What’s the best way to pay a lump sum on the mortgage?
Q My wife and I have a lump sum that we are considering applying to our mortgage. Should we apply for its application on the capital and, if so, will this reduce both the duration of the mortgage and the monthly repayment payments?
A A mortgage is the most important loan that most households will have, but it is not the most expensive. So you should consider paying off any other more expensive loans first, according to Kevin Johnson, chief executive of the Credit Union Development Association (CUDA).
Debt such as credit cards or overdrafts will have a significantly higher interest rate than your mortgage and should therefore be given priority. Mr Johnson says everyone should have a rainy day fund of two to six months of their take-home pay just in case of an emergency.
If you still have funds left after this, then any lump sum applied to your mortgage will not be would reduce the outstanding principal, which would reduce the interest you will have to pay over the remaining term, as well as your monthly payments.
Check with your lender to get a understand the impact that your lump sum could have, as you should have the choice of reducing your monthly repayment or maintaining your current repayment and reducing the term of the loan.
The latter will be more beneficial if you can afford it, the CUDA boss said. Ask if a lump sum payment might be subject to a fee if it is a fixed rate mortgage.
Q I am a member of Vhi. When I go on vacation, I always book travel insurance with them. Before Covid-19, I had booked an Alaska cruise. After purchasing my insurance, the customer service person informed me that Vhi does not cover the passenger transferred from the ship to shore, but will cover me once I get ashore. Could you give me the names of the insurance companies that cover the entire vacation, including the ship ashore?
A There are some providers who offer specific travel insurance policies for cruises with the different terms and conditions. What is covered and what is not covered in their policies is described on their websites. Ucompare.ie is a comparison site that should point you in the right direction, according to Insuremyholiday.ie Managing Director Jonathan Hehir.
Some insurers specialize in travel and cruise insurance policies that cover medical expenses when a traveler becomes ill on board a cruise ship and requires medical attention ashore. Or when a traveler has to cut short their cruise vacation and return home in the event of a family medical emergency or death.
Mr. Hehir advises all travelers to discuss their special needs with their insurer or broker before purchasing coverage. Vhi said if a member of Vhi Healthcare were to receive emergency medical treatment aboard a cruise ship, his private medical insurance would cover him for it. If, for medical reasons, the insured must be transferred to a more suitable land-based medical facility, this will also be covered.
Q We are a family of five struggling to fit into our three bed trailer. We have approximately $ 500,000 of equity in our current home and we have savings of $ 70,000. We don’t know if we need to fit out the attic and garage, or move out and get a bigger house. The children are in school, so we want to stay in the area.
I am a technician and earn € 120,000 basic and my husband is a nurse and earn € 54,000 basic. We are concerned that it may take a while to find a new home if we sell. We usually come out with more, due to a bonus and overtime. Do you think we can move out and buy a five bed house, which costs around 1 million euros, or should we expand our current house and avoid the risk of a move?
A It might be easier to expand your home, according to Joey Sheahan, Credit Manager at MyMortgages.ie and author of The mortgage coach. However, he said it might be worth moving now if you think you’re going to be buying your “forever home”.
You will likely need to sell or at least sell your own home first, as this will put you in a stronger position. This is especially the case if you are bidding on a new home and you are faced with a cash buyer or someone who does not have to sell a property.
If that’s an option, you might consider selling first and moving in with your family or renting a property, Mr. Sheahan said. Securing a mortgage amount of € 609,000 (3.5x gross annual income) shouldn’t be a problem, he adds.ed.