€€200 per month off Mortgage or into Savings Account?

Jodie001

Hi guys, quick question. Wondering if I would be better paying an extra 200 euro per month into my Mortgage to ideally pay it off in 15 years rather than 20. (Tracker so lucky there) or saving it somewhere so it can earn some interest and maybe be paid into Mortgage later. Advantage being I would have access to it (which may be a bad thing too). Any advice appreciated or tips on good savings accounts. TIA.

BrokenArrows

There have been a few threads on this recently.
But the answer is you are much better off paying the money off the mortgage.

Any interest you get from a savings account will be very little.

The only benefit from a savings account is as you said "having access to the money".

Paying off the mortgage will equate to earning 5-7% interest on the 200 per month depending on your mortgage rate.

Prezatch

Just to re-iterate, this is an absolute no brainer. 100% put it against the mortgage

Jodie001

Thank you so much. Appreciate both responses. Will do that.

AlmightyCushion

What rate are you paying on your mortgage at the moment?

daheff

BrokenArrows wrote: »

But the answer is you are much better off paying the money off the mortgage.

Any interest you get from a savings account will be very little.

The only benefit from a savings account is as you said "having access to the money".

Prezatch wrote: »

Just to re-iterate, this is an absolute no brainer. 100% put it against the mortgage

for the 2 options, yes pay it against the mortgage. There are other options available though. Your tracker is (I'm guessing) relatively low (2% or less?).

You are probably going to also be claiming trs too? So paying off the mortgage is saving less than 2%.

I'm not aware of too many deposit accounts around that pay that after tax...but could you invest in other products and earn 3-4+% (which you would need to equate after tax vs savings on mortgage)? Probably.

If you had a lump sum, you could buy dividend paying stocks and hold it for 10-15 + years. Over time the dividend and the stock values would most likely beat the overpayment on the mortgage.

Just remember the downside to paying off the mortgage is that that money is gone...you cant access it without the banks permission (ie new loan) if you need it.

For me -I'd build a reasonable nest egg and then pay some off the mortgage and invest some .

BrokenArrows wrote: »

Paying off the mortgage will equate to earning 5-7% interest on the 200 per month depending on your mortgage rate.

Genuinely interested in the calcs behind this?

BrokenArrows

daheff wrote: »

Genuinely interested in the calcs behind this?

Sorry it was a typo, meant to say you would require a deposit account earning 5-7% to get the same return as a mortgage payment based on what my mortgage is.
My mortgage is 3.69%