing wither, it's just the notion of reaching a milestone is very appealing even with the never to give up/get rid of tracker, I'm very committed to it :)

Any suggestions, recommendations, thought would be appreciated.
 
logically the more expensive debt should be the first to be dealt with

Personally, I would stick with logic over achieving some psychological goal. Money is money, debt is debt - anything else is just mental accounting.

The mortgage protection policy is cheap life assurance - there is a good case for maintaining the cover even if you redeem a mortgage before schedule.
 
Not many questions on AAM have simple straightforward answers, but this does.

  • Pay off the credit card,
  • pay off the car loans,
  • pay down the holiday home mortgage,
  • stop over paying the home mortgage,
  • probably start overpaying the holiday home mortgage.
To rephrase Sarenco's point more bluntly, the idea of reaching a milestone with the home mortgage is just childish.
 
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