Should I use my savings to put a lump sum towards my mortgage?

[lam]

Age: 30
Spouse’s/Partner's age: n/a

Annual gross income from employment or profession: €66,000
Annual gross income of spouse:n/a

Monthly take-home pay €3564

Type of employment: e.g. Civil Servant, self-employed - private sector employed

In general are you:
(a) spending more than you earn, or
(b) saving? saving

Rough estimate of value of home €225,000
Amount outstanding on your mortgage: €166,000
What interest rate are you paying? 3.6% (though just got a letter through the door and think I can avail of a lower 3.1% once I get my house revalued)

Other borrowings – car loans/personal loans etc - no

Do you pay off your full credit card balance each month? yes
If not, what is the balance on your credit card?

Savings and investments: €70,000

Do you have a pension scheme? yes

Do you own any investment or other property? no

Ages of children: n/a

Life insurance: just that standard mortgage protection insurance


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

My monthly costs are lower than my income and I've managed to save a good nest egg. I don't know whether I should put a good chunk of cash (say €40k) towards my mortgage which would avail me of a lower LTV interest rate or should I just look to reduce the term of my mortgage and pay more each month keeping the nest egg intact? My mortgage currently only takes about 20% of my salary. Maybe I should be investing but I have an aversion to risk! Any advice welcome.

 

[Sarenco]

Hi lam

Here's what I would do if I was in your shoes:-

• Use €55k of your savings to pay down the mortgage. That will leave you with €15k in cash for emergencies;
• Don't shorten the mortgage term - reducing your monthly payments gives you flexibility;
• Get the property revalued and get yourself onto the very lowest mortgage rate available;
• Use the improved cash-flow to maximise your pension AVCs for your age (if you aren't already doing so) and invest the lot in global equities for the time being; and
• If there's anything left over, keep throwing it at the mortgage until it's paid off in full.

Hope that helps.