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Do you overpay your mortgage?

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  • Registered Users Posts: 5,368 ✭✭✭JimmyVik


    Was talking to my brother about this as he is moving.
    He had a tracker at 0.7% and he said he overpaid for the first year by 50%.
    Then he was wondering why he bothered and stopped the overpayments and bought funds and equities.
    His house is paid off now anyway, but the money he diverted from over payments to equities and funds are allowing him to retire early now too.


  • Registered Users Posts: 411 ✭✭chosen1


    I don't pay anything more than my repayment rate and don't plan to.

    The way I look at it is that as long as there is upwards inflation, the money I have now is more valuable to me than the money that will be left to pay off in 25 years time. The €1000 a month I pay now is a significant percentage of my salary, but I'd confidently expect that the repayments in my final years of the mortgage will be a greatly reduced portion of my salary at that time.

    People I know of my parents generation, finished up their mortgage with repayments of just over €100 a month and I'd bet that money was a lot more costly to them back in the early 80s. Granted there was greater inflation then than now, but I'd still expect the cost to reduce somewhat.

    Also I'm at the stage in life where there are plenty of other outgoings to take care of in the form of childcare and education. Want to be able live a comfortable lifestyle and take plenty of leisure time and holidays, without pouring it all in to one asset.


  • Registered Users Posts: 3,590 ✭✭✭Blackjack


    Does you does or does you don't take Access?

    showing your age there.


  • Registered Users Posts: 4,473 ✭✭✭blue note


    Another point I find frustrating is that people say a mortgage is the cheapest money you can get.

    The money you save is the cheapest money you can get. Bar a mortgage which is a necessary evil, taking a loan for anything else (holiday/car) is a mugs game. Buy the things you can afford and in the end you'll be much better off financially.

    But the thing is - if you don't pay extra off your mortgage you're more likely to have money left over for things like a holiday / car / home improvements. So if you pay an extra €1,000 off your mortgage you'll save say €300 per year. But if you need a new car and need to borrow €1,000 less for it you'll save €600 a year.

    That's what people mean when they say a mortgage is cheap money. It's all well and good saying that a loan other than a mortgage is a mugs game, but sometimes you'll need money for something. Home repairs, medical / funeral expenses, college, etc. No-one is defending someone going to a money lender for a lavish holy communion, but plenty of loans are taken out by people who have considered the cost of them, are able to comfortably repay it and just consider the cost of the loan to be worth it. Even if it's for a holiday or the like.


  • Registered Users Posts: 213 ✭✭smokie72


    With Kbc and overpaying by €160 per month. Have savings as well and plan to pay a lump sum in several years time and clear the mortgage 10 years early. The house is only an asset when the mortgage is paid off. I plan then to put any savings towards my pension and downsize by selling the house and move out of Dublin.


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  • Registered Users Posts: 1,953 ✭✭✭bilbot79


    No I certainly do not overpay my mortgage and whenever this question comes up, I find myself getting very mad at Eddie Hobbs, who used to go around telling everyone to overpay their mortgage.

    If you are already very rich, then overpay your mortgage. Most of us are not at all rich.

    Like most mortgage owners, I don't have a big rainy day fund sitting in a bank account, so comparing savings vs lending interest rates is purely theoretical in the first place.

    If I put all my money into my mortgage, however, i will inevitably need a personal loan sometime in the future, or run up a big credit card debt. Have you seen the rates they charge?

    Keep your money. Pay at the agreed rate. If you are likely to need a personal loan in the medium -future, do not pay down your mortgage. Save that money for a rainy day.

    I see what you're saying but would also draw your attention to the fact that a rate of 2% on 100k is the same amount of repayment as a rate of 10% on 20k

    People always bang on about how 'its the cheapest money you'll ever have' but the reality is that the amount owed dictates a lot. I've just increased my mortgage to 345k with minimum repayments around 1500. I'll spend the first 2-3 years trying to pay down 4k a month. Tough but big debts need to be reigned in and i would say rates will start going up in about 3 years.

    If the interest portion of my loan is 560 at 1.95% now but if the rate increased to 3% it would be 840. Thats because the principal is so high. If you have big debt then pay down hard and fast, potentially easing off later.


  • Registered Users Posts: 1,953 ✭✭✭bilbot79


    smokie72 wrote: »
    With Kbc and overpaying by €160 per month. Have savings as well and plan to pay a lump sum in several years time and clear the mortgage 10 years early. The house is only an asset when the mortgage is paid off. I plan then to put any savings towards my pension and downsize by selling the house and move out of Dublin.

    I reckon you have more to gain putting your money into the pension than the mortgage. Max out the pension contributions, then overpay the mortgage.


  • Registered Users Posts: 3,411 ✭✭✭griffdaddy


    No I certainly do not overpay my mortgage and whenever this question comes up, I find myself getting very mad at Eddie Hobbs, who used to go around telling everyone to overpay their mortgage.

    If you are already very rich, then overpay your mortgage. Most of us are not at all rich.

    Like most mortgage owners, I don't have a big rainy day fund sitting in a bank account, so comparing savings vs lending interest rates is purely theoretical in the first place.

    If I put all my money into my mortgage, however, i will inevitably need a personal loan sometime in the future, or run up a big credit card debt. Have you seen the rates they charge?

    Keep your money. Pay at the agreed rate. If you are likely to need a personal loan in the medium -future, do not pay down your mortgage. Save that money for a rainy day.

    It's possible people's personal circumstances could change over a period of 35 years and they may be able to afford to overpay now when they couldn't previously?


  • Registered Users Posts: 4,095 ✭✭✭jj880


    You find something hard to believe even though a simple Google search tells you it's true. Used the Internet before? :D

    Ulster Bank allow a 10% of your outstanding balance per year..... have 300k left on your mortgage and you can over pay by 30k

    KBC allow the same

    BOI fine you a very small amount

    Forgive me for thinking the banks (especially in Ireland) would not give an inch on any interest owed. So they allow overpayment with limits. Not what I had in mind but still a nice option to have.


  • Moderators, Social & Fun Moderators Posts: 14,783 Mod ✭✭✭✭AndyBoBandy


    Yes, we overpay by about an additional 150% on top of our standard payments.
    Took 165k over 20 years, we are currently 7 years in, with only 44k remaining, and will be clear in 23-24 months.
    Proposed interest over the 20 year term was to be €80k, and will end up being closer to €31k

    Remember folks, if your LTV changes significantly, you could end up qualifying for a better interest rate from your bank....
    It could change by either reducing the overall amount owed to fall under a certain LTV%, or you could increase it's value by simply doing work to it, again pushing you under a certain LTV%...

    Example: My sister moved home from America, bought a house for €250k, they immediately renovated it, putting roughly €25-€30k onto its market value meaning their LTV% went from something like 78% down to around 65% (or whatever it was), and because of this, it qualified them for a slightly lower interest rate, which saved them something like €30 per month on their payments..... all for the price of a house valuation (which itself was paid back after a few months of the lower monthly payments).

    Play around with this tool from CCPC, and see how much difference even the smallest overpayments can make to your overall payback on a mortgage...
    CCPC Mortgate Overpayment Calculator


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  • Registered Users Posts: 4,760 ✭✭✭jimmytwotimes 2013


    Blackjack wrote: »

    showing your age there.

    100% :)


  • Registered Users Posts: 213 ✭✭smokie72


    bilbot79 wrote: »
    I reckon you have more to gain putting your money into the pension than the mortgage. Max out the pension contributions, then overpay the mortgage.

    I reckon I could make around 100k easily by downsizing and moving. Use that plus my savings as an investment towards a pension.


  • Registered Users Posts: 26,960 ✭✭✭✭GreeBo


    BraveDonut wrote: »
    I have a slightly different take on this.
    I do have a rainy day fund that I could use to clear most/all of my mortgage.
    However, I choose to continue to pay my low interest, manageable monthly amount as I see it is a form of savings.

    If I cleared my mortgage and had more available cash at the end of the month, I would probably only start to spend more.

    How long left do you have on the mortgage?
    Seems mad to me that you would keep paying interest when you don't have to, unless you have invested your rainy day fund somewhere and its value is down?

    Or put it another way, how long will your rainy day fund last you?
    I certainly wouldnt advise emptying that fund, but keeping too much while continuing to pay a mortgage seems wrong. You need a much smaller rainy day fund if you have no mortgage to pay every month...


  • Registered Users Posts: 11,262 ✭✭✭✭jester77


    Nope, not worth it. With the interest being so low, that money can be put to much better use.


  • Registered Users Posts: 26,960 ✭✭✭✭GreeBo


    smokie72 wrote: »
    I reckon I could make around 100k easily by downsizing and moving. Use that plus my savings as an investment towards a pension.

    100K isnt going to do much for a pension fund, especially if you only add the 100K when you are already drawing down the pension.


  • Registered Users Posts: 26,960 ✭✭✭✭GreeBo


    jester77 wrote: »
    Nope, not worth it. With the interest being so low, that money can be put to much better use.

    As long as that "much better use" is to make more money then I 100% agree.


  • Registered Users Posts: 1,228 ✭✭✭The Mighty Quinn


    GreeBo wrote: »
    100K isnt going to do much for a pension fund

    Are you joking!

    If you put 100K into a pension at the age of 46, achieved an average 3.5% growth per annum - very achievable - then you'd have 206K at 68.

    That's assuming you hadn't added another penny.


  • Registered Users Posts: 213 ✭✭smokie72


    GreeBo wrote: »
    100K isnt going to do much for a pension fund, especially if you only add the 100K when you are already drawing down the pension.

    I already have other investments. I work in the public sector and have a avc. I invested in solidarity bonds years ago when it had a 30% yield.


  • Registered Users Posts: 11,262 ✭✭✭✭jester77


    GreeBo wrote: »
    As long as that "much better use" is to make more money then I 100% agree.

    Well yeah, spending it in the pub is not going to help :D
    Mine is fixed with some of it under 1% and the rest under 2%. A decent savings account or market investments will return more than that


  • Posts: 13,712 ✭✭✭✭[Deleted User]


    bilbot79 wrote: »
    I see what you're saying but would also draw your attention to the fact that a rate of 2% on 100k is the same amount of repayment as a rate of 10% on 20k

    People always bang on about how 'its the cheapest money you'll ever have' but the reality is that the amount owed dictates a lot.
    Of course, that's just arithmetic, but I wonder are people fully cognizant of the opportunity cost, when you factor personal taxation?

    Take a PAYE worker, 50 years of age, on a salary of €100,000. The man who puts €15,000 per annum into his pension (which will be matched to some degree by his employer) is saving almost €10,000 per annum on his tax bill, compared to the guy paying off his mortgage. The mortgage payer comes nowhere near that kind of saving/investment.

    Sometimes paying down your mortgage is a wise choice, if you already have a strong (maybe public sector) pension and you have a lot of savings.

    For most of us, overpaying your mortgage is a feel-good investment with very weak return.


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  • Registered Users Posts: 1,228 ✭✭✭The Mighty Quinn


    We overpay 130 a month.

    And truth is, if I didn't put it into that it'd disappear. I wouldn't be a wise investor or be smarter with it, I know it'd be consumed some other stupid way, so this way at least I know it's doing me some good.

    I am maxed out on pension, but don't have much savings.


  • Registered Users Posts: 828 ✭✭✭2lazytogetup


    to pay for covid, im worried the government will bring in a wealth tax. id rather pi55 away the money than overpay the mortgage and end up paying more tax for the privilege.

    even if government dont raid these coffers, id rather enjoy 1k now when im young than have an extra 2k when im 65.


  • Posts: 13,712 ✭✭✭✭[Deleted User]


    We overpay 130 a month.

    And truth is, if I didn't put it into that it'd disappear. I wouldn't be a wise investor or be smarter with it, I know it'd be consumed some other stupid way, so this way at least I know it's doing me some good.

    I am maxed out on pension, but don't have much savings.
    I think that's a very good point. When we do the maths, we sometimes assume we are fully rational. I'd be the same as you — if I had spare cash, maybe I'd be likely to upgrade the car or spend it on God knows what, re-do the garden.

    In some cases, it's better to just put the spare money out of reach. It's a very individual choice, there is no one-size.


  • Registered Users Posts: 3,662 ✭✭✭NewbridgeIR


    Definitely not.
    I have a tracker mortgage so the interest rate is pretty low.
    Spare money goes into savings (rainy day fund) and occasional AVCs


  • Registered Users Posts: 3,635 ✭✭✭dotsman


    Overpaying your mortgage stopped being good advice at the turn of the millennium (and has continued as ridiculously bad financial advice). Up to and including the 90's, mortgage interest rates were so high, it made perfect sense as overpaying provided excellent returns (and people didn't have the same access to financial markets as they do today). However, with dirt cheap mortgages over the past 15-20 years, it is far, far, far more financially sensible to invest your spare cash (after you have built and maintain an emergency cash fund) rather than wasting it on something as stupid as mortgage overpayments.

    Over the past 3 years, I have averaged a 33% return on my investment portfolio (and up 10% so far this year). Compare that to the <3% on my mortgage. It's a no-brainer. But, more than that, if I do hit hard times, I am able to cash in some/all of my investments, whereas the last thing the bank would allow me do is borrow more money.


  • Registered Users Posts: 76 ✭✭Arealred


    I overpay on the mortgage. It's a guaranteed return. Knowing you will own the roof over your head no matter what is a great piece of mind. Investing is all well and good but the taxman gets his cut. Agree with other posters, have a buffer saved for the rainy day but after that clear the mortgage.

    The earlier you pay extra on the mortgage the less interest. Would strongly recommend anyone to download Dr Karl's mortgage calculator and play around with different overpayment figures its an eye opener.


  • Moderators, Regional Midwest Moderators Posts: 11,034 Mod ✭✭✭✭MarkR


    I reduced the term of my mortgage last time my fixed rate was up for renewal. Increased my monthly payment to an amount we were happy with, and took 4 years off term of mortgage.


  • Registered Users Posts: 51,060 ✭✭✭✭bazz26


    Yep, I overpay about 100 euro every month on top of my normal monthly repayment. The over payment is voluntarily so will continue to do as long as I can afford it. I also paid a modest lump sum off the capital amount last summer just before I moved to a new lower fixed rate. That saved me about 3 years in interest alone, the money was earning next to nothing in interest anyway sitting in a deposit account. Every little helps to pay off the mortgage quicker and pay less interest.


  • Registered Users Posts: 5,127 ✭✭✭James Bond Junior


    Bought in 2015 at the tail end of the bad times and cheap houses. We currently overpay by about 60% PM as the place is rented and rent more than covers 160% payment even after tax. We moved the mortgage in the 1st year as it was with KBC and they were awful to be a customer with so it was an F.U. as much as anything.

    Switched to UB and have availed of their ability to let you revalue to bring down the LTV and unlock lower rates. LTV is below 50% now. We fixed for a 3 years as we are away and wanted certainty. Between switching and overpaying at the current amount, we will be finished in about 8 years anyway, a reduction of about 15 years in total.

    We are in two minds on what to do, we should have enough savings to pay it off in full by late summer but we are hoping to move up the property ladder in a few years to something more spacious. Having liquid cash for another deposit is very important and we may keep this house as an investment rental. If there was a repeat of the crash, I'd rather not have to sell.

    House is big enough for now though and even if we welcome along a small person it will be fine for another few years.


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  • Registered Users Posts: 2,043 ✭✭✭martinedwards


    mortgage free on a 5 bed detached house at 54.

    never overpaid a penny.

    but then we never had loans.... saved up to buy cars holidays etc.


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