solidarity bond investment or tracker mortgage lumpsum payment

C

colcal

Guest
Hi - I have a lumpsum on my current a/c which I would like to start working for me. Can anyone advise whether it would be better to pay in the lumpsum against my tracker mortgage (75 bps over ECB) or to invest it now in a solidarity bond and pay the resulting amount in 10 years time against the mortgage ? I am sure this is a reasonably common query and the answer has to do with compounding effects etc. just dont have the wherewithal to come up with the answer myself. thanks
Colmcal
 
If your mortgage is a variable one, which I guess it is, then the following is your scenario.

The interest bill on your mortgage can only go one way, and that is up. The Solidarity bond offers a fixed rate of return on a 10-year timeline.

Your risk is a hike in interest rates above the solidarity bond rate, and personally I believe that is a high liklihood. For that reason, I would pay down the mortgage.

Hope that helps
 
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