Mortage Question

denashpot

Hi lads,

I'm nearly 2 years into a 35 year mortage and the other day myself and my girlfriend were thinking about paying 10k off.

Is this a good idea interest wise?

Is it a good idea in general?

Thanks.

Pat.

denashpot

Anyone?

drunkmonkey

would it put much of a dent in your repayments, will you be able to do it again in another year...

i'd put it in a high interest savings account until things recover, it would be nice to have it there just in case of an emergency...

jimmycrackcorm

Definately a good idea . Given the amount me interest you crew paying in the first years, hey you can get the capital reduced then you'd find it difficult to find an equivalent savings benefit. A good alternative is to note your mortgage to an offset provider. That allows your interest to be reduced by offsetting your savings against the mortgage while still keeping the money available.

denashpot

Never got around to doing this.

Still unsure about it. Don't know if its a good idea.

Has anyone on here ever paid a lump sum off they're Mortgage before?

Paulw

If your bank will allow it, it's a brilliant idea. It would reduce your capital, and therefore reduce your interest repayments. It will have a much larger effect in the long term and save you lots more money.

Go talk to your bank or mortgage broker about it.

Moonbeam

Make sure you ask them to take it off the capital and not the interest.

fontanalis

Interest rates for borrowing are higher than for saving so you'll save that way. Do a quick calculation;
Your monthly interest amount is approximately your remaining principal multiplied by the interest rate divided by 12.
Take 10,000 of your remaining mortgage and multiply by your rate divided by 12. This isn't exact as banks calculate on a daily basis, but it'll give you an idea.

antoinolachtnai

It does depend on your interest rate. You might well have a really good rate. If this is the case it might be better to just do what drunkmonkey says.

Have you paid off all your other debt, which is likely to be at a higher rate?

D3PO

antoinolachtnai wrote: »

Have you paid off all your other debt, which is likely to be at a higher rate?

This. If you have any other debt pay it off first starting with the one your paying the most interest on so credit cards then work your way down from there.

if your debt free and you can afford to pay it off then unless you can find a no risk bond giving you a better rate of return that your mortgage rate (and remember you have to pay DIRT on any interest gains) then pay the cash off the mortgage

Jo King

If you are getting mortgage relief on the interest you are paying the saving may not be great. The disadvantage of paying off a capital sum is that you will not have access to the money as easily again. You could be forced to borrow money at a higher rate at some point in the future, rather than use savings.
The advantage is that you will shorten the term of your mortgage and will not fritter away the money. If you can get a fixed term deposit at or near the rate you are being charged net of mortgage relief you should do that.

johnnyskeleton

Also if you're on a fixed rate, they may hit you with a penalty.

If you're financially prudent you could put it in a savings account with a higher rate than your mortgage, then when the mortgage rate goes higher than the savings rate (probably later this year) make the payment then. You should also check what the scenario is with TRS.

Where is the 10k coming from? I might suggest you consider what would happen if there was a dispute later on. If the 10k belongs just to you, you might not get as much advantage by putting it off a mortgage in both names.

Victor

Part of me is screaming "No, not now". Inflation is is negative figures, interest rates are low and TRS makes them even lower and there is the ever possible risk of unemployment (or any other rainy day event) when you might need that €10,000.

You should work out how much you should earn by putting it in say a one year savings account and the alternative of putting it against the mortgage.

raido9

I'd recommend it, if you can comfortably afford it. Don't put all your saving into it, but if you're not going to need it in the short to medium term and your debt free apart from the mortgage go for it.

As others have said, do the maths and see if your repayment interest is higher than any savings accounts out there. There's also the added bonus of seeing that mortgage figure take a nice hit in the right direction, and the mortgage free date gets a little bit closer.

Moonbeam wrote: »

Make sure you ask them to take it off the capital and not the interest.

Seriously, can we have a sticky explaining the relationship between capital and interest payments. They are not separate sums to be paid off. All the money you pay will come off the capital, and the interest will be recalculated on the new amount.
The notion that people who have borrowed hundreds of thousands without knowing how this works astounds me.

fontanalis

raido9 wrote: »

I'd recommend it, if you can comfortably afford it. Don't put all your saving into it, but if you're not going to need it in the short to medium term and your debt free apart from the mortgage go for it.

As others have said, do the maths and see if your repayment interest is higher than any savings accounts out there. There's also the added bonus of seeing that mortgage figure take a nice hit in the right direction, and the mortgage free date gets a little bit closer.


Seriously, can we have a sticky explaining the relationship between capital and interest payments. They are not separate sums to be paid off. All the money you pay will come off the capital, and the interest will be recalculated on the new amount.
The notion that people who have borrowed hundreds of thousands without knowing how this works astounds me.

Interest only loans come to mind.

raido9

fontanalis wrote: »

Interest only loans come to mind.

That doesn't make a difference.

fontanalis

raido9 wrote: »

That doesn't make a difference.

What's the advantage of an interest only loan?

raido9

fontanalis wrote: »

What's the advantage of an interest only loan?

In my opinion, there is no advantage. But thats for another discussion.

What I'm saying is if you have an interest only mortgage, and you pay a lump sum in, it will reduce your capital and your interest repayments. The fact that the loan is interest only will make no difference.

fontanalis

raido9 wrote: »

In my opinion, there is no advantage. But thats for another discussion.

What I'm saying is if you have an interest only mortgage, and you pay a lump sum in, it will reduce your capital and your interest repayments. The fact that the loan is interest only will make no difference.

You're right it's for another thread, my post was meant to add to your bit about lack of financial literacy, should have been more clear.