Pay down mortgage entirely, but what about my rainy day fund?

1

17-pdr

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Mortgage is a tracker with BoI. ECB +1.4%. Current interest rate is 3.4%.
Amount remaining = €37,977.
Current monthly repayments = €300.

Savings = €50,000.
Gross salary per year = €45,000.

No other debt.

Planning to spend €12,000 next Summer when I want to change my car.

Should I clear the mortgage entirely now, and build up my savings fund again?

Thanks.
 
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Nice position to be in.
I would keep three months expenses/8k aside as a rainy day fund+ hold onto 12k for your car. I would then pay 30k off the house.
That would leave you with a mortgage of 8k which could be paid off at your leisure. You could either knock about 10.5 years off your mortgage or bring the repayment down to about 65 euro per month with the same term

When you have cash it can be tempting and easy to justify spending it on all sorts of things that you don't really need so I would dump a large portion of it into paying down the mortgage.

If your job is "secure" or you would get a sizeable redundancy payment if you lost your job then you could probably just be done with it and pay the whole thing off now.
 
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Thanks for your reply. I'm working in the public service so the job is secure.

I've 13 years left on the mortgage so I'd prefer to reduce the monthly payments on it to as low as possible as you suggest.
 
@17-pdr

If you pay off full amount bank will seek to return your house deeds.

a very low mortgage payment is often good value to have your house deeds professionally stored.
 
Keeping small mortgage, is a good idea if you are with the likes of AIB where you get free current account if funding mortgage so keep 150/200 of a mortgage, pay minimum repayment and save current account fees, as interest would only be €5-10 a year, but savings of €60/80 in fees per year.
This is what we do, and also bank stores deeds for us.
 
Thanks for the further replies guys.

@NoRegretsCoyote - Thats interesting. Never thought about that. Sounds like a good idea.

@cloughy - I'm with Bank of Ireland for my accounts and mortgage. They don't offer that option as far as I know similar to what AIB do.
 
You can reduce your mortgage protection to be in line with outstanding amount, or keep as additional insurance,
 
cloughy said:
You can reduce your mortgage protection to be in line with outstanding amount, or keep as additional insurance,
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But there must be some minimum premium that they charge that, on top of the cost of servicing the outstanding "rump" loan, makes it more attractive to just clear the loan and pay somebody for secure document storage of the deeds in some (many?) cases?
 
ClubMan said:
But there must be some minimum premium that they charge that,
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Life insurance has a value independent of it's necessity for a mortgage account!

Something like €2,000 amortising over 15 years (if you can get away with it) is going to be cheaper than secure storage.
 
malcom said:
Anyone know what would happen if you stopped paying your mortgage protection insurance at that point?
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It's a condition of your loan, isn't it? Therefore, stopping payments will likely result in the cover being cancelled, and you being in breach of the loan agreement. Most lenders take a dim view of such actions tbh
 
I'd pay it off and put €300 a month into a rainy day fund.

Currently the 50k you have is earning next to nothing in interest, so by paying off the mortgage it is effectively earning you 3.4%

On top of that, the satisfaction of being mortgage free and owning every brink in the house brings its own reward.
 
For me, it's a pay off the mortgage now. You've more than enough savings to do both the mortgage and the car purchase next year
It seems mad to be paying 3.4% interest on your mortgage while getting little or no interest on your savings
And that 3.4% is as of now next month it probably will be close to 4% if not higher and quite possibly even higher next year

You say you're in a secure job so while its nice to have a large savings balance or rainy day fund, it doesn't always have to be large
If you clear the mortgage now you'll be left with 12K and presumably if you save the mortgage payments now you'll have close to 16K this time next year plus what ever else you normally save, so more than enough to pay for the car you're thinking of

I'm dure most people would agree with me here when I say there is a certain feeling you get when you pay off your mortgage and it's a good feeling, a very good feeling
 
17-pdr said:
Planning to spend €12,000 next Summer when I want to change my car.
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17-pdr said:
Savings = €50,000.
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17-pdr said:
Amount remaining = €37,977.
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It's very clear. Pay off your mortgage. You still will have €12,000 so that is a big enough rainy day fund.






NoRegretsCoyote said:
a very low mortgage payment is often good value to have your house deeds professionally stored.
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People often say this, but what does professional storage mean? It's not as if a thief is going to break into your house rob your title deeds and then claim that they own your house.

Keep your deeds in an envelope marked "House Deeds". Scan the key ones. So you have copies of them.

It is possible that someone might rob your deeds and it's possible that your house might burn down. But both are very unlikely. In fact, I would say it's more likely that the bank would lose your deeds than you would lose them.

If it happens, then you will face a bit of hassle and cost reconstructing them.

Key Post - Where to store title deeds?

A friend who owns their house outright from 10 years ago had the deeds stored by a company in Dublin, the bank at the time suggested them, fee was nominal then, but now with 6 days notice he has to pay 150 euro for 10 years or 95 for 5. Is there a cheaper and just as safe alternative? They...
www.askaboutmoney.com

Brendan
 
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Thanks for the further replies guys. I am age 56, so I probably (hopefully!) will work for just another 10 years. I would consider myself a good saver, so all things going well I will save enough for my retirement.
 
Once again, thanks for all the suggestions.

Ok, here is what i have done. Paid another lump sum off the mortgage.

Amount remaining is now €11,875. Repayments going forward will be €95pm.

Savings now are €25,000.

I hope to work for another 10 years (i’m 56), so I want to concentrate on building up the nest egg.

Just one further question. If my savings are now bigger than my remaining mortgage, do i have to keep paying mortgage protection insurance? I’m currently paying €32pm for this. I had a look at the t&c’s and it seems that the payments stay the same no matter what the size of the mortgage is that’s being covered.
 
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The requirement to have mortgage protection is independent of your level of savings.

I would imagine the T&C's of you mortgage basically say as long as you've a mortgage you need mortgage protection.
 
17-pdr said:
I had a look at the t&c’s and it seems that the payments stay the same no matter what the size of the mortgage is that’s being covered.
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That's normally the way that mortgage protection life insurance is done. A fixed monthly premium for the lifetime of the mortgage. You could shop around for new cover for the remaining amount and number of years left and if you can get it cheaper contact your lender about buying such cover, having it assigned to them, and cancelling the original policy.

Alternatively if you have dependents you might want to look at more general life cover and if that can be assigned in part or full to the lender to kill two birds with one stone.
 
If you cancel the premium and stop paying the bank can take out a policy and charge you for it so I would not stop paying until you spoke with them.
If you speak with them you can explain that you want to cancel your mortgage protection as you are in a position to self insure with your savings. They might be ok with this as the amount is small.

Failing that you could take out a new policy for about 10-15 euro per month assuming you are not a smoker or have any pre existing conditions.

The benefit of keeping the mortgage protection that you currently have is that your next of kin would receive any surplus should you die.
 
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