Need advice on which loan to overpay

T

tom1ie

Registered User
Messages
126
Age:
41
Spouse’s/Partner's age:
41

Annual gross income from employment or profession:
100K
Annual gross income spouse:
78K

Type of employment:
Im employed in semi state wife is employed by foreign multi national.

Expenditure pattern:
i have approx 33K saved in cash and my wife has approx 10K in shares from the company she works for.

Rough estimate of value of home
750K
Mortgage on home
215K
Mortgage provider:
Avant
Type of mortgage: Tracker, interest only, fixed rate
7 year fixed- 4 years and 10 months approx left of the fixed and overall there's 25 years left on the mortgage. The repayment amount at the moment is €907.91
Interest rate
1.95%

Other borrowings – car loans/personal loans etc
credit union loan for 120K, the repayment of which is €1360.66 PM. This loan is at a rate of 6.5%

Do you pay off your full credit card balance each month?
no credit cards

Savings and investments:
i have approx 33K saved in cash and my wife has approx 10K in shares from the company she works for.

Do you have a pension scheme?
yes I have a DB scheme in work that myself and my employer have to pay into, and my wife has a DC scheme herself and her employer pay into

Do you own any investment or other property?
No.

Ages of children:
11, 8, 19 months.

Life insurance:
Yes.

What specific question do you have or what issues are of concern to you?
We have just drawn down our credit union loan and have a builder lined up to build an extension and various other outstanding bits and pieces to the house. My question is are we better off overpaying the CU loan or the mortgage with any spare cash that we will have? Or what are peoples suggestions to do with spare cash that we will have?
I'm of the opinion that we should be looking to overpay the credit union loan with the extra money? Am I correct?

thanks folks.
 
The CU loan is the most expensive and, if you have to keep money in shares/on deposit while borrowing, quite likely more expensive than the headline rate of 6.5%. So that's the loan that should be tackled first based on the info posted.

It also makes little sense to be holding €33k in cash savings (at what rates?) and €10k in shares while borrowing €120k from the CU and €215k via your mortgage.
 
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Well I suppose the reason for the 33k cash plus the 10k shares is for an emergency fund (car breaks down, boiler goes kaput etc) and for any cost overruns on the work we will be getting done on the house.
4K of that 33K is made up of cash on deposit in the CU that I am borrowing the 120K from however they have confirmed I can withdraw the 4K if need be for whatever reason even though I have the loan.
 
tom1ie said:
We have just drawn down our credit union loan and have a builder lined up to build an extension and various other outstanding bits and pieces to the house.
Click to expand...

You should not repay either loan at this stage.

Wait until the building work is complete and then repay the loan.

Borrowing from a Credit Union is very expensive. Did you ask your home loan provider for a top-up? That would have been a lot cheaper.

Brendan
 
tom1ie said:
Well I suppose the reason for the 33k cash plus the 10k shares is for an emergency fund (car breaks down, boiler goes kaput etc) and for any cost overruns on the work we will be getting done on the house.
4K of that 33K is made up of cash on deposit in the CU that I am borrowing the 120K from however they have confirmed I can withdraw the 4K if need be for whatever reason even though I have the loan.
Click to expand...
With a joint salary of €178k you shouldn't need to worry about the cost of a new boiler, far from it.
 
Brendan Burgess said:
You should not repay either loan at this stage.

Wait until the building work is complete and then repay the loan.

Borrowing from a Credit Union is very expensive. Did you ask your home loan provider for a top-up? That would have been a lot cheaper.

Brendan
Click to expand...
Agreed Brendan that would have been our first choice, but Avant do not do top ups.
I actually posted that on a different thread here.
Regarding paying off the loan I meant paying off smaller lump sums when I have them in a years time after the building work is done for example.
Not paying off in full.
 
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