The eternal question - tracker mortgage, pay off a lump sum or not

chabsey · 04-04-2022 3:29pm #1

I've a tracker mortgage which, when we first got it (2005) went up and up and up. Then as we all know it has since dropped and stuck at zero or thereabouts for a good while. During that time I have not increased my monthly payments but as a result of the interest amount dropping, I've been paying off a good bit of the overall amount. Now, with interest rates likely to increase later in the year and given that they will not spike up and down but rather will go up and up and up again, does it make sense to pay off a lump sum or increased amounts each month? I've got about 20 years left on it but circumstances dictate that we will likely sell this place within the next 5 years.

I don't think the tracker will be transferable (or at least not in its current form) so I'm wondering do people recommend paying off lump sums now while interest rates are low (in anticipation of them increasing) and leaving it at 20 years left or decreasing the number of years with an aim of paying it off sooner. Or does any of that make sense given the plan to (maybe) sell in the next 5 years?

Buddy Bubs · 04-04-2022 3:34pm

Look up alternative investment strategies for medium to long term savings. This includes pension. It also includes not borrowing money for holidays/cars/ home improvements and using savings instead.

I wouldn't be paying off a tracker early. I've a 2.15% mortgage which is prob higher than yours is going to go and I am not paying it off early, no way. Other things on the go.

DubCount · 04-04-2022 3:41pm

This is a very general question. Really a consultation with a Financial Advisor is the only to answer this for your personal circumstances - well worth a few quid.

I would say you need to consider

1) Return - if you can get a better return on the money by investing it somewhere else, or paying off higher interest-rate debt, then dont overpay mortgage

2) Money requirements - Once paid back, you wont get that money again as cheep. If you are going to need a car, college fees for kids etc., it may be better to save the money outside of the mortgage so you can still access it.

3) Future plans. You talk about moving in 5 years, but what about changing jobs or moving somewhere new. Your future plans may decide if paying off the mortgage quicker makes sense for you.

chabsey · 04-04-2022 3:46pm

https://www.boards.ie/discussion/comment/118879220#Comment_118879220

Thanks yeah pension is definitely on my radar at the moment. To be honest I'm encouraged by the replies I'm seeing here as I had a fear I was missing something obvious. But your decision echoes my own, I can better use the money elsewhere and I'm not missing a trick by not paying off a chunk now before it starts increasing.

chabsey · 04-04-2022 3:49pm

https://www.boards.ie/discussion/comment/118879256#Comment_118879256

Thanks. To address your points, 1 - definitely can better return on my money elsewhere and I'll concentrate on that. 2 - agree, I will probably need it to renovate a place we buy or upgrade the car in the next few years. 3 - Hopefully job stays as is for the next 5 years but we shall see - all things remaining as they are (for me personally I mean) then I think the feeling is not to increase payments or pay off a lump and instead use the money elsewhere.