Paying off Mortgage Early

coil1985

Hi I am just looking to get people's opinions on paying off a mortgage early. Is it a good/bad idea? Do you do it? And if you do, do you pay a little extra off each month or do you pay it off in bigger sums once saved up in your bank account. I've read differing opinions so I'm just curious. Tks

Geuze

The interest rate will be a factor to consider.

Without providing that information, it's difficult for anybody to respond.

iniscealtra

It depends on the interest rate. I put in a chunk from savings when I can / if it’s suits as in I know there is no big bill coming for certain i.e. have to buy a car. Sometimes there are bills that you don’t expects. I keep a float for an unexpected bill and savings above that go into the mortgage. It does make a difference as my re payments are now noticeably less. With interest rates going up I put a chunk in recently to reduce it. Saving to pay it off early and living quite frugally to achieve that. It’s absolutely worth it.

coil1985

Ye just for clarity the rate is 2.85%. I have five year fixed and I am a year and a half into the five years.

Seve OB

If you are in a fixed then you won’t be able to pay a chunk off without serious penalty

2.85 is savage rate

stick your money in a 4 year saving plan and then decide

coil1985

https://www.boards.ie/discussion/comment/120590344#Comment_120590344

I was told I can pay it off. Savage as in terrible?

Chris_5339762

Ask your bank. Often "savage" actually isn't that much, or the amount can be made back in reduced interest within a year.

cython

https://www.boards.ie/discussion/comment/120590344#Comment_120590344

This is a complete oversimplification to say there will definitely be a penalty. Plenty of lenders allow overpayment to a defined limit within the fixed term (e.g. 10% over the fixed term, or 10% per annum), and the poster would need to check their own terms and conditions.

Even allowing for the above, some lenders are allowing their customers to exceed these preagreed limits as the cost of borrowing has increased, and accelerated repayment is in their interest in the current climate.

RE the questions about the word savage, I'd take it to mean very good, as few if any lenders are offering so low a rate to new business or those looking to fix at the end of their current fixed terms.

For what it's worth, I'm under a year into 5 year fixed at 2.4% and am overpaying monthly as I can overpay up to 10% of the total over the fixed period without penalty or question. I'll probably exhaust the 10% after about 4 years but I'll engage with the bank to see at that point, as there's every chance I'd be able to break out for no fee, and usually if that's the case, they'll not penalise overpayment either.

rameire

as above, check with lender what you can do.

I overpay every month as part of the direct debit and am able to also pay a lump sum in addition every year.

I keep the term the same and keep the payments at the same level by upping the monthly overpayments to the same total amount.

I was UB and now PTSB so have the same UB terms.

the interest rates in the savings accounts in Ireland are useless, so its better to have your money working for you instead of in a bank account.

Also check out Raisin.ie , do your due diligence, they have good rates on accounts that are available to us.

daheff

I wouldn't go rushing to pay this off early.

2.85% is a cheap rate.

What you could do is save your money to a savings account (look at askaboutmoney.com for good deposit rates).

Then when your fixed rate expires you can pay down the principal with what you have saved and reduce future payments.

In general I'm not a fan of early repayment of mortgages as once the money is repaid to the bank it's hard to get it back (and costly).

3DataModem

With tracker and variable interest rates hitting 5%+ I decided to pay big lumps off the mortgage, but that is because I didn't have any fixed, had other spare capital, and have a fairly risk averse cash investment strategy (due to age, retirement planning, and other reasons). If I had a fixed rate of 2.85% then I definitely wouldn't have done this... that is very cheap money.

coil1985

https://www.boards.ie/discussion/comment/120625839#Comment_120625839

What would you have done in my case with your savings? Just curious. :)

3DataModem

https://www.boards.ie/discussion/comment/120627063#Comment_120627063

Well... it depends how much, and what you are saving for.

e.g.

• if it's less than half a year's net salary, I'd probably just leave it in cash at the best rate you can.
• if you are close to retirement and have 250k or more that you'll not really ever need, I'd buy a rent-generating asset like residential or commercial property and enjoy the income.
• if you are somewhere in between ...

i.e. it really really depends. I am really risk averse when it comes to cash and investing, so don't necessarily heed my advice.

coil1985

https://www.boards.ie/discussion/comment/120627542#Comment_120627542

Tks for the answer.

mp3ireland2

A big factor also is that you've up pay tax on any savings or investments. So if you are paying tax at 40% you'd need to be getting over 4.75% interest or return on investments to make it better than paying off mortgage early based on 2.85% interest rate. I'm on 2.1 rate and toying with paying off a bit.... But also fun stuff I want to do with the money so can't decide :-D

coil1985

https://www.boards.ie/discussion/comment/120676279#Comment_120676279

Fun stuff? I am intrigued, spill the beans. :)

HeidiHeidi

I'm in my mid 50's, and the amount of my contemporaries (colleagues, friends, acquaintances) who have died suddenly is shocking - so if there's fun stuff to do and you have spare money I'd be doing the fun stuff all day long. Don't wait till retirement/ the mortgage is paid off/the family is gone.

All within reason obviously, you have to keep one eye on your dotage, if you get there.

Sorry if that's O/T, but it's something I feel strongly about!

coil1985

https://www.boards.ie/discussion/comment/120678100#Comment_120678100

Not O/T at all. I like it. Im 38. We have to buy a car this year. So there's that. Plus I want to travel more over the next couple of years. We haven't been able to over the past years due to visa issues. Life is defo short and I'm conscious of having experiences you can remember in years to come.

mp3ireland2

https://www.boards.ie/discussion/comment/120678078#Comment_120678078

I have a pool table that I want to do up, but don't think I've room in house or garage....To build a wooden cabin the the garden could quickly become a ridiculous price :-D Trying to figure out how much I'd use it!