Payoff Mortgage or not?

[igloo]

My situation is as follows;

• Mortage on our primary residence is €1250 pm and rising... €220k owned on it.
• Both wife and I are working, joint gross earnings €130k per year approx.
• We have a second home in west Dublin with €100k left on mortgage, its worth approx €380k. We rent it out at €1000 pm, mortgage on it is €900 pm.
• My wife would like to resign/take a long sabbatical for a few years as we have a young family.

We are considering selling the Dublin property, and writing off the primary residence mortgage by €120k leaving a €100k left on mortgage - very manageable on one income. We would expect (after tax and mortgage buyout) to have proceeds of approx €210k at our disposal, so if we put €120k towards reducing mortgage, this leaves €90k for other investment.

Questions;

1. Do you knowledgeable folks out there consider it prudent to take the money profitted to wipe off a significant portion of the mortgage...in an environment of rising interest rates?
2. Any advise on what to invest in - renting out property is almost like having a parttime job, we'd prefer to consider alternatives to that..

Thanks,

p.s. great web-site, I fear I may not be as productive as usual if I stay on here too much..

 

[Satanta]

1. It's a guaranteed investment for the money in which you beat most (guaranteed) rates, the return is probably (given recent ECB remarks) going to increase (right into 2008 - who can predict beyond that for any investment), you gain a higher equity in the property (which could be released if for some unforeseen event it was needed - not tied up like a pension).
It may not have the greatest return but for a guaranteed saving it certainly ain't a bad move. It's the one I'd always edge towards personally.

2. Worth looking into having "rainy day" savings to cover small unforeseen costs. This should be kept out of shares (if needed in a hurry can't wait out a dip in the market) and in a high yielding CA (lots of talk about this in other threads).

Apart from that, you need to decide how much risk you want to take on.
You could pay more off the PPR mortgage, invest in pensions, look into index linked investments/ETFs (Quinn Life for example is often suggested for its low fees).

Lots of info about investments around the threads (way too much to go into them all here). Read up and see which ones you find most suitable to your risks, needs, wants and hopes. With a sum of 90k and future additions to this it may be worth seeking advice from prefessional independent financial advisors (may also help investigate the potential of a better mortgage given your now much lower LTV).