Do you overpay your mortgage?

Cyrus wrote: »

maybe start with an accountant because what you posted was utter tosh.

so all those respected commentators, again, some academics, others not, and the institutions that back those statements, i.e central banks, are wrong, yea? baring in mind, some of those commentators actually realised 08 was in the post prior to it, due to these facts, you know, those that were recommended to commit suicide for spreading alarmist information about the oncoming crash!

Cyrus wrote: »

i have no idea, but your post and reference to 'double entry accounting' is utter nonsense, so you clearly don't understand it.

so you are disagreeing with those respected commentators and those institutions ,no offence, but im gonna stick with their research, but im willing to listen to your version of events?

Cyrus wrote: »

i am saying what you wrote is nonsense



whatever you mean by the above it isnt what you think it is.

im sorry, but im going to stick my sources, this is exactly the way they explain it, even though im sure the process is a lot more complicated than just this, again, this is exactly how they explain it, again, baring in mind, some of my sources realised 08 was in the post, knowing this from their knowledge and data analysis. again, im willing to listen to your version of money creation?

Cyrus wrote: »

i am saying what you wrote is nonsense



whatever you mean by the above it isnt what you think it is.

Hes basically saying the banks write an IOUs and you as the mortgage taker are the actual creator of the money by repaying the debt. Not some magic ECB money tree.

Zinchenko231 wrote: »

It's astonishing that Lehmann Brothers went bankrupt with their ability to create money from thin air.

They had testicles everywhere.

Zinchenko231 wrote: »

It's astonishing that Lehmann Brothers went bankrupt with their ability to create money from thin air.

They didn't play ball with a request from lizard people/the Rothschilds/Bill Gates/Big Pharma.

silliussoddius wrote: »

Too much double entry

:D I got nothin

Amirani wrote: »

I think they were doubling entering their double entries, and making derivatives out of them.

so they securitised double entry squared?

nice

AAA rated too i assume

Louis Friend wrote: »

This is nonsensical.

Repaying mortgage debt at a rate of 3% is like getting a GUARANTEED return of 6-7% on a personally-held investment account.

Tax arises at rates of 33%, 41%, and 52-55%.

Plus it costs money to invest in terms of management fees and transaction charges.

And returns aren’t guaranteed; there is the potential to lose money.

So behind Door A is a guaranteed return of 6-7%, and behind Door B is a potential return or loss; I know which one I’d choose and advise people to choose.

My own approach is simple:

1) Build a cash reserve equal to 6 months’ expenditure
2) Maximise my pension contributions
3) Maximise my mortgage overpayments
4) Invest personal cash

It's more than that if you factor in potential and likely rate rises against the non-overpaid mortgage

6 wrote: »

Awful advice tbh.

It's not really. Many people get caught up in the total interest bill for a mortgage.interestvrates fir new loans are in the 2-2.5% bracket. At 2.25% on a 300k loan you will pay 84k over 25years. Say your early redemption brings that to 20 years you will save approximately 18k in interest.

A 20k car loan at 7% will cost 3.5k over 5years. A 50k house renovation will cost you 10-12k over 7years. 75k for children's education ( about 50% of projected two children's third level costs) will cost you 15k over 10 years. Any one of these will eat into any interest saved and it may well cost you much more in the long run.

Louis Friend wrote: »

So the average rate for new mortgages these days is 2.8%.

That needs to be paid from after tax earnings.

So, BEST CASE SCENARIO, assuming CGT rates and no costs, a return of 4.2% is required to justify investing.

Or to put it another way, clearing debt that’s costing you 2.8% is the equivalent of a gross return of 4.2% in the parallel universe that some posters occupy where all returns are subject to CGT and investments only go up in value.

In reality, it’s the equivalent of a much higher return.

The key point though is that even if someone was only offering you a guaranteed return of 4.2%, you’d be insane not to take their hand off.

Investing outside of a pension whilst carrying non-tracker mortgage debt is deranged from a financial perspective.

You are assuming people can only access invested income at the higher tax rate. This is not true of children's education funds. You also have not allowed for compounding of interest on investments. Opportunity Investments ( such as property) as well work outside these norms. Business investments where you actively manage an investment may seem less attractive but outperform many assumptions you are making

We've overpaid ever since we got our first mortgage anything from 20 pounds (yes I'm that old) a month to several hundred euro defending on circumstances. Just finished off mortgage last month 6 years early so now debt free. Was supposed to spend the spare cash on a blowout holiday - maybe next year!

Louis Friend wrote: »

None of that makes any sense.

What’s a “children’s education fund”?

What parallel universe do “opportunity investments” inhabit?

Business investments where you’re actively involved are different so that’s not comparing like with like. Passive investments should only be compared with other passive investments.

I actually manage money for a living…I’m a CFA. My mortgage is at 2.5% and I haven’t a penny invested directly in my own name. Yes, my pension is maxed out, but I lob the spare cash at the mortgage. Given Ireland’s harsh tax regime for private investors and our very high mortgage rates, it’s crazy to invest personally whilst carrying mortgage debt.

well I am glad you are not my CFA.

I have gone through the costs to put children through college already in this thread. It will cost in the region of 75K/child. By opening an investment in a child's name and putting money into it it will help to fund college. While most young adults work while going to college they will not use up all there tax Credit. As well some of the the money can be extracted into a normal account pre college. Even if you leave some money in the account till college there highest rate of tax is 20%

Opportunity investment is where you keep saving in a cash form to invest when a down turn happens. This may be into stocks or into property. Last Apri/May If you invested in the Irish banks your return would be above 200%. If you had cash in 2012/2013 you could have bought apartments for the price of a midrange new car today such apartments are worth 4-5 time the cost then. Even as late as 2015/16 you could have bought houses in mid sized county towns for 50-80K that are worth 50% more than that now and you still have to add rental income to the return.

Very little investment is passive. You have to actively look at all investment.

Eircom_Sucks wrote: »

well with the " Oracle of Nebraska " on the board it will continue to do well i would think

I dont buy into that he is the only one running that company at all.
What i like about them is that they are very transparent.
But I think ETFs are probably a better way to go once you have enough invested in shares to use up your yearly cgt allowance.

Deleted User wrote: »

This is an awfully funny thread. People get very defensive if anyone doesn't follow their instructions.

I can only speak for myself, but I have a retired neighbor, who used work with mortgages in one of the main Irish Banks. He drives a very nice car, retired at an early age, and has, what I would consider a very comfortable life.
He offered advice one evening, and I gladly listened to him.

Bear in mind, I started with a 30 year mortgage of approx €350,000. 4 years fixed rated at 2.6%

His advice, in simplistic terms was:
1. Max out your pension contributions if you can afford to
2. Have no more than 6 months of salary easily available - rainy day fund (Anyone more is not working for you)
3. If you can find an investment that has a return of greater than 5%, then invest in it
4. If you can't be sure of a greater than 5% return, then put that extra money into overpaying your mortgage

Avoid, in anyway possible paying interest only on your mortgage.

Good advise i would say.

No.

JimmyVik wrote: »

I have used up the allowance each year of €2540 so no CGT tax payable of it so far anyway. I will keep using the CGT allowance each year to reduce any tax payable.

What are you doing to use up the allowance?

JimmyVik wrote: »

I dont buy into that he is the only one running that company at all.
What i like about them is that they are very transparent.
But I think ETFs are probably a better way to go once you have enough invested in shares to use up your yearly cgt allowance.

Your CGT allowance is only used up by disposing of the shares. Taxes are higher, and administration more onerous on ETFs for Irish investors.

[Deleted User] wrote: »

Avoid, in anyway possible paying interest only on your mortgage.

This is the most important bit. But if you do insist on doing it, you should at least understand what you are doing.

McGaggs wrote: »

Your CGT allowance is only used up by disposing of the shares. Taxes are higher, and administration more onerous on ETFs for Irish investors.

Its called harvesting. Very easy to do.
Only go to ETFs when you have enough in shares to use up that allowance.
If you then have to go to ETFs thats a good thing. It means you are doing well.
A spreadsheet will sort out all you tax and you can pay them easily.
And even with ETF tax alone you would still beat paying overpaying the mortgage.


But I get it. Stock markets are not for everyone.
But if you do do it properly you will be paying off your mortgage with your investments a lot earlier than if you just overpaid the mortgage.