Mortgage fixed rate term
- Thread starter FIAT 450
- Start date
Farmer Murph
Well-Known Member
Unless you can pay all your mortgage off completely, at the current rates it’s not worth paying a little bit off extra every month - It’s the cheapest money you will ever borrow.
Use any extra money you have now to pay off any loans or build up a cash reserve for future purchases
Use any extra money you have now to pay off any loans or build up a cash reserve for future purchases
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FIAT 450
Well-Known Member
Ya would agree. Esp if you have a young family. You need the few pound in the back pocket. Be easier down the road when the pressure is off to put a few extra bob into it then
They are at their easiest on the pocket when they're small believe me. The bigger they get the more demands there is for money.
JohnBoy
Well-Known Member
Dunno how other mortgages work but ours is with ptsb, we overpay but it goes into a separate bucket. It doesn't reduce the principal as such, but when the interest is calculated each month it is calculated on principal minus the overpayment bucket.
We could withdraw the overpayment bucket or apply it to the overpayment. It's a very flexible arrangement.
We could withdraw the overpayment bucket or apply it to the overpayment. It's a very flexible arrangement.
I really like the sound of that. If I'm reading it right, it basically means a return of over 2% (unless you're on a tracker) net of tax on liquid money. I have approval in principal for a switch to a different lender which I'll probably go ahead with out of laziness but if I'd known about that facility I'd have been all over PTSB.
A lot of lads above are saying that present mortgage rates mean that mortgage loans are cheap money which maybe they are but it's worth remembering that they have to be cleared with after tax money so *if* you have spare cash *and* you're a top rate tax payer *and* you don't have any (present or anticipated) real need for liquid funds, paying off a chunk of your mortgage is often the best of a bad lot as investment opportunities go.
Crops
Well-Known Member
There’s higher than that around.
avent
Well-Known Member
snap, I got the exact same letter today but what do you do fix again for2 or 3 years or take a chance on variable rates that seem to be going only one way
Arthur
Well-Known Member
There is no option to fix in my letter, my reading of it is I will be put on a variable rate whether I reply or not, What is the point of sending out such a letter ? , phone call upcoming next week.
Crops
Well-Known Member
I wouldn’t be in a hurry to fix rates, ECB appear to have stalled interest rate rises as inflation is falling.
I’m on a tracker and the rate is higher than yours now, I did well out of it for years so I’m not complaining too much.
This is the second mortgage I’ve had in my life, I remember when I took my first one out in about 2004. I didn’t really know what the difference was between tracker and variable. I still remember looking up the definitions online to get a handle on things;
The tracker tracked the ecb rate plus a fixed margin for the bank, The variable rate was set at the “discretion of the bank”. I said to myself I know which I’ll go for….
The banks are well slippery. A few years ago I decided to put a lump sum against the mortgage. I told the chap behind the counter what I wanted to do. He asked if I wanted to put it against the term of the loan or to reduce the size of the monthly payment. I said I didn’t know and what would he suggest?
He said I’d pay less interest by reducing the term and therefore I asked to go with that.
Lo and behold, the bank reduced my monthly payment anyway. I sent a cranky letter outlining what I had requested and they then changed it to reduced term.
Slippery as could be.
I’m on a tracker and the rate is higher than yours now, I did well out of it for years so I’m not complaining too much.
This is the second mortgage I’ve had in my life, I remember when I took my first one out in about 2004. I didn’t really know what the difference was between tracker and variable. I still remember looking up the definitions online to get a handle on things;
The tracker tracked the ecb rate plus a fixed margin for the bank, The variable rate was set at the “discretion of the bank”. I said to myself I know which I’ll go for….
The banks are well slippery. A few years ago I decided to put a lump sum against the mortgage. I told the chap behind the counter what I wanted to do. He asked if I wanted to put it against the term of the loan or to reduce the size of the monthly payment. I said I didn’t know and what would he suggest?
He said I’d pay less interest by reducing the term and therefore I asked to go with that.
Lo and behold, the bank reduced my monthly payment anyway. I sent a cranky letter outlining what I had requested and they then changed it to reduced term.
Slippery as could be.
Native Grain
Well-Known Member
Saw this a couple of weeks ago
Just when I seen it mentioned in this thread about a mortgage been the cheapest money you could borrow and have heard it numerous times from others and always stuck with me as being the wrong mindset.... And nearly back to the good old days of " sure get a few extra Bob on the mortgage.... buy a new car.... go on a holiday.... sure it's the cheapest money you can borrow"
Maybe I am way off the mark here but I just always found that mindset wrong.
Maybe I'm doing it wrong myself. A good while back I seen this add popup on Facebook, it was about people in serious debt, looked at a few of the videos from their page and offered advice to everyone in different circumstances to help reduce their debt.
But it was always the same advice, build an emergency fund.
Start by paying off the smallest loan first. Once that's done add that repayment to the next loan and keep rolling through the loans in that manner.
I don't want this to sound like a trumpet blowing post but hopefully help someone else achieve their goal. from my own circumstances I started it 3 years ago and currently on track to taking 19years off my mortgage and will have saved 35-40k in interest.
I know you could sit down and run the figures and come to the conclusion that you could be better off spending the money buying land or stock or investing in X y z . But I just think there would be some satisfaction in waking up one day debt free and knowing no-one can take the roof from above your head.
Maybe I am way off the mark here but I just always found that mindset wrong.
Maybe I'm doing it wrong myself. A good while back I seen this add popup on Facebook, it was about people in serious debt, looked at a few of the videos from their page and offered advice to everyone in different circumstances to help reduce their debt.
But it was always the same advice, build an emergency fund.
Start by paying off the smallest loan first. Once that's done add that repayment to the next loan and keep rolling through the loans in that manner.
I don't want this to sound like a trumpet blowing post but hopefully help someone else achieve their goal. from my own circumstances I started it 3 years ago and currently on track to taking 19years off my mortgage and will have saved 35-40k in interest.
I know you could sit down and run the figures and come to the conclusion that you could be better off spending the money buying land or stock or investing in X y z . But I just think there would be some satisfaction in waking up one day debt free and knowing no-one can take the roof from above your head.
Absolutely for credit cards.
But take this as a very crude and inaccurate example. 😆
You have
100k at 9% 10 years remaining paying 700/month.
20k at 7% 3 years remaining paying 300/month
10k at 8% 2 years remaining paying 200/ month
Assuming you can pay extra without being penalised.
Increase the lowest to an amount that you can afford to pay extra a month. Say 300/month.
So the lowest loan becomes 500/month.
Once it's paid off , take that 500 and add to the 20k loan. . Now paying 800/month... Once that's cleared take that amount and add to your 100k loan...
I think that approach is more or less a mental stimulant that you are getting loans cleared instead of concentrating on the big loan and not seeing that you are making ground in paying it off.
Yellow-belly greenhorn
Well-Known Member
Great advice where possible and where there's not another way the extra cash can be used to generate more income than you'd save in interest paying down the loan quicker.
Mortgages were cheap money when they were 20-25 years and houses were a proper ratio to average income. Interest costs are insane now they are 30-35 years and takes two good incomes or 1 very very good one.
Mortgages were cheap money when they were 20-25 years and houses were a proper ratio to average income. Interest costs are insane now they are 30-35 years and takes two good incomes or 1 very very good one.
JohnBoy
Well-Known Member
It's good logic alright.
I graduated college owing 13k to AIB, the month I got that paid off I setup a standing order into a savings account. I never saw the repayment money so I continued putting it aside.
The logic above is the same. When one debt is gone don't start spending it's repayment, use them to pay down the next debt.
It's a good system if you are able to over pay at all.
Your right,It all depends on each person's circumstances and I suppose that's where the professional advice can steer someone in the right direction, but with all investments comes risks and that's where I would chicken out and go the safe route 😆.
And that would probably make the most financial sense.... But I really do think that the biggest obstacle is a positive mental impact of making progress....
I do sometimes get overwhelmed with tasks and get frustrated when I didn't get what I wanted done. Say I had planned to do today 5 jobs tomorrow .... And I got 1 done.... That would eat me up. If I planned to get one job done tomorrow and got it done I'd feel a hell of alot better about it.
So for me if I consolidated all those loans into one I would probably give myself anxiety having one big loan to pay back over longer Vs achieving paying off the 3 one by one....
Don't get me wrong I'm not the type that promotes spiritual well-being and the likes.. I just think sometimes you need to think of the mindset in some financial decisions and not just the bottom line.
Absolutely, and promotes living more frugal if you don't see it sitting in your current account. Did the same with the credit union. At the end of the year if there were no emergencies 70% goes back into loans. And start again.
That’s a very interesting approach and agree about being a mental stimulant.
Logic etc would say pay off the highest interest rate loan, but I can see how this approach give the sense of making more progress and being a greater motivation.
Yellow-belly greenhorn
Well-Known Member
Ah I meant more so to potentially use the extra money for something on farm or whatever that might make a higher return than the Interest savings. Renting a bit more land or bit more stock etc that would hopefully return more per year than loan interest savings.
All depends on circumstances and personal view on debt. I know some people who can't save, need to borrow for everything and don't mind loans. And others who detest loans and save like mad. I think business loans are good as very hard to grow a business at pace on savings, personal loans are dead money unless absolutely necessary in my opinion.
Investments is a very long game and no different than bookies imo if trying to make a quick buck out of it unless very skilled.
Interestingly though read a few articles that showed that consistently investing in blue chip companies over your lifetime is more profitable than say investing in a second house via buy to let mortgage with far less hassle too. Not many people would think that way tho as often forget the hassel and costs that come with property and renting. Capital gains tax is much lower than rental income tax too.
Boundary boy
Well-Known Member
Was that referring to America or Would that apply in ireland too given the punitive taxes on stocks and shares here?
Yellow-belly greenhorn
Well-Known Member
Was one done on Ireland too. 33% here. America and UK are 15-20% typically so yes gains are better there.
Tbh with the shitty laws on leasing in Ireland where you've pretty much 0 chance of recouping losses from Tennant's with renting out plus rental income getting taxed at over 50% in most cases not to mention upkeep of house I think it's as valid here as anywhere. Tough game unless your lucky with Tennant's and have a thick skin.
A good pension is technically best place to push spare cash and much better value than paying down a mortgage as it reduces tax bill. Tax free up to a substantial amount on the way in (age dependant). But you need to live to Pension age is the catch of course.
sorry going off topic a little.