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Paying off or moving mortgage?

  • 10-06-2019 7:42pm
    #1
    Registered Users Posts: 441 ✭✭ ripcord


    Hi all,


    I have some savings and was curious about paying off my mortgage. I've read other threads and realise the difference between reducing the monthly payments and reducing the term. I have a couple of questions and would appreciate any help.

    Some approx numbers:
    I have a tracker mortgage of 0.05% interest.
    I have 100K left and 15 years left on the term.
    Repayments are 600 per month.
    The house is rented and I get 1200 per month rental income.
    I have 60K in savings.


    I really like the idea of being mortgage-free asap. I'm single with no kids, so don't need a huge rainy-day fund. I have no intention of ever selling the house as it is good for rental. However I may want to get another house someday.

    Questions:
    1. Is it possible to borrow more money on my current mortgage and then use it to buy a second house? I don't want to lose the good tracker rate.

    2. My pensions are all over the place at the moment (from various companies I've worked for). If I can afford it - should I consolidate them and then transfer some more income into a pension regularly? Is that a difficult process? I'm 40 and should really get serious about the pension!

    Thanks!


Comments

  • Registered Users Posts: 12,289 ✭✭✭✭ Mad_maxx


    ripcord wrote: »
    Hi all,


    I have some savings and was curious about paying off my mortgage. I've read other threads and realise the difference between reducing the monthly payments and reducing the term. I have a couple of questions and would appreciate any help.

    Some approx numbers:
    I have a tracker mortgage of 0.05% interest.
    I have 100K left and 15 years left on the term.
    Repayments are 600 per month.
    The house is rented and I get 1200 per month rental income.
    I have 60K in savings.


    I really like the idea of being mortgage-free asap. I'm single with no kids, so don't need a huge rainy-day fund. I have no intention of ever selling the house as it is good for rental. However I may want to get another house someday.

    Questions:
    1. Is it possible to borrow more money on my current mortgage and then use it to buy a second house? I don't want to lose the good tracker rate.

    2. My pensions are all over the place at the moment (from various companies I've worked for). If I can afford it - should I consolidate them and then transfer some more income into a pension regularly? Is that a difficult process? I'm 40 and should really get serious about the pension!

    Thanks!

    Paying off a mortgage with such a low rate makes no sense bar some kind of principal based on an avoidance of debt.

    It's effectively free money as if you lob a chunk of your savings into a pension pot, you will get a larger tax deduction than the interest on your tracker mortgage, put a lump of your savings in a pension seeing as you are late getting started on one


  • Closed Accounts Posts: 4,123 ✭✭✭ amcalester


    You'll get a better return by increasing your pension contributions (unless you are already paying the max for your age).


  • Closed Accounts Posts: 5,019 Luka Plain Fingerprint


    I wouldn't pay off the mortgage when you have such a great mortgage rate (I'm jealous!). And I would be slow to increase pension contributions significantly, unless your employer is matching any increase.


  • Closed Accounts Posts: 4,123 ✭✭✭ amcalester


    I wouldn't pay off the mortgage when you have such a great mortgage rate (I'm jealous!). And I would be slow to increase pension contributions significantly, unless your employer is matching any increase.

    Can I ask why? Even without an employer contribution any contributions would be tax free. (assuming OP is not already contributing the max).


  • Closed Accounts Posts: 5,019 Luka Plain Fingerprint


    Personal experience. Two close loved ones put significant amounts into their pensions and both passed away not long after retirement. Both were single/widowed etc. so bye bye pension pot. One of those individuals put every penny he could into his pension.

    You're single and you have no kids. Who is the beneficiary of your pension if you die? Could you put the additional funds to better use *now*?


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  • Registered Users Posts: 3,601 ✭✭✭ Fol20


    Personal experience. Two close loved ones put significant amounts into their pensions and both passed away not long after retirement. Both were single/widowed etc. so bye bye pension pot. One of those individuals put every penny he could into his pension.

    You're single and you have no kids. Who is the beneficiary of your pension if you die? Could you put the additional funds to better use *now*?

    So your entire plan for your pension is based on 2 people who passed away just after retirement... do you know anyone that survived long into their retirement? With people surviving longer and longer now, how are you planning your golden years?

    Investing in your pension is the best way to use your money. If your worried your close to death on retirement, you can take out an arf where your loved ones will get your money. Its not guaranteed like annuity but at least you know it will stay within your family.


  • Registered Users Posts: 12,289 ✭✭✭✭ Mad_maxx


    Personal experience. Two close loved ones put significant amounts into their pensions and both passed away not long after retirement. Both were single/widowed etc. so bye bye pension pot. One of those individuals put every penny he could into his pension.

    You're single and you have no kids. Who is the beneficiary of your pension if you die? Could you put the additional funds to better use *now*?

    Silly logic


  • Closed Accounts Posts: 4,123 ✭✭✭ amcalester


    Mad_maxx wrote: »
    Bizzare logic

    Counting on an early death is prudent financial planning.


  • Closed Accounts Posts: 5,019 Luka Plain Fingerprint


    No. I am unsure why you're jumping to that conclusion. I have a very diverse investment and pension portfolio. Yes, absolutely losing those two people had me question my own retirement plan and I've altered my outlook and my plan accordingly.

    I am preparing to live a very long and healthy life, well beyond retirement age. While investing in a pension is important and I continue to contribute, it is not straight forward to say it's "the best way to use your money". My own investments have returned far in excess of what my pension has over the last 20 odd years.

    Do you have a crystal ball, can you tell me how our tax system will look in 20 years? Pension levy etc? I wouldn't mind the lotto numbers while you're at it! :P
    Fol20 wrote: »
    So your entire plan for your pension is based on 2 people who passed away just after retirement... do you know anyone that survived long into their retirement? With people surviving longer and longer now, how are you planning your golden years?

    Investing in your pension is the best way to use your money. If your worried your close to death on retirement, you can take out an arf where your loved ones will get your money. Its not guaranteed like annuity but at least you know it will stay within your family.

    Why do you believe it's bizarre logic? Prudent financial planning comes with an expectation that you will live a long and healthy life but it must also include a plan for the unexpected, including untimely death.
    Mad_maxx wrote: »
    Bizzare logic
    amcalester wrote: »
    Counting on an early death is prudent financial planning.


  • Registered Users Posts: 3,601 ✭✭✭ Fol20


    Yes you plan on both. Thats why i mentioned the arf. Your loved ones will receiving you contributions in your estate.

    The alternative is to invest privately which currently incurs a cgt of 33pc on any gains or just save your money in cash which will be eaten away at inflation.

    At least with your pension, any gains you make over 20years are compounded virtually tax free. When you retire you also receive a tax fee lump sum. Its very hard to best this in the ireland environment and i would be highly skeptical if you can best that. You may have had better gross gains but net gains?


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  • Registered Users Posts: 1,136 ✭✭✭ TheShow


    ripcord wrote: »

    Questions:
    1. Is it possible to borrow more money on my current mortgage and then use it to buy a second house? I don't want to lose the good tracker rate.



    Thanks!

    Some lenders may let you release equity on your investment property to assist in buying another property, however don't be misguided by thinking that you will get the additional finance at your current tracker rate. You will not. You will only get the the current rates available on the day and for equity release on an investment property, the rate will be considerably higher than the tracker you are on. Higher again than a residential mortgage would be for your own property. A standalone mortgage on the property you are seeking to purchase would be the cheapest in terms of finance costs.

    The tracker is a very low rate, so its not really costing you much to maintain the mortgage, so to me it would make sense to hold onto my cash and leave the mortgage there.


  • Registered Users Posts: 543 ✭✭✭ jonnybravo


    1) You want to buy your own house at some stage. As you will not be a first time buyer you will need a 20% deposit so you'll probably need your €60k as a deposit.

    2) If you have a lot of pensions and want to consolidate you probably need financial advice. A lot of pensions will have exit fees and it might make more sense to leave them where they are.

    3) If you are not currently contributing to a pension you should start - even at a minimum to get your employers contribution.


  • Moderators, Sports Moderators Posts: 11,205 Mod ✭✭✭✭ hmmm


    Holy god that's free money from the bank. If I was in your shoes I would put any spare money into my pension, without a shadow of a doubt. Even if share prices fell, they'd have to fall a long way before you'd lose due to the tax savings.


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