Paying off Mortgage for Mobility

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Says I

Guest
Age: 32
Spouse’s/Partner's age: N/A

Annual gross income from employment or profession: ~120k
Annual gross income of spouse: N/A

Type of employment: Private, good job security

In general are you: (b) saving

Rough estimate of value of home: ~280k
Amount outstanding on your mortgage: ~300k
What interest rate are you paying? 4.5% variable

Other borrowings – car loans/personal loans etc : None

Do you pay off your full credit card balance each month? : Yes

Savings and investments: 100k (maxed out) NIB esaver @3%, 50k Rabo @2.4%, ~50k current accounts

Do you have a pension scheme? - yes, 15% monthly, all got nicked by the gubmint though.

Do you own any investment or other property? No.

Ages of children: None

Life insurance: Yep.

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

It's reasonably likely I'll want to either move or alternate between Ireland and somewhere else in the next few years (job allows for it). I don't want to make specific plans. Repayments have gone 1200pm -> 1600pm in the last few years, and was looking at dropping some savings on the mortgage in order to lower repayments. Not too fussed about term, but I'd like to get repayments back down in order to be able to rent elsewhere as well as paying mortgage, etc.

However, repaying mortgage is boring, and I could also stay where I am and invest in property or otherwise (I know, bringing macroeconomics into it). Wanted to throw it out to people who keep up with the maths of personal finance moreso than I do (I'm probably making people cringe with my naivete, but I'm slowly emerging from a 20s spent on planes and working long hours and want to get my house (figuratively speaking) in order).

Any ideas?
 
Well you are getting much less in interest than you are paying on your mortgage, so for that reason alone I would pay some of it off. What kind of TRS are you getting at the moment?
 
TRS is about 180 pm. I'm aware that at face vaue I should pump cash into the ortgage, looking for a happy medium between lowering repaymants and having cash on hand.
 
Cash is king in this credit crisis but if I were you I'd still be inclined to use (say) €50,000 of my savings to get myself out of negative equity and back to an LTV in the 80% to 90% range. I'd also (believe it or not) consider shopping around for a better mortgage deal. You appear to be the kind of candidate that the banks like to see and your 4.5% rate seems a little high. I'd also look to shop around for the very best deals in relation to your savings. You're definitely not getting the best rates. Finally, I think that you should increase your pension contributions to the maximum 20% allowable (for your age bracket).
 
Gekko said:
Cash is king in this credit crisis but if I were you I'd still be inclined to use (say) €50,000 of my savings to get myself out of negative equity and back to an LTV in the 80% to 90% range. I'd also (believe it or not) consider shopping around for a better mortgage deal. You appear to be the kind of candidate that the banks like to see and your 4.5% rate seems a little high. I'd also look to shop around for the very best deals in relation to your savings. You're definitely not getting the best rates. Finally, I think that you should increase your pension contributions to the maximum 20% allowable (for your age bracket).
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Is LTV actually relevant though? I'm not looking at borrowing more at the moment, does it affect other ratings?

I hadn't even considered the mortgage rate high, getting that down a bit means the question if whether to drop cash into the mortgage gets more annoying :)
 
I am not sure that cash is really king. There is fundamental uncertainty over the future of the government and the banks. That means that deposits are at risk. For that reason alone, I would set all the savings against the mortgage and reduce it to €100k. You are saving anyway, so you will build up a cash pile pretty quickly again. I am not sure that you need a rainyday fund.

The only reason not to do that would be if you feel that you might be letting your home. You will be able to set 75% of your interest against your rental income for tax purposes.

Talk to your bank. They would probably like you to reduce your mortgage and they may well allow you to take a break from future repayments if you need it.

If there is one think we have learned again from recent times, is that it is just not a good idea to borrow to invest. You are well off. You have good net assets. You have good income. There is no need to put this at risk through borrowing to invest.

Brendan
 
Brendan Burgess said:
I am not sure that cash is really king
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If credit's difficult to obtain and assets are available "on the cheap", then surely "cash is king"?

I don't think that setting all of the OP's savings against the mortgage would be a good idea at all. Who's to say what could happen to the OP in the short term? Two hundred grand in cash isn't easy to come by so throwing it against a mortgage may not be a prudent move.
 
Hi Gekko

The problem with an expression like "cash is king" is that it ignores that it could disappear overnight in the event of a crisis. So it's not the undisputed king. In generaly you should pay off your borrowings and the logic of this can be disrupted by a saying such as "cash is king".

The OP has not indicated that he has any major expenditure coming up. He is saving a lot. If he pays €200k off his mortgage, he will be saving even more.

Brendan
 
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