MORTGAGE-FREE RETIREMENT DILEMMA
Sinead Ryan answers your property questions
Should you pay off your mortgage early? Sinead Ryan reports
QMY HUSBAND and I are in our midfifties and have a mortgage of €185,000 with eight years left and we have savings of €100,000. Would you recommend that we pay the €100,000 off the mortgage or buy an investment holiday property in Spain and with the rental income pay more off the monthly mortgage, as it is our dream to commute from Ireland to Spain or could you recommend where we could invest the money for our retirement?
You have lots of questions here! I’m not going to decide between them because I think the first thing you need to do is work out which you would like to do the most. Being mortgage free is a goal for all of us, and this will be happening for you in eight years, one way or the other. The only question is how you plan to fund it during that time.
If you pay the entire €100,000 off the loan, it will reduce the term by four years, seven months (assuming 4pc interest rate), and give interest savings of €25,496.
If you are on a fixed rate, you may run into problems with your bank, however, so do check first that an overpayment is permitted.
You don’t say where the money is currently, but I’m presuming on deposit, and as a result, earning practically nothing, so putting it to use is a good thing. The very first recommendation I would suggest however, is something you haven’t — and that’s paying down any other non-mortgage debt, such as personal loans, credit cards etc, you may have, first.
This is invariably being charged at a higher interest rate so you should get rid of it. If there is none, then with my non-financial hat on, I’d say follow your dream. If you truly want to bi-locate in retirement, then, and only with excellent independent advice, why not buy a holiday property? It will serve the purpose of an income for the next decade, and also become available to you when you retire. Investing in a pension plan here is by far the most tax efficient though. Although the income must be ‘earned’ to attract maximum tax relief, a good financial broker will advise you how to do this. You will get tax relief on the money going in, while it’s in the fund, and a chunk of it will be tax free on retirement. With just 10 years to go however, independent advice is paramount.
Best of luck with whatever you decide.
QWhen I filled out my form for the Local Property Tax (LPT) this year, I put the estimate of my house’s current value in the box. Now Revenue has sent me a bill for over €1,000 as it seems to be assuming I under-paid all this time. I have always paid the correct amount when asked, and I know the rates were frozen but I thought the values were current and was trying to be honest — do I have to pay it? My house has risen in value, but only in the last year or two.
They say no good deed goes unpunished, but in fact, there was no need to disclose the current value of the property. Both the valuations used for LPT and the rates themselves (0.18pc) have indeed been frozen since 2013, so that is the correct value your tax should be based upon.
It won’t be re-valued until 2019 (at least), and this is considered entirely for political reasons. There will be a huge hike for almost everyone at that time, as house prices everywhere, like yours, will have increased. For now, I can reassure you that you don’t owe the bill, so write to Revenue, or call it on its LPT hotline (1800 200 255) and explain what happened. You’re not the only one and I’m sure Revenue will be understanding.