Daniel Kelly
Registered User
- Messages
- 15
Having made that decision, the question is whether you should use your savings or take out a mortgage?
You are going to have €65k savings left if you buy it for cash.
If you take out a mortgage you will have €125k savings and €60k cash!!!!
Unless you are about to invest €125k in a business in the next year or two, then there is no reason for you to borrow €60k on which you will pay 3.5% interest to place it on deposit on which you will get 0% interest. That would cost you about €2k a year.
€65k savings should be plenty. You will be saving the €3,600 a year in mortgage repayments.
Most people carry the idea of having a rainy day fund to a ridiculous extent. I fear that you are doing that.
Brendan
Thanks. I know I'm always planning for the future rather the presents. Kids education, kids this, kids that, I support 1847 is still engrained in the psycheOn a salary of €75,000 with no mortgage, you have no need for a rainy day fund of €125k.
Buy the house you want and pay cash for it.
Brendan
Thanks. I know I'm always planning for the future rather the presents. Kids education, kids this, kids that, I support 1847 is still engrained in the psyche
Brendan is right. Buy the house with the bells and whistles and pay cash for it (i.e. no mortgage). You will be in a fantastic position...mortgage free and plenty of cash in the bank.
What ages are the kids?
If you are saving on child care, I presume that they are young?
So the savings you can make by paying €2,000 a year less interest will amount to a fair bit by then.
And with €65k in the bank and saving over €3,000 a year, they won't need a loan for a car or for college.
By the time his kids reach college age, they will have built up their savings. It's probably that his wife will have returned to paid work by then anyway.
Hi Bronte
The OP is a saver. Borrowing €60k at 3.5% to put it on deposit at 0% does not make him any more a saver. In fact, it is the opposite, as his outgoings will increase by over €2,000 a year in interest. When his eldest starts college, he will have very substantial savings which will be about €25,000 higher if he does not take out a mortgage now.
Of course, neither he nor I knows what might happen. But borrowing money at high mortgage rates is only a good idea if they know that they will have a definite need to borrow money in the immediate future. For example, if they needed to buy a car within a year or two. Likewise if someone had a child starting college in a year or two, they might be better off not paying off a mortgage if it meant that they would have to remortgage for the college costs.
Brendan
Just to put a different slant on this.
Originally I said I had 130k saving and wife had 70k savings.
In summary we need to make up shortfall of 140k to buy the 425k house.
What I didn't say (didn't think I needed to get into the details)
was that my 130k is 70k saving and 60k in various investments (Life Assurance, REIT Fund, ISEQ Wisdom Tree).
Would prefer to leave 60k investments in place and monitor them (they have recovered well from the 2009 bashing they took).
The advice has been great and appreciate but I'm thinking
70k (my savings) + 50k (wife's savings) + 20k mortgage = 140k
Also, we'll spread the 20k mortgage over the longest possible period to keep the monthly repayment down.
Also, keep it variable so we can pay off in chunks when we can.
Hi Daniel
It makes no sense at all to borrow money to invest.
You can keep your €60k investments largely intact and use your cash to buy the house.
Borrowing money to invest is a terrible idea. Spreading it over a longer period makes a terrible idea worse,not better.
If you do decide to cash some of your investments you should not cash any which are currently worth less than you paid for them, as any gain from the current value up to the price you paid will be, effectively, exempt from tax.
Brendan
Now there's a new one on me after 20+ years in the businessbanks don't like people who have no borrowings,
Now there's a new one on me after 20+ years in the business
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