100K - put all off mortgage or invest half of it?

Andrewf20 · 31-05-2022 11:37pm #1

Hey folks,

Trying to get feedback as to which sounds like a better idea. Pay all 100K off mortgage, giving us a guaranteed 6K a year due to a lower mortgage bill. Other half is thinking of paying half it off the mortgage and investing the other half. Things look fairly fragile out there with a potential recession coming and im nervous about it when you include CGT on any gains. Is investing now a good idea? In our mid forties age wise.

Many thanks.

ShamoBuc · 01-06-2022 12:03am

Pay it all off the mortgage. Maintain monthly payments as they are, mortgage paid off a lot sooner, disposable income at that point will be very healthy. There's certainty built into that option, calculations on interest saved etc would need to be done obviously.

Half and half gives you a level of certainty but also a possibility of making money. As mentioned, a recession in a year or two might make it a little less wise but that would depend on the investment of course.

You have to factor in your own circumstances - hard for an outsider to do- , job security, savings, how many years left on mortgage, when do you want to retire etc alot of other variables that might sway the choice. Depending on the above, upgrading 1 or both cars without a car loan, might be an option - balance of the money against the mortgage. You get a tangible benefit and a certainty while not needing a car loan for years to some. Tangible benefit is hard to quantify but, again, that would depend on your personal circumstances - which could dictate options in a number of directions I think.

Paying off a mortgage as early as I can would be a preferrable option to me, based on my circumstances.

Padre_Pio · 01-06-2022 12:12am

Would where you are in the mortgage factor into it?

If you're 20 years in, then your yearly interest might not be much, but if you're only starting then the bulk of a monthly repayment is interest.

Andrewf20 · 01-06-2022 9:07am

Ok, cheers folks. We are 8 years into the mortgage, 22 years to go.

I just dont feel the love for putting 50K into investments at the moment. Im thinking - put it all against the mortgage and with the savings we build in the next 2-3 years, invest that instead if/when the markets drop in say 3 years time.

01-06-2022 9:10am

All into mortgage and then invest the reduced mortgage payments into an investment fund each month? Even better if pension as it is tax efficient

Padre_Pio · 01-06-2022 10:20am

https://www.drcalculator.com/mortgage/

Put your 50k in here and see what the interest savings would be

Shedite27 · 01-06-2022 1:02pm

I'd also suggest looing at when you might need the cash, have you kids starting college, needing a house deposit etc in the next 10 years? If so, a 10 year investment is better to be able to help them rather than having extra disposable income at that point.

macvin · 01-06-2022 1:18pm

You can get you a safe and secure 70% return on that over 7 years. Tax free!

The first question is what pension plans do you have?

If you have decent guaranteed pensions and you don't have a tracker, put 75k off the mortgage and 25k into state savings. That will give you a small tax free return of the rate you are paying for your mortgage.

If your pension is not strong, then put 25k+ a year for the next 6years 8 month from salary into pension saving you massive tax. And then drip feed the 100k from a savings account into your current account. This will give you 70% + return

Here's the calculation

25k gross into pension sees a drop of 15k in net income. Put the 100k into a savings account with a monthly payout of €1250 which makes up the shortfall in your net income. You could do this for almost 7 years. And even if you put the pension into a very safe fund, in 7 years time the pension will be over €170k.

Only drawback is you can't access til 60+

But massive benefit is you can retire early if you wish and have enjoyable active retirement

01-06-2022 1:39pm

I'd pay the mortgage but keep the payments the same or similar so you can pay it off years earlier.

Maybe set a little aside as a rainy day fund.

Andrewf20 · 01-06-2022 1:48pm

Thanks again, some good info and links there. Yup, forgot to mention about pensions and using this to put some cash there instead of stocks/shares.

Pussyhands · 01-06-2022 1:49pm

I'll throw something different on the table.

Buy a secondary property outright.

Here's a 3 bed in Sligo for 90k. 400 euro per Ukrainian per month means 1200 tax free. 13k tax free after management fees.

https://www.daft.ie/for-sale/apartment-apartment-80-block-5-the-village-sligo-co-sligo/3915836

AirAmp2019 · 01-06-2022 2:00pm

Depends on your interest rate on your mortgage. If its low, I wouldn't be rushing to pay it off. Pension, low risk investments, even a Government savings bond would leave your money still accessible to you, should you need it.

If you do decide to pay off a chunk, you should look to re-structure the mortgage to the lowest rate and fix for as long as possible.

Bass Reeves · 01-06-2022 2:12pm

What way is your mortgage fixed. If you and your spouse have not got pensions definitely start some of the funds into it. If you are paying the high rate of tax it's a no brainer. 10k/ year will cost you 6k net.

Of your mortgage is fixed for 3+ years I be slow paying any off. I would definately consider an investment like Pussyhands indicated if you live outside the big cities in Ireland. In smaller towns and villages there is plenty of property that cam be our have for sub 100k. Rental market is extremely strong. While you may not get capital growth you will get a return

Two beds houses/ apartments are make 800+/ month at present. That is an annual return of 9.6k even allowing for costs you are probably looking at a net return of 8k before tax

Xidu · 01-06-2022 2:14pm

Ah!

when QT starts the yearly return of investing in SPY was -4.7% back in 2019

so don’t see the point to put in stock market unless you are super good at short term trading.

or you wanna invest in open a small biz might be more success chance.

Underpaid Mike · 01-06-2022 2:31pm

https://www.boards.ie/discussion/comment/119144124#Comment_119144124

Very smart, nicely done. Could also go down the buy to let route with that 100k in savings, the drawdown will instead be the rent but the same calculations will apply

macvin · 02-06-2022 3:39pm

https://www.boards.ie/discussion/comment/119144686#Comment_119144686

Rent will be taxed at high rate and the hassle of being a landlord and all the regulations and registrations and obligation you have with tenants is not worth the headache.

The drip feed combined with higher pension is literally as good a return as you can get, passively managed without nay headaches and at near zero risk you can get 70% over 7 years and with a different risk level it could be a lot higher (or lower).

The only thing you need is to have the willingness to adhere to the plan and not sneak 5k out here and there :)

100K - put all off mortgage or invest half of it?

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