Your Questions: Should I use my pay increase to reduce my mortgage, or save it?

Your Questions: Should I use my pay increase to reduce my mortgage, or save it?

Posted on 12Aug

Your Questions: Should I use my pay increase to reduce my mortgage, or save it?

by MyMortgagesCategories UncategorisedTags , , , , ,

Charlie Weston

Question: I have just been promoted at work and got a pretty big pay increase. I am going to treat myself and the family to a holiday this year, as we have not been able to afford one since we bought our home two years ago. My wife thinks maybe we should throw an extra few euro on the mortgage each month, but I am not sure. Maybe we should just save it?

Answer: Well done on the promotion, and enjoy your well-deserved holiday. You should listen to your wife, according to the head of credit at Joey Sheahan.

Banks are paying little or no interest on deposits, so you probably would not be doing yourself any favours by saving this extra cash.

Unless, of course, you don’t have anything in a rainy day fund, in which case it might be wise to accumulate some savings.

But if you already have some money set aside, then Mr Sheahan advises you to look at overpaying on your mortgage.

You do not mention what type of rate you are currently on, and there could be a breakage fee if you are on a fixed rate, so talk to your bank or broker about this.

Even with a breakage fee, it may still make financial sense in the long term.

This example illustrates the impact on the mortgage term reduction and interest savings.

Say you are on a €300,000 mortgage over 35 years at a variable interest rate of 3.15pc, where you would be paying €1,179.81 monthly.

By overpaying €100 monthly, this would reduce the mortgage term by four years and seven months, and reduce the total interest amount by €29,127, Mr Sheahan calculated.

You will be very glad of almost five fewer years of mortgage repayments when the time comes.

Question: I am 44 years old and have never had health insurance. I am now back in permanent employment and want to take out cover. Is there any way of avoiding new age loadings, and what corporate plans do you recommend?

Answer: Unfortunately, you are out of luck when it comes to the age loadings, according to Dermot Goode of

The legislation requires that any person who is 35 or over on joining must pay an additional age loading equivalent to 2pc for each year over the threshold.

For this member, this equates to a loading of approximately 20pc (10 x 2pc).

Once you join, the loading is fixed at this level and it remains in place for 10 years.

For the best corporate plans, Mr Goode suggests that you check out the likes of Irish Life Health 4D Health 2 (€1,263), Laya Simply Connect Plus (€1,286) or VHI’s PMI 36 13 (€1,242).

Please note that these costs are net costs after tax relief at source, with no loadings applied.

Question: I am 41 and single, and I am hoping to have a baby. Three years ago, I had my eggs frozen, so now I am looking at the donor route. This is not an inexpensive process. Already, I have spent a fair bit of money having my eggs frozen and paying for them to be stored in the clinic, and the next step of the journey is going to cost me several thousand euro. Chances are, I may have to try several times before it works. I am willing to pay what’s needed, but I am wondering if there is any financial assistance at all out there for someone in my position?

Answer: Late last year, Taoiseach Leo Varadkar said the Government had set aside some funds, specifically €1m, to help people struggling to conceive, and that the Government intended to put in place some type of means-test financial support.

This has yet to be implemented, so as it stands, there are not IVF-specific supports available from the State, according to the commercial director of Eileen Devereux.

However, you can claim a tax relief worth 20pc of the costs involved in the process.

This applies to any costs incurred in the previous four years, so you should be able to recoup some of the money you have already spent.

In addition, the Drug Payment Scheme will cover the cost of any medication over the €124 monthly threshold.

There is no means-test for the scheme and you can apply through the HSE using your PPS number.

If you have private health cover, it is also worth checking out what you are eligible for, as often there is a limited amount of cover for fertility treatments available to policyholders, or you may be eligible for some refund on the cost of consultant fees.


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