Paying lump sum off house?yay or nay

Hi guys,
An area I get confused over is whether to pay a lump sum off my mortgage or not. About 6 months ago I got 100% mortgage of €360,000 monthly payments are around €1,500. I have a lump sum of money approx €10,000 which I could now pay against my mortgage. I have no other loans so paying it off seems like the sensible thing to do however I hear that it will make little difference to my monthly repayments (very disappointed!). Should I take some time of the term instead??, or pay off the money??..... or travel the world
Any advice would be much appreciated
Thanks a lot

Take a look at the mortgage calculator here.

Try inputting different amounts etc. and play with the figures. It will help you decide.

Sorry, I can't advise on travelling the world

If it were me, I'd like to keep a certain amount in savings for any unforseen events (loss of income etc.), 6 months outgoings if possible. After that I'd try to pay down the mortgage as the interest over the term is horrendous!!

Easier said than done, I know, especially as with the recent hikes in interest rates, 10k will seem like a drop in the ocean! Nevertheless paying anything off the mortgage saves you money long term. If you don't want to reduce the term you can take a drop in payments giving you more dispoable income.

It's a tough one 10k in the hand...........

Depending on the term of your mortgage, you could lop from 1 to 2 years of the term of your mortgage.

But as this term is likely to be 30 or 35 years, you will wait a long time to see the advantage of it, unless it will not just be a one-off.

Will you be in a position to make regular substantial over-payments, or even change from monthly to fortnightly payments? If you are, then it would be a very good idea.

On the world travel idea, this would be a "very good thing", depending on your status, free and single or hooked-up, kids, no kids, that sort of thing

i certainly wish i had been able to do that when i was young carefree and single, no chance now, except maybe in retirement, when i cash in the old equity

All the best whatever you decide.

i'd pay it off the morgtage providing i had a few quid extra in case of an emergency

Having 10k sitting under the mattress is costing you approx 40 euro a month in foregone mortgage interest savings. To me, the comfort of having funds available to soak future shocks (kids, dream holiday, interest rate hikes, ...) is well worth the 40 euro a month.

Liklihood is it won't be sitting under the mattress, but lodged in a high yield deposit account (see plenty of threads) earning not far short of mortgage interest rates, and quite accessible, so the actual cost to you of not putting it against the mortgage will be even lower than 40/month.

I think it is a no-brainer. But I'm not you.

Highest demand deposit on offer end of this month on sums of €1,000+ = 3.70% gross CAR from Nothern Rock. That's 2.96% after DIRT. Inflation is [broken link removed] 4.2%. Money on deposit is losing real value so only keep it there if absolultely necessary. So it might well be "costing" even more than the €40 p.m. Spare money (bar a liquid "emergency fund") should, in the first instance, be used to clear or reduce debts. If the only debts that one has is the mortgage (i.e. no higher cost debts) and the money is not earmarked for any short/medium term use then it should probably be used to reduce the mortgage and save possibly significantly on interest costs avoided and also reduce the effective term of the mortgage. Just keeping money spare while in debt for the warm fuzzy feeling that it gives does not necessarily make sense.

Thanks a lot for the sound advise everyone, food for thought for sure!
Much appreciated

Over 20 years at 4 % average €10,000 paid off should save you €60 per month or a total of approx €14,500 overall. At higher rates even more.

irishpancake said:

...or even change from monthly to fortnightly payments?...

Click to expand...

Is this something that the banks are willing to do? When I took out my mortgage two years ago I was told by my brother to ask the bank to arrange this, as he was sure it would save intereest in the long run. As the interest is calculated on a daily basis, making two payments a month would reduce the interest slightly. Is this the case, or is it "six of one, ...".

I never did ask the bank (just something I forgot to do ) but seeing that post just makes me think it might be worth switching now.