Home economics: We need to cut costs
Friday September 05 2008
We've just bought a house and have gone over budget. We'd been renting while waiting on the right property to come up and it did. We'd like to keep the costs of physically moving as low and hassle free as possible. What would you advise?
I'm generally against DIY moves, so I won't suggest you rent a van and move all your own furniture. However, if you don't have much and you're not going far, you may want to do this. Make sure you're insured to drive whatever you hire or get someone who is.
If you use a company however, move mid-week and negotiate a better rate. The most popular (and expensive) time to move is the weekend and the end of the month, particularly for renters.
Get your ducks lined up in terms of switching utilities. Find out if you can save money by keeping your old phone number, for example. Don't bother moving bank accounts etc even if you're in a new town. It may cost you.
However, the biggest money saving comes from shopping around for things like life insurance and the mortgage itself. Use a broker, or ask different lenders to break down costs for you (i.e. cost per €1,000 borrowed and total repayment over the mortgage's lifetime) so you can compare like with like.
Switching to a lender with just half a per cent difference in rate can save over €850 a year in repayments for a €250,000 loan over 25 years.
I've received a redundancy lump sum of €40,000. I have another job in the pipeline which doesn't pay as much as the old one, so I'm anxious to cut my outgoings. What difference would it make to pay off €160,000 of my mortgage?
It would make a massive difference and is an excellent way of using your lump sum, particularly if you already have another job. I don't have all your details, but using the Bank of Ireland overpayment calculator I've assumed your mortgage is over 25 years at 5.5pc.
On that basis, paying off the €40,000 in one go would save you €33,644 over the lifetime of the mortgage, and bring your monthly repayments down from €982 to €736. However, and here's the important bit, if you can afford to continue paying the full amount of €982pm, the extra €246 can be diverted as a monthly overpayment which would clear your mortgage ten years early and save you a huge €44,733 in interest payments.
Contact your own lender for the procedure and make your instructions clearly in writing. There should be no fee to set this up unless you have a fixed rate mortgage. Good luck with the new job.
Questions to siryan@independent.ie
- Sinead Ryan
