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Invest or put towards mortgage!

  • 23-03-2021 5:56pm
    #1
    Registered Users Posts: 1,501 ✭✭✭ Ottoman_1000


    Hi there, apologies if a topic like this have been covered many times over but here is where I am at;

    Between myself and my wife we have accumulated just shy of 200k that is sitting in our savings account. Money was earned/inherited through a few different variants (all legal)!
    I am not a investor and no real history of it in my family so advice/options is lacking, some of my family is suggesting we just use it to clear our mortgage (nothing wrong with that advice either).
    We are both in our mid to late thirties so obviously clearing off a huge chunk of our mortgage is tempting.

    However I was thinking of maybe looking at investing it. My first thought is to buy an apartment outright in 1 of the commuters towns around Dublin, rent it and use the income from the rent to pay some of our monthly mortgage repayments.
    Then we could use the additional freed up money to increase our pension contributions in work. Or put it in some 15/20 year invest fund for the kids education down the line.

    Obviously we will speak to a professional before we make any decisions but I just wanted to throw some of my ideas out to see if I am absolutely miles away with my intentions.

    Thanks in advance


Comments

  • Moderators Posts: 11,980 ✭✭✭✭ Black_Knight


    Hi there, apologies if a topic like this have been covered many times over but here is where I am at;

    Between myself and my wife we have accumulated just shy of 200k that is sitting in our savings account. Money was earned/inherited through a few different variants (all legal)!
    I am not a investor and no real history of it in my family so advice/options is lacking, some of my family is suggesting we just use it to clear our mortgage (nothing wrong with that advice either).
    We are both in our mid to late thirties so obviously clearing off a huge chunk of our mortgage is tempting.

    However I was thinking of maybe looking at investing it. My first thought is to buy an apartment outright in 1 of the commuters towns around Dublin, rent it and use the income from the rent to pay some of our monthly mortgage repayments.
    Then we could use the additional freed up money to increase our pension contributions in work. Or put it in some 15/20 year invest fund for the kids education down the line.

    Obviously we will speak to a professional before we make any decisions but I just wanted to throw some of my ideas out to see if I am absolutely miles away with my intentions.

    Thanks in advance

    The usual boilerplate advise is:
    Clear short term debts
    Max out your pension contributions
    Build an emergency fund (6 months worth of expenses)
    Put the money where it works best

    A rental property will be subject to income tax, so it can take the shine off it, and if it's not local to you it's a bit more difficult to manage.

    As far as investing Vs paying off the mortgage, which yields the most? Paying off the mortgage might save you 3%, investing might yield 4-5%. Just pulling numbers, your research will give more accurate numbers


  • Registered Users Posts: 14,306 ✭✭✭✭ jimmycrackcorm


    Solid advice from Balck Night.

    If you are on a marginal rate, It's difficult to beat the benefit of maxing out your pension AVCs. I'd think about paying off the mortgage and then pumping the maximum from my salary into AVC's. Worth also checking if you can take money out of your pension at an earlier age. E.g. I have one that allows doing this from age 50 - that's a nice tax-free sum to get early, on top of having achieved good investment growth.

    Stating the obvious, but pension funds are a long term investment, so this is probably the most tax-efficient long term way to invest.


  • Registered Users Posts: 2,241 ✭✭✭ garrettod


    How safe are your personal incomes ?

    Anything, other that permanent state employment, can't be considered 100% safe.

    So, if you aren't employed by the state, then seriously think about putting a significant part of that €200k into debt reduction.

    Keep a minimum of 6 months salary in cash, as this is your emergency money.

    Thanks,

    G.



  • Registered Users Posts: 1,501 ✭✭✭ Ottoman_1000


    Cheers everyone, Thanks for all the advice.


  • Registered Users Posts: 2,649 ✭✭✭ cooperguy


    As far as investing Vs paying off the mortgage, which yields the most? Paying off the mortgage might save you 3%, investing might yield 4-5%. Just pulling numbers, your research will give more accurate numbers

    Worth pointing out that this is tax free return. Your 3% saving on the mortgage is equivalent to 5% return on the stock market (but its guaranteed)


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