No immediate financial pressure but looking for advice

G

grazia

Guest
hi all, I've just discovered this excellent forum and I'm interested to hear your thoughts of our situation.

Age: 30
Spouse’s/Partner's age: 30

Annual gross income from employment or profession: 35K
Annual gross income spouse: 40K

Type of employment: employees

Expenditure pattern: Living modest lifestyle, not big spenders. Never overspend.

Rough estimate of value of home: 320 (based on recent slowing down of the Galway market)
Mortgage on home: 320

Type of mortgage: Tracker (5.1%)

Other borrowings – none

Do you pay off your full credit card balance each month? - yes
If not, what is the balance on your credit card? n/a

Savings and investments: circa 50K savings - in various high interest a/c's (Rabo X 3, Anglo, AIB online savings etc..)

Do you have a pension scheme?: Yes / spouse-no

Do you own any investment or other property? : no

Ages of children: n/a

Life insurance: min level (decreasing sum mortgage prot.)


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

We work very hard and are very careful with our money. We are lucky enough to have good stable jobs and have managed to save a bit of money while also making mortgage payments and maintaining our lifestyle.

But we think that we probably need a 'money makeover'! What would others do in our situation - use some savings to reduce mortgage ? start a pension for spouse (despite them being just over the min income tax rate threshold) ? consider putting some money on a (long) term deposit ? invest in lottery tickets!?!

I know a lot of what we could do depends on our long term objectives. I suppose one of our main long term objectives is to get our mortgage paid off asap...

I'm hoping that some of you 'experienced' AAMers might have been in a similar situation in the past and I'd be interested in hearing your thoughts.

Thanks.
 

sam h

Registered User
Messages
1,249
I'm a believer in paying off the mortgage asap (I know some argue you may be able to invest your €50k and get a higher return, but this is usually at a higher risk). I would suggest that you have a look at a mortgage caluclation which will let you look at different senarios to see which will best suit you. You probably want to hold some of the savings for emergencies as it is difficult to get back once you pay it over to the bank (remortgage hassles). Another option is also to up your monthly payments if you have surplus cash.
Assuming you have a 30 year mortgage a €25k payment would knock about 3.5 years off, also upping payments by €200 per month would knock about another 6 years off.
All means you're paying less interest over a shorter period of time.
 

GeneralZod

Registered User
Messages
1,198
Using Karl Grabe's tax calculator I estimate your after tax monthly combined income at a healthy €5500.

Using Karl Jeacle's mortgage calculator and an assumed 30 year term with a €50k prepayment you'd reduce the term by almost 9 years and the total interest by about €80k in real terms assuming 3% per annum inflation.

The higher rate tax benefits of pension contributions would be limited since you're only just above the threshold. At this stage it's better to concentrate on getting the mortgage down. After several years of paying down the mortgage and real terms pay increases you'll be in a better position to justify pension contributions.
 
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