Mortgage or Cash?

Currently looking to buy when the Covid restrictions are lifted enough to view places.

We have the option of buying cash or getting a mortgage and I'm wondering what people here would advise/do in our situation since I've no experience with mortgages etc?

TheBoyConor

buying in cash will be far far cheaper.

if u think you might need the cash you could do a 50-50 split

DubCount

I reckon this is a question you should run past an independent financial advisor.

Being mortgage free is a great aspiration, but especially if you are young and in stable employment etc., having a mortgage may not be the worst idea if it allows you to invest in pensions etc which may make your money work better for you over the next 20 years. This is a very individual question and depending on your individual circumstances, your answer may be different to someone else.

DubCount

DubCount wrote: »

I reckon this is a question you should run past an independent financial advisor.

Being mortgage free is a great aspiration, but especially if you are young and in stable employment etc., having a mortgage may not be the worst idea if it allows you to invest in pensions etc which may make your money work better for you over the next 20 years. This is a very individual question and depending on your individual circumstances, your answer may be different to someone else.

Yeah that's great advice and we've been considering contacting a financial adviser for other reasons so I guess we can lob the mortgage question in.

Thanks, DubCount.

Sleeper12

You'll pay back around 3 times what you borrow over the length of the mortgage. I'd always suggest paying cash if you have it rather than borrowing it. Better value imo. Another thing to factor in is a cash buyer offers the same or even slightly less than someone with a mortgage or in a chain then usually the cash buyer will get the property.

punisher5112

Get a mortgage but invest in a 2nd property maybe.
Really depends on financial situation of course but having the 2nd could give you a return and be useful for retirement.

Snipp

It depends where you have your cash currently invested. If you are getting an 8% return per annum currently in an investment fund or something, then taking out a mortgage @3% is a great move.

cruizer101

Sleeper12 wrote: »

You'll pay back around 3 times what you borrow over the length of the mortgage. I'd always suggest paying cash if you have it rather than borrowing it. Better value imo. Another thing to factor in is a cash buyer offers the same or even slightly less than someone with a mortgage or in a chain then usually the cash buyer will get the property.

On a 30 year mortgage at current rates you pay less than 1.5 times.
In order to pay 2 times rates would have to be ~5.3% and for 3 times would have to be over 9%.

Interest rates are fairly low at the moment to be fair but 3 times is still a lot.

A mortgage is the cheapest credit you will ever get, I would say stick a chunk of cash towards it, but no harm in a small manageable mortgage.

Cash buyer vs mortgage I don't think there is much difference, not like chain buyer.

Sleeper12

cruizer101 wrote: »

In order to pay 2 times rates would have to be ~5.3% and for 3 times would have to be over 9%.

Interest rates are fairly low at the moment to be fair but 3 times is still a lot.

A mortgage is the cheapest credit you will ever get, I would say stick a chunk of cash towards it, but no harm in a small manageable mortgage.

Cash buyer vs mortgage I don't think there is much difference, not like chain buyer.

Not saying OP should or shouldn't borrow but two points on your reply worth looking at




On a 30 year mortgage at current rates you pay less than 1.5 times.

It is worth remembering that interest rates can go up as well as down. I paid over 20 percent in the early 90s.International rates are at an all time low at the moment. That will likely continue for another 4 or 5 years but once EU economies recover rates will increase. Hopefully not into the teens but it is possible.



A mortgage is the cheapest credit you will ever get,

This is true. I have heard this exact comment for over 50 years. Even when I was paying 20 percent interest on my mortgage. It's always worth remembering that whats even cheaper again is not getting credit at all.

awec

Personally I think living totally mortgage free is an envious position. It's a massive burden taken off your shoulders, if you're a decent earner then you're likely to enjoy a very comfortable lifestyle.

I think it's hard to put an exact value on this sort of thing but if it were me I think I'd buy the house with cash and enjoy life.

Buddy Bubs

Sleeper12 wrote: »

You'll pay back around 3 times what you borrow over the length of the mortgage. I'd always suggest paying cash if you have it rather than borrowing it. Better value imo. Another thing to factor in is a cash buyer offers the same or even slightly less than someone with a mortgage or in a chain then usually the cash buyer will get the property.

My mortgage was 220k when I took it out.
Payments have varied between 900 and 950 in different fixed and variable periods, take an average of 925. 2.25 to 3.00%
30 years x 12 months x 925 is 333,000 or 1.5 times the principal.

Don't know why people insist of firing out advice on topics that they know nothing about.

Go see an advisor OP, its a free for all in here.

You'll get a full financial review and a plan. It's not all or nothing regards mortgage either, depending on circumstances you can get mortgage for the infinite steps there are between 0 and 90% of house value.

Theres the interest charge of course which is never nice but then there's the opportunity cost of using all your capital. This needs to be weighed up properly.

thomasjad

It really depends what you'd do with the cash if you didn't use it to purchase and instead got a mortgage.

Option A: Use the cash to buy. No monthly mortgage price. Saving 3-4% interest a year on the mortgage.
Option B: Use a mortgage. Invest the cash in something that gives a higher return than your mortgage rate. Example, something that gives 10% return vs your mortgage rate of 3-4%.
Option C: Use a mortgage. Keep the cash in the bank and it will lose value. Example, mortgage interest 3-4%, savings interest 1%.

Honestly, you're best off getting a mortgage if you can, it's the cheapest credit you'll ever get and invest the cash in something tangible like property or with a property investor if you can get a charge on a property.

jimmycrackcorm

Part mortgage/part cash is an optioin. Mortgage rates are very low so the cost of borrowing is not offputting. But if you invest cash, you can get a good rate of return. So if you were to get say a ten-year mortgage at circa 2% rates with half and invest the other half in an index fund that gives an annual rate of return circa 7% then you'd gain roughly a nett 5% gain on half your money.

Of course, if you buy outright with cash, then you could invest the equivalent monthly mortgage payment secure in the knowledge that you won't lose the roof over your head. If you have a public service job then that isn't a worry.

If you want to think longer term, then if you don't need to make mortgage payments every month, putting extra cash into your pension at the marginal rate probably hives the best return. Especially if you get it to a point that you could retire early.

In your position, you'd want to talk to a FA.

thomasjad

thomasjad wrote: »

Option B: Use a mortgage. Invest the cash in something that gives a higher return than your mortgage rate. Example, something that gives 10% return vs your mortgage rate of 3-4%.

If you wouldn't mind identifying this something I think everybody would like to know where to get a 10% return (presumably after taxation and without risk?) :pac:

Sleeper12

Buddy Bubs wrote:

Don't know why people insist of firing out advice on topics that they know nothing about.

You should research Irish interest rates and you will see that I do have some knowledge on the subject. My interest rates varied from 3 to 20 percent. I watched people lock in at 15 percent when I was paying 20. A few months later they were crying as rates started to fall.
I love the optimistics that think interest rates will stay low for ever. We are extremely lucky for the last 10 years or so because the EU economy has stalled. International rates have never been lower. Ever.

thomasjad

No such thing as zero risk. I'm in the property industry so coming at it from that perspective. 10% for loaning an investor funds and getting first charge on a property isn't too crazy. I'm talking pre-tax.

Buddy Bubs

Sleeper12 wrote: »

You should research Irish interest rates and you will see that I do have some knowledge on the subject. My interest rates varied from 3 to 20 percent. I watched people lock in at 15 percent when I was paying 20. A few months later they were crying as rates started to fall.
I love the optimistics that think interest rates will stay low for ever. We are extremely lucky for the last 10 years or so because the EU economy has stalled. International rates have never been lower. Ever.

Sleeper12 wrote: »

You should research Irish interest rates and you will see that I do have some knowledge on the subject. My interest rates varied from 3 to 20 percent. I watched people lock in at 15 percent when I was paying 20. A few months later they were crying as rates started to fall.
I love the optimistics that think interest rates will stay low for ever. We are extremely lucky for the last 10 years or so because the EU economy has stalled. International rates have never been lower. Ever.

In no way, shape or form are mortgage interest rates going back to anything like that level. At 15% my mortgage interest alone would be 30k a year. A 400k mortgage would be 60k a year interest. Every house in the country and indeed in europe with a mortgage would be handed back or repossessed or brought into some sort of government bail out.

My parents mortgage was at those rates but the house was 9000 euro.

Can fix for 10 years at 3.5% with bank of Ireland at the moment.

pwurple

ecoli3136 wrote: »

If you wouldn't mind identifying this something I think everybody would like to know where to get a 10% return (presumably after taxation and without risk?) :pac:

Your private pension as an example?

The tax advantages there are substantial for a start. Rather than paying 20 or 40% PAYE, live on a smaller budget, and max out the AVCs, or even put a lump sum in.
https://www.revenue.ie/en/jobs-and-pensions/pensions/tax-relief-for-pension-contributions.aspx

Depending on the OP's age, can put up to 40% of their gross salary into a pension and avoid the tax on it. That's a decent use of their money, depending where they are in life, what else they want it for.

You should also look at the Loan-to-value options, perhaps get a sub-50% mortgage, where the interest rates can come in around the 2% mark.

A lot depends on your aims. You can use money to make money, you can spend money on something you want to do. You might place a high value on financial security and knowing you don't have a debt.


First thing to do is make sure you are not servicing any other more expensive debts, like student loads, car loans, personal loans. Use your cash there.

Make sure your retirement is funded

Make sure your life expenses are funded (food, holiday, cars etc) from your wages and if you want to set aside some for say, a car change in 2 years.

Then see what's left, and use that to reduce the LTV on a mortgage.

Sleeper12

Buddy Bubs wrote: »

In no way, shape or form are mortgage interest rates going back to anything like that level. At 15% my mortgage interest alone would be 30k a year. A 400k mortgage would be 60k a year interest. Every house in the country and indeed in europe with a mortgage would be handed back or repossessed or brought into some sort of government bail out.

My parents mortgage was at those rates but the house was 9000 euro.

I'm going to educate you here. Average mortgage is 30 years. in 1991 you could take out a mortgage for as much as 13.3 percent. By 1992/93 we had a currency crises. Mortgage rates hit 20 percent. This was scary BUT what was really scary was the fact that the banks were paying 75 percent on overnight rates. In other words they were losing money hand over fist with me only paying 20 percent. We devalued & rates started coming down.



This might seem like a lifetime ago to you but I'm not 55 yet. Saying it couldn't happen again is like saying Natzi Germany couldn't happen again & jet almost half of America voted for Trump not once but twice! Of course it can happen again. People speculate against a currency & rates go up. Anything can happen. The EU could collapse & we revert back to punts & use interest rates to control inflation. We can say that most likely we will have low rates for the next 5 years but outside of that we are crystal ball gazing. There is no financial planner on this planet will plan for the next 30 years based on low interest rates. When you plan for the future you should never, ever rule anything out.

Buddy Bubs

Sleeper12 wrote: »

I'm going to educate you here. Average mortgage is 30 years. in 1991 you could take out a mortgage for as much as 13.3 percent. By 1992/93 we had a currency crises. Mortgage rates hit 20 percent. This was scary BUT what was really scary was the fact that the banks were paying 75 percent on overnight rates. In other words they were losing money hand over fist with me only paying 20 percent. We devalued & rates started coming down.



This might seem like a lifetime ago to you but I'm not 55 yet. Saying it couldn't happen again is like saying Natzi Germany couldn't happen again & jet almost half of America voted for Trump not once but twice! Of course it can happen again. People speculate against a currency & rates go up. Anything can happen. The EU could collapse & we revert back to punts & use interest rates to control inflation. We can say that most likely we will have low rates for the next 5 years but outside of that we are crystal ball gazing. There is no financial planner on this planet will plan for the next 30 years based on low interest rates. When you plan for the future you should never, ever rule anything out.

I'd certainly rule most of that post out when making financial decisions. I'd stress test at a couple of % like the banks do but bringing doomsday scenarios into planning would mean people would never commit to anything.
Trump has been and gone. Covid has come and nearly gone and no drastic changes to interest rates.

Bass Reeves

Sleeper12 wrote: »

You'll pay back around 3 times what you borrow over the length of the mortgage. I'd always suggest paying cash if you have it rather than borrowing it. Better value imo. Another thing to factor in is a cash buyer offers the same or even slightly less than someone with a mortgage or in a chain then usually the cash buyer will get the property.

Incorrect about 1.3-1.35 of borrow money over 25 years

Sleeper12

Buddy Bubs wrote: »

I'd certainly rule most of that post out when making financial decisions. I'd stress test at a couple of % like the banks do but bringing doomsday scenarios into planning would mean people would never commit to anything.
Trump has been and gone. Covid has come and nearly gone and no drastic changes to interest rates.

The Irish & UK government didn't expect the currency crisis. Investors & homeowners didn't expect the world banking crisis that led to the collapse of several world economies including our own & to our first property crash in Ireland. No one expects when the stock market crashes or when bitcoin takes it's next dive. It's foolish not to factor a major event into your planning


Anyway none of this is helping OP. As already stated they should get proper financial advise. The only thing I would say is that being mortage free is the best feeling in the world

Bass Reeves

Sleeper12 wrote: »

The only thing I would say is that being mortage free is the best feeling in the world

If a mortgage is the only.money you ever borrow then I would not be overerly worried. For instance if you have or intend to have children borrowing for Education down the line could be as large as mortgage borrowing but lending rates will be maybe double the interest rate. At some stage we will have another economic downturn saving may give investment opportunities.

For instance if it would make sense to hold funds to carry out improvements to the house if it is required rather than borrowing for such requirements. Personal borrowing can cost 4+% and mostly in the 5-7% bracket such as cars or lifestyle choices.

An Ri rua

Buddy Bubs wrote: »

My mortgage was 220k when I took it out.
Payments have varied between 900 and 950 in different fixed and variable periods, take an average of 925. 2.25 to 3.00%
30 years x 12 months x 925 is 333,000 or 1.5 times the principal.

Don't know why people insist of firing out advice on topics that they know nothing about.

Go see an advisor OP, its a free for all in here.

You'll get a full financial review and a plan. It's not all or nothing regards mortgage either, depending on circumstances you can get mortgage for the infinite steps there are between 0 and 90% of house value.

Theres the interest charge of course which is never nice but then there's the opportunity cost of using all your capital. This needs to be weighed up properly.

And a €1 in year one will have the same buying power as a €1 in year 30?? 1.5 times nominally. I think you might need a trip to an advisor also.

Sleeper12

An Ri rua wrote:

And a €1 in year one will have the same buying power as a €1 in year 30?? 1.5 times nominally. I think you might need a trip to an advisor also.

Totally agree.
The reverse can be said about someone's parents buying a home for 9k. It wasn't anyway near 9k in today's money. The 9k in 1969 is over 170,000 in today's money. They paid 170,000 for the house

Bass Reeves

Another factor OP is the HTB scheme which will refund you tax and dirt over last three year if you are buying a newly build house. You cannot draw this money down if you are cash buyer. If you and your partner drew 15-20 of this it's equivalent to 15-25% of the interest you will pay over 25 years on a 250k loan. The refund is enhanced to 10% of the house price at present

cruizer101

Sleeper12 wrote: »

Totally agree.
The reverse can be said about someone's parents buying a home for 9k. It wasn't anyway near 9k in today's money. The 9k in 1969 is over 170,000 in today's money. They paid 170,000 for the house

I doubt many were paying 9k for a house in 1969 it would have been a mansion.
Also from here it would be 130k now though don't see the relevance of comparing with 1969.

9k in 1990, when rates were high, is equivalent to 16k now, houses prices were far less compared to the average salary. Banks tended to only give mortgages of 2 times the primary earner + 1 times the secondary.


Regarding interest rates going up, yes they could but chances of going to mid teens again are fairly slim and kind of irrelevant to OP.
People are syaing it might make financial sense to take a mortgage and invest some of the cash elsewhere. OP is obviously in a confortable financial postition and if interest rates were to start to rise the cash investment would likely also see increased returns, if not it coudl be used to cover the mortgage anyway.

Sleeper12

cruizer101 wrote:

it would be 130k now though don't see the relevance of comparing with 1969.

According to the calculator you linked 9000 pounds in 1969 is over 160,000 euro today & not 130k.

I was just pointing out that younger people saying how cheap their parents got their houses isn't quite what they make it out to be. Every generation has had it tough at the start of their mortgage. People buying now don't have it harder than I had 30 years ago or my parents 60 years ago.

Bass Reeves

Sleeper12 wrote: »

According to the calculator you linked 9000 pounds in 1969 is over 160,000 euro today & not 130k.

I was just pointing out that younger people saying how cheap their parents got their houses isn't quite what they make it out to be. Every generation has had it tough at the start of their mortgage. People buying now don't have it harder than I had 30 years ago or my parents 60 years ago.

OP asked for advice on cash or mortgage not a leasson in what a pound was worth 30 or 50 years ago

Sleeper12

Bass Reeves wrote: »

OP asked for advice on cash or mortgage not a leasson in what a pound was worth 30 or 50 years ago

Do you suppose when making a 30 year investment decision that you should take into account what the value of the rewards will be? How do we try work out today, the true value of your investment in 30 years?



Answer: by looking at the value of investments over the last 30, 40 or 50 years. If you can't see how important it is to look back & see how the value of 9k, 90k or 900k works out after 30 years then, respectfully, as An Ri rua says in post 24

I think you might need a trip to an advisor also.

Bass Reeves

Sleeper12 wrote: »

Do you suppose when making a 30 year investment decision that you should take into account what the value of the rewards will be? How do we try work out today, the true value of your investment in 30 years?



Answer: by looking at the value of investments over the last 30, 40 or 50 years. If you can't see how important it is to look back & see how the value of 9k, 90k or 900k works out after 30 years then, respectfully, as An Ri rua says in post 24

Yes it important to look back but a kind of one up man squabble over what value a pound or euro was worth in 1970 or 1990 is not adding anything to OP question. Op has a cash lump sum in the bank at present. Deciding on spending it all on a house purchase or taking a mortgage for the house or part of the values of the house will be a life direction decision that will effect them and there family.

Sleeper12

Bass Reeves wrote:

Yes it important to look back but a kind of one up man squabble over what value a pound or euro was worth in 1970 or 1990 is not adding anything to OP question. Op has a cash lump sum in the bank at present. Deciding on spending it all on a house purchase or taking a mortgage for the house or part of the values of the house will be a life direction decision that will effect them and there family.

OP got the only relevant answer needed in post 3

DubCount wrote:

I reckon this is a question you should run past an independent financial advisor.

Everything else is just opinion by random financial experts that hang out on boards.

pwurple

Sleeper12 wrote: »

Do you suppose when making a 30 year investment decision that you should take into account what the value of the rewards will be? How do we try work out today, the true value of your investment in 30 years?

The average mortgage lasts 12 years, not 30. And OP isn't looking for a huge mortgage I'd assume.


A lot has changed over the years, but the main one that has an impact here is the ECB. The european central bank regulates and levels out the massive financial turbulence that was here when Ireland wasn't part of a larger economic block.

Risk of massive interest jumps is low as long as we remain in europe.

Sleeper12

pwurple wrote:

The average mortgage lasts 12 years, not 30. And OP isn't looking for a huge mortgage I'd assume.

I'm sorry but the average mortgage length does not last 12 years. Unless you are talking commercial mortgage?

"The average LTI was 2.3 and the average gross income of borrowers with refinanced PDH mortgage loans was €106,521. The average borrower age was 40 with an average loan term of 22 years. Source: Banking and Payments Federation Ireland (BPFI)."

Source centralbank.ie year 2019

pwurple

I see what you're saying but initial loan term does not indicate eventual mortgage length. Keeping the mortgage as is for the full term is unusual.

People move or sell house (paying off mortgage)
Overpay mortgage or add lump sum.
Switch/adjust mortgage to reduce term/rate

Sleeper12

pwurple wrote:

People move or sell house (paying off mortgage) Overpay mortgage or add lump sum. Switch/adjust mortgage to reduce term/rate

Yes but they take out another mortgage. The actual length of mortgage /mortgages on a home is 30 years. In other words the average home isn't fully paid for, for around 30 years. Very few will be mortgage free after 22 years and only a tiny minority free after 12 years.

pwurple

In OPs case, where they have the funds to buy entirely in cash, a 30 year 90% mortgage is not likely.

They are coming to their first potential mortgage with the funds of a previous house sale in their back pocket.

Any mortgage they get in this situation would ideally be 50% or less to make sure they get the low LTV rates. AIB offer a 2.2% fixed 5 year mortgage for that LTV.

Ten year small mortgage at 2.2% , putting the rest in pension or investment fund would be an option to explore.

Pay with cash.

If you've a decent paying job your money will accumulate quickly.

Max out your pension contributions and you're in a fantastic position.

Well done.

dubrov

Take out the full mortgage from one of the banks that offer 2% cashback on their variable rate then pay it off.

You won't find any investment that will give as good an after tax return for zero risk

Bass Reeves

HTB is 10% on new houses for 2021. Depending on OP,'s and there partners tax situation over the last three years they can get a tax refund of 10% of the house value up to 30k. On a 250k house they get a refund if 25k. However they have to drawn down a mortgage.

Borrowing at less than 70% LTV Tate is 1.95% with Advant. Borrowing 170k over 20 years they will pay about 20K in interest. They can draw up to 25k back in tax and first refunds depending admittedly paid to the developer.

House price as follows 250k

Mortgage. = 170k
HTP. =25k
Personnel funds= 55k



That is what I be doing especially if between myself and my partner I had 25k in tax and dirt paid over last three years

dubrov

Bass Reeves wrote:

That is what I be doing especially if between myself and my partner I had 25k in tax and dirt paid over last three years

But what would you do with the odd 200k left over in your back account. Not much point in paying 1.95% on the borrowing and earning 0% in a back account, especially with inflation risks around the corner

thomasjad

thomasjad wrote: »

It really depends what you'd do with the cash if you didn't use it to purchase and instead got a mortgage.

Option A: Use the cash to buy. No monthly mortgage price. Saving 3-4% interest a year on the mortgage.
Option B: Use a mortgage. Invest the cash in something that gives a higher return than your mortgage rate. Example, something that gives 10% return vs your mortgage rate of 3-4%.
Option C: Use a mortgage. Keep the cash in the bank and it will lose value. Example, mortgage interest 3-4%, savings interest 1%.

Honestly, you're best off getting a mortgage if you can, it's the cheapest credit you'll ever get and invest the cash in something tangible like property or with a property investor if you can get a charge on a property.

But in the real world, of course, the 10% you suggest can result from option B is (a) taxed and (b) carries significant risk. Of course, the mortgage carries risk too (a) risk the property could decrease in market value and not recover or (b) interest rates could go up. However these are greatly mitigated compared to the investment risk your Option B entails.

thomasjad wrote: »

No such thing as zero risk. I'm in the property industry so coming at it from that perspective. 10% for loaning an investor funds and getting first charge on a property isn't too crazy. I'm talking pre-tax.

Of course the 10% is pre-tax. Perhaps you shouldn't be comparing the gross 10% against the mortgage interest rate of 3-4% in the circumstances, unless the OP is in a position to deduct their mortgage interest against income, which would alter the situation and, fair enough, we don't know that. So perhaps a fairer and more useful comparison would point out that up to approx 50% of the 10% could be lost to revenue. I'm not "in the property industry" myself I'm afraid so I can only do my best to apply a bit of common sense.

So, what you're really talking about is taking on the investment risk to potentially get a couple of % ahead of the mortgage interest, and at the end of it all, if it all goes well, you don't even own a second property, you just had your loan repaid to you by the grateful investor (who for some reason couldn't get finance from a commercial lender and was happy to sign up to pay you 10% interest).

Unless the loan defaults, which would presumably be associated with a collapse in the property market so you have the opportunity to repossess a distressed asset.

That sounds really stupid.

edit: not to suggest there arn't other options OP to use the money than buying a property outright, and are not limited to leaving the cash on deposit at meagre interest rates and vulnerable to inflation or chasing illusory promises of 10% gains. That is why they should discuss with a financial adviser, who will enquire into things like their pension arrangements and other important information regarding their general financial circumstances.

Bass Reeves

dubrov wrote: »

But what would you do with the odd 200k left over in your back account. Not much point in paying 1.95% on the borrowing and earning 0% in a back account, especially with inflation risks around the corner

I use at least 50-70k as a reserve so as not to have to borrow for cars, holidays home improvements. This 70k would be partially drawn down at times like this and replenished by saving again. Personnel borrowing costs 5-8%. It also acts as a reserve against the rainy day.

70ish in investment funds there is a myriad of them out there some capital gauranteed, some not gauranteed. If wages are not substantial enough to pay mortgage and fund pension I even use this to supplement repayments to fund pension through wages. However OP has just asked drawing down a mortgage or not. I presume repayments are not an issue. If they can afford a separate investment fund outside there pension funding this can be used for children education. I actually consider putting the funds in the Children's name as that word be more efficient tax draw down when children reach college age. You can find this over 2-5 years using the small gift method so as not to use up inheritance allowances.

The last of the money I use as opportunity money. It would be used to invest in what ever you felt comfortable with when the next economic downturn came. Even at present you will still buy holiday apartment and houses in the west of Ireland. This could be lifestyle and investment. Return might not be huge but it is an option.

And technically you are not paying 1.95% the HTB allowance is paying the tax on it. You could in 4-5 years time pay that off. But personally I use the full term

dubrov

Bass Reeves wrote: »

I use at least 50-70k as a reserve so as not to have to borrow for cars, holidays home improvements. This 70k would be partially drawn down at times like this and replenished by saving again. Personnel borrowing costs 5-8%. It also acts as a reserve against the rainy day.

70ish in investment funds there is a myriad of them out there some capital gauranteed, some not gauranteed. If wages are not substantial enough to pay mortgage and fund pension I even use this to supplement repayments to fund pension through wages. However OP has just asked drawing down a mortgage or not. I presume repayments are not an issue. If they can afford a separate investment fund outside there pension funding this can be used for children education. I actually consider putting the funds in the Children's name as that word be more efficient tax draw down when children reach college age. You can find this over 2-5 years using the small gift method so as not to use up inheritance allowances.

The last of the money I use as opportunity money. It would be used to invest in what ever you felt comfortable with when the next economic downturn came. Even at present you will still buy holiday apartment and houses in the west of Ireland. This could be lifestyle and investment. Return might not be huge but it is an option.

And technically you are not paying 1.95% the HTB allowance is paying the tax on it. You could in 4-5 years time pay that off. But personally I use the full term

I agree that you shouldn't pay down the mortgage if you expect to need to borrow in the short term. However, keeping 50-70k in cash is madness if you don't have any specific plans for it. A liquid investment would make much more sense.

Also remember if the OP paid off the mortgage, they wouldn't have any mortgage payments so could pretty quickly build up enough cash to pay for cars/holidays or build a college fund for the kids.

Buying funds is a good idea but remember that the profits are likely subject to income tax. No fund is going to give anything like the after tax return of paying down a mortgage in the long term.

As you say buying a holiday home is a lifestyle choice and rarely pays as an investment.

The OP can still get the benefit of the HTB and mortgage cashback deals by drawing down a full mortgage and paying it off shortly after

Bass Reeves

dubrov wrote: »

I agree that you shouldn't pay down the mortgage if you expect to need to borrow in the short term. However, keeping 50-70k in cash is madness if you don't have any specific plans for it. A liquid investment would make much more sense.

Also remember if the OP paid off the mortgage, they wouldn't have any mortgage payments so could pretty quickly build up enough cash to pay for cars/holidays or build a college fund for the kids.

Buying funds is a good idea but remember that the profits are likely subject to income tax. No fund is going to give anything like the after tax return of paying down a mortgage in the long term.

As you say buying a holiday home is a lifestyle choice and rarely pays as an investment.

The OP can still get the benefit of the HTB and mortgage cashback deals by drawing down a full mortgage and paying it off shortly after

I an not sure if you read or understood my post.

On college fees, by using a lump method and having the individuals funds in the children name even with college jobs if the tax system is the same as present the first 4-6k of drawn down will be tax free. At an average return of 5% over 15 years the fund's will slightly over double. Saving as you go would unlikely to make the same size fund. It costs about 10k+/ year to put children through college. Saving as you go as a flaw in that you will not double your fund in 15 years. Because of the shortfall as the First child starts college you will need to fund as you go to a large extent. This will incur borrowings. At 5+%.

You might consider holding money in a cash fund as a waste but there is no such thing as a liquid investment. Liquid investments such as shares and investment funds tend to fall sharply when you get an economic shock. You may actually take a severe hit if you need to access these so called liquid funds.

There are still holiday homes being sold at 40-70% of build costs. The most important thing about a holiday home is that it needs to be within 90 minutes of your home.

On HTB I am not sure if there is a clawback if you pay back the money too early. I do know that these used to be a clawback on the 2% cashback with banks if you did not hold the mortgage for 3 or 5 years. After checking the conditions there dose not seem to be such a condition but it is some that you would need to check to be sure

bridryan

I'm in a similar(ish) situation. I paid for my house with cash and am now considering selling up and buying a larger house. However, with the sale of my own I won't have enough funds so have mortgage approval on the difference.
It important to know if you are buying with a mortgage, there are additional costs and effort involves - the bank will also insist on engineers sign off, mortgage protection etc.

I would get a good broker and see what the best rate you can get approved on and then speak to an independent financial advisor to see what investments options you would if you invested the case. You could borrow a % of what you need and invest some of the case. You don't have to borrow the full amount needed.

Bass Reeves

bridryan wrote: »

I'm in a similar(ish) situation. I paid for my house with cash and am now considering selling up and buying a larger house. However, with the sale of my own I won't have enough funds so have mortgage approval on the difference.
It important to know if you are buying with a mortgage, there are additional costs and effort involves - the bank will also insist on engineers sign off, mortgage protection etc.

I would get a good broker and see what the best rate you can get approved on and then speak to an independent financial advisor to see what investments options you would if you invested the case. You could borrow a % of what you need and invest some of the case. You don't have to borrow the full amount needed.

To qualify HTB if OP is entitled to it you must draw down a 70% mortgage minimum. Most indication at present from listen to financial advice on radio and TV is that 5+ year returns are at or about 5%. However there is a risk that you may have to time the access to your money to get that return. Some give you the right access funds at any stage but you have to accept the risk of a financial hit on your investment depending on market performance.

I am not advising borrowing the maximum and most advising to borrow are not either. But accessing money at 2% a n a fixed rate for 5 years is virtually free money. This especially when projected returns on investment is 5% compounded.

Mortgage protection is relatively cheap and I think banks will accept a term life insurance. It's a good idea anyway for any couple to have a 30 year term life insurance policy to cover an unexpected event that may never happen hopefully. You will get a dual life policy for a couple for 300k for 25year term for about 30/month.

With any house you will need engineer signoff anyway.

TheValeyard

I think pay in cash.

Even from a peace of mind approach. No matter how bad things get or Job losses, you will always have a roof over your head. Never having to fear the knock on the door or phonecall from the bank.

Bass Reeves

TheValeyard wrote: »

I think pay in cash.

Even from a peace of mind approach. No matter how bad things get or Job losses, you will always have a roof over your head. Never having to fear the knock on the door or phonecall from the bank.

You will always have a roof over your head anyway. We do not do repossession's in Ireland. All you have to do is put up with the begging letters and phonecalls. With mobiles it's great you can block the numbers

Joe4321

Maybe make sure your pension is maxd out first, interest rates are so low at the moment maybe do a 50/50 or 75/25 mortgage cash and then when intresr rates start to rise make sure you are able to pay a lump of your mortgage or even finish it off, pensions over the long term will give you the option of retiring early if you choose, with higher rate 49/ tax relief its a no brainer for me, but everyone have different priorities, but maybe something to consider,