Pay off mortgage or invest?

M

Mcgoldenarches

New Member
Messages
5
Hey all,

I was looking for 2nd opinions.

Personal details

Age:41
Spouse’s/Partner's age:39

Number and age of children: 4 all under 10


Income and expenditure
Annual gross income from employment or profession: self employed
Annual gross income of spouse:0

Monthly take-3200

Type of employment: self-employed

Summary of Assets and Liabilities
Family home worth €800k with a €267k mortgage

Family home
BOI
Interest rate3.2
variable

Buy to let properties
Value:40000
Rental income per year:14400
no debt


Other information which might be relevant

I have an investment property that produces post 1200 per month- this is being sold in the next year as the other co owners wish to sell. I will get my share but will no longer have the additional income. We have a lot of overheads and generally save very little. The intention was to put some of the money from the sale against the mortgage to batter it down when the time comes

My concern is mortgage is variable and I've already been hit with one interest rate hike this year and without the additional rental income from the investment it will be a bit tighter around the house. Im also conscious that energy bills will be without credits soon so household expenses will rise considerably. I am a sole trader.

The intention is to move house in a few years and have proof of savings etc ,currently we save little and without the mortgage that could change things considerably.

However we have been fortunate and will benefit from a lump sum that could clear the mortgage. Would it be wise to use this to pay down the mortgage on the PPR now or invest in another investment property to replace the one sold?
 
Last edited:
You have not said what will be your share of the sale after taxes. That would help somewhat.

On your ppr, what is the bank and what interest rate are you on? Can you fix for a few years so you have some certainty?
You say that you get very little income from the rental so cashflow is your issue in your home.

Sit down with all your house hold bills and see where the money is going. Set a budget and keep to it. Track your spending and see what you can get rid off or reduce. Over time you can adjust your budget. If you have other person loans or credit cards try a 'snow balling' tool and see what you can clear sooner rather than later. Keep your sole trader money seperate from your home expenses.

If it was me and the amount you would get is around €20k/€30k I would hold onto it and not clear the mortgage.
 
Mcgoldenarches said:
Monthly take-3200
Click to expand...
This is separate from the current rental income or not?
This seems to be c. €40k net p.a.?
Are you making any pension contributions?
Mcgoldenarches said:
Family home worth €800k with a €267k mortgage
Click to expand...
Mcgoldenarches said:
I have an investment property that produces post 1200 per month- this is being sold in the next year as the other co owners wish to sell. I will get my share but will no longer have the additional income. We have a lot of overheads and generally save very little. The intention was to put some of the money from the sale against the mortgage to batter it down when the time comes
Click to expand...
Why the rush to accelerate your mortgage repayment when your loan to value is very low and the interest rate seems competitive?
Mcgoldenarches said:
or invest in another investment property to replace the one sold?
Click to expand...
That really depends on the business case/plan for such an investment and anecdotal evidence seems to be that many landlords are getting out of that business these days.

It's still difficult to comment meaningfully without having some idea of your overall household incomings and outgoings.
 
ClubMan said:
This is separate from the current rental income or not?
This seems to be c. €40k net p.a.?
Are you making any pension contributions?


Why the rush to accelerate your mortgage repayment when your loan to value is very low and the interest rate seems competitive?

That really depends on the business case/plan for such an investment and anecdotal evidence seems to be that many landlords are getting out of that business these days.

It's still difficult to comment meaningfully without having some idea of your overall household incomings and outgoings.
Click to expand...
This is separate to the investment income

Overheads are high and at present we have virtually nothing left at the end of the month. We cannot make pension contributions as a result. Another rise in interest rates and energy costs later in the year will make things difficult

As you say, its tempting to not pay the mortgage off earlier and invest but invest in what?

For example the investment is being sold as the co-owners feel they may not be able to get vacant possession to sell in a few years time depending on who is in government and their policies.
 
This is the information you need to provide to get a meaningful answer.

Key Post - Basic information required for the "Money Makeover" forum

It can be difficult, but please try to use a meaningful title in your thread For example "27 year old with mortgage arrears". You will get a much better and much more coherent answer if you give as much information as possible in your first post. For example, if you give your mortgage rate, it...
www.askaboutmoney.com
 
Don't forget their is an emotional aspect to paying off the mortgage, rather than just the numbers. We had 130k or so in investments but pulled them and paid off the mortgage and its been such a relief. Would have made more financial sense not to do it, but from an emotional aspect we sleep so much better at night because of it.

It can drastically improve your quality of life even if the numbers don't exactly make sense.
 
Hello,

So, you are self employed, in a single income household, have four children under 10, and are considering risking part of this windfall, is that correct?

I wouldn't think twice about paying off the Homeloan, if I were you.

While you've acknowledged that you haven't been saving, and that really needs to change (for the long term, first for an emergency fund, then to provide for college fees etc.), I don't think you should be considering this cash lump sum for that purpose. With due respect, I'd have concerns that you'd dip into it, and run it down, given you haven't demonstrated the discipline to save regularly, to date.

Clear your debt, then set up a standing order to save, along with a bit into a pension, regularly - it's a lifestyle change, but you'll have free cash once you don't have to pay the mortgage anymore, not to mention the security of having paid off your Homeloan, if your income ever dries up (which is a risk, particularly for the self employed). :)
 
I know you have 4 kids but could you downsize? You seem to be over houses for your income. Could you move to live somewhere mortgage free?
 
Mcgoldenarches said:
Thanks for the responses. Appreciate you all taking the time. We are going to play it safe and just clear down the loan on our PPR as much as we can.
Click to expand...
Just a word of warning. There was a guy on the radio a few years ago and he was made redundant and the amount he received as about €50k. His mortgage was €350k from what I remember. He reduced the mortgage with the full €50k. In his case he could not get work. He got into difficulty paying his mortgage and the bank went to take the house. Personally as you are self employed with one income house I would leave some for a rainy day. The month you cannot work it is always good to have a backup plan.
 
I didn't quite get the amount you are supposed to be able to reduce your mortgage by. Is it only 40k or are you able to pay off your mortgage? If it is only 40k, I would definitely make sure I had a rainy day fund as well as a plan to increase income before putting it in the mortgage. It will only reduce the mortgage by a couple of hundreds of euros while your income will be down by €1200.
 
Mcgoldenarches said:
Hey all,

I was looking for 2nd opinions.

Personal details

Age:41
Spouse’s/Partner's age:39

Number and age of children: 4 all under 10


Income and expenditure
Annual gross income from employment or profession: self employed
Annual gross income of spouse:0

Monthly take-3200

Type of employment: self-employed

Summary of Assets and Liabilities
Family home worth €800k with a €267k mortgage

Family home
BOI
Interest rate3.2
variable

Buy to let properties
Value:40000
Rental income per year:14400
no debt


Other information which might be relevant

I have an investment property that produces post 1200 per month- this is being sold in the next year as the other co owners wish to sell. I will get my share but will no longer have the additional income. We have a lot of overheads and generally save very little. The intention was to put some of the money from the sale against the mortgage to batter it down when the time comes

My concern is mortgage is variable and I've already been hit with one interest rate hike this year and without the additional rental income from the investment it will be a bit tighter around the house. Im also conscious that energy bills will be without credits soon so household expenses will rise considerably. I am a sole trader.

The intention is to move house in a few years and have proof of savings etc ,currently we save little and without the mortgage that could change things considerably.

However we have been fortunate and will benefit from a lump sum that could clear the mortgage. Would it be wise to use this to pay down the mortgage on the PPR now or invest in another investment property to replace the one sold?
Click to expand...
Are you intending on moving to a more expensive house? Your home value already seems at odds with the income you say you have? Maybe I'm missing something obvious though.
 
You must log in or register to reply here.
Back
Top