What should we do with savings?

[mobileme]

Age: 29
Spouse’s/Partner's age: 29

Annual gross income from employment or profession: €80k plus €5k bonus
Annual gross income of spouse: €62k

Type of employment: Both private sector

In general are you spending more than you earn or are you saving? Saving

Rough estimate of value of home: €450k
Amount outstanding on your mortgage: €370k
What interest rate are you paying? Discount tracker ECB +0.7% (4.95%)due to end end Sept. Then moving to ECB +1.25%

Other borrowings – car loans/personal loans etc: None

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? 0

Savings and investments:
Rabobank €60k
AIB Deposit €85k
Credit Union €30k

Do you have a pension scheme? Yes both with employer contributions

Do you own any investment or other property? No

Ages of children: None

Life insurance: No


What specific question do you have or what issues are of concern to you? We both have good jobs and a healthy monthly income (total €7300 after BIK on 2 cars). Monthly outgoings are low and we are recently married. The intention was always to overpay on mortgage after the wedding. We are facing moving to a higher interest rate in September and would like to get a better deal. We are prepared to use some savings to achieve a lower LTV. Also, we feel that savings are not 'working' for us and would like to put our savings to better use. We realise that higher return means higher risk but are willing to consider this. Open to all suggestions on uses for savings.

 

[so-crates]

Re: Review of mortgage and savings

You have (by your estimated value) about 82% equity. What percentage would you need to have to avail of significantly better rates? How much of a saving would that rate present? How much of your savings would you need to achieve that rate?

You have a pot of €175k savings, supposing you look at getting the mortgage down to <60% LTV you need to spend at least €100k to achieve that. Only you can determine if the savings that will accrue to you by doing so will be worth the up-front cost.

The important question you need to ask yourself is what do you want to do with your money? Have you set any goals or have any plans as to how you want to use it? Do you wish to retire early? Set up your own business? Pay off your mortgage in ten years? Buy a yacht and sail around the Mediterranean? You don't need to answer those questions in public but you do need to sit down and look at what you expect your savings to do for you. Set out aspirations for the next two years, the next ten years, the next twenty years and then see how best you can use the money you have built up to work towards those achieving those aspirations.

As you have been a careful saver rather than an investor (based on the list you have supplied), if you are now looking at taking on more risk, perhaps give yourself a "play" fund out of your savings that you can use in a higher risk fashion, this will give you a learning ground to try out new investment patterns.

Good luck, well done and enjoy.

 

[mobileme]

Thanks, a 'play' fund was something we had considered with a view to experimenting in more risky experiments.

We are talking a lot at the moment about plans for the future as you suggest. What I was really looking for was some interesting suggestions. What would you do if it was you?

 

[poorrelative]

I wouldn't hesitate paying a lump sum off the mortgage (maybe 150k)....you probably only getting about 4% interest on this after DIRT where it is now whereas paying a lump sum off mortgage is about 5.5% depending on what your interest rate is.