money / mortgage advice

pologirl

hi there,
i was wondering if you guys could help me.
i have 17 thousand saved up that i was thinking of using to pay abit off my mortgage. but then i thought should i put this into a svaing account for a year instead? our rate is a tracker which is 2% .
but we get mortgage interest relief. (think that only lasts for 7 years)
anyway will this relief go down if i pay off osme of the mortgage.
and is it wise to pay off some of the mortgage now when the rate is low?
im not financially minded at all, and would appreciate a little advice.
thanks for reading

Nevyn

You are best off getting proper financial advice on this from a professional.

seamus

Should probably be moved to accomodation/property.

If you can get an interest rate on a savings account that's significantly better than 2%, then it might be worth going for.

You need to do some sums before you can decide what to do. Yes your mortgage relief will go down - but so too will your mortgage repayments.

Example:
If you have €200k mortgage, 2% interest, 25 years left. And you decide to stick your €17k in a five-year savings account @ 2.5% EAR.

After five years, your mortgage will be €171,500 and your savings will be €19,200.
Offest them against eachother and your mortgage in five year's time will be 152,300.

On the other hand, if you stick the €17k against your mortgage *now*, then your mortgage is €183,000. After five years, your mortgage will be down to just shy of €157,000. You haven't actually "lost" that €5k, it's just a function of your repayments.

But these are only example figures, and afaik, savings accounts aren't that simple, and if you are reducing the principle of your mortgage, it's always a good idea to look at reducing your term too. Beware though - reducing the term may lead to you losing your tracker rate, which is not something you want to do.

pologirl

thanks very much,
our mortage is currently 95k with 23 years left.
id be afraid that if i locked it away for 5 yrs that the ecb will prob have increased by then.
the account i was looking at was 3.5% over 1 year so it will make 500 euro after dirt.
we throught about the national solidarity bond thing the government introduced, it has a great return of 47% but its over ten years. :rolleyes:

seamus

pologirl wrote: »

thanks very much,
our mortage is currently 95k with 23 years left.
id be afraid that if i locked it away for 5 yrs that the ecb will prob have increased by then.
the account i was looking at was 3.5% over 1 year so it will make 500 euro after dirt.
we throught about the national solidarity bond thing the government introduced, it has a great return of 47% but its over ten years. :rolleyes:

95k over 23 years is a tiny mortgage. A lot of people would give their right arm to be in the same position. With a mortgage that small, I personally would actually hold onto the 17k indefinitely and keep it as a nest egg, but it all depends on your personal circumstances.
If your ultimate intention is to use it against your mortgage, then a one-year savings account is pointless really. You can only save a couple of hundred euro at most over the life of the mortgage.

Here's some sums relevant to your situation;
At present, in ten years' time, your mortgage will be €61k and you'll have 13 years to go.
Stick the 17k in a national solidarity bond, and it'll be worth €25k. Offset against your mortgage, and you then owe €36k over 13 years. Your mortgage payments will then drop to roughly half.

Alternatively:
You can put the 17k against your mortgage now, and cut the term of your mortgage by 7 years. That means that in ten years' time, you will owe €35k, but more crucially you will only have six years left on your mortgage.

You say you're worried about the ECB rate rising - if you're at the limit of how much you can afford on your mortgage, then throw the 17k at it now and your repayments will drop by about €100/month. On the other hand, if you can afford ECB rate rises by 2% or 3%, then throw it against your mortgage and reduce the length of your term to maintain the same repayments that you have right now. IMO.

LegacyUser

If your lender does not impose any penalties, then i would pay the €17k off mortgage. it will save you a lot more in the long run.

I have done this and just this year finished paying altogether , That was about 6 years early and believe me, it is a great feeling. If you are like me, the €17k would be spent in small amounts over the years anway and I would not really have anything to show for it. FInishing your mortgage early gives you many options later in life when you might really need them

Ickle Magoo

Moved from PI