Paying extra off mortgage

Jane1012

Hi all,

My Husband and I bought our house a little under 2 years ago.
We now have approx 30k in savings and we are putting in €1,200 a month so it’s building up at a nice pace.

What I’ve been thinking about lately, should we pay the extra off the mortgage (or some of it) rather than continuing to save.

We don’t have kids yet, but do want to have them soon.
We do eventually want to do a kitchen extension which will cost about 40k so that would deplete all our current savings.

Can anyone offer any insight if paying extra off the mortgage massively outweighs keeping a savings back up should we lose our jobs or car breaks etc. I know it reduces the interest overall, I just can’t figure by how much.

We are 22 months into a 35 year mortgage, €278,000 of a mortgage, house was €320,000

Thanks for any insight

Wheety

Personally I'd rather have a lump sum of around 6 months salary and also the extension built before paying extra off mortgage.

Cuddlesworth

You should always have around 6 months living expenses in cash handy, so subtract that first.

Second thing would be, if you fully intend on building a extension, then its just easier to do it in cash, than try to finance it through a loan or re-mortgage.

If you don't want to build the extension and your mortgage is variable, then I would suggest setting a higher mortgage and paying that monthly regardless of what the official payment is. EG, current mortgage payment of 800, pay 1k a month.

The reasons I say this are:
You will get used to the higher amount and adjust your spending accordingly
As time goes on you end up overpaying by more and more, clearing it off quicker.
If it ever comes to struggling with money, after a couple of years your monthly payments will be lower and more manageable in times of stress.

lau1247

Jane1012 wrote: »

Hi all,

My Husband and I bought our house a little under 2 years ago.
We now have approx 30k in savings and we are putting in €1,200 a month so it’s building up at a nice pace.

What I’ve been thinking about lately, should we pay the extra off the mortgage (or some of it) rather than continuing to save.

We don’t have kids yet, but do want to have them soon.
We do eventually want to do a kitchen extension which will cost about 40k so that would deplete all our current savings.

Can anyone offer any insight if paying extra off the mortgage massively outweighs keeping a savings back up should we lose our jobs or car breaks etc. I know it reduces the interest overall, I just can’t figure by how much.

We are 22 months into a 35 year mortgage, €278,000 of a mortgage, house was €320,000

Thanks for any insight

Plug your info in here https://www.drcalculator.com/mortgage/ie/

I roughly played around with the figures you have provided, monthly payment is around 1150 at interest rate of 3.5. If you were to throw in 30k for the next payment, you will be paying around 90 euro less interest per month from here on in (of course there is a gradual reduction over time).

per the summary, you will be saving around 55K over the entire loan until you pay it off.

MAJJ

Also, assuming you both work today and you intend to continue working after you have one/two kids best factor in your childcare options and do some projections as it can be expensive.

GingerLily

A mortgage is a cheaper form of credit then a loan - so I would keep your savings for your kitchen extension!

Jane1012

Thanks everyone, seems the best thing is to wait a few more years and continue saving before changing anything.

The 6 month back up thing is where we are about now before paying for the extension or factoring in kids/childcare or reduced work hours.

Thanks for the input!

tommythecat

Jane1012 wrote: »

Thanks everyone, seems the best thing is to wait a few more years and continue saving before changing anything.

The 6 month back up thing is where we are about now before paying for the extension or factoring in kids/childcare or reduced work hours.

Thanks for the input!

I would save the 1k and over pay the mortgage by €200 Euro each month provided you are on a variable. That way you keep saving but are reducing your interest payments by paying a little off the capital every month. That’s what we do and over time it really does add up.