Tuesday 24 October 2017

What should I do with my lump sum?


I have €54,000 to invest. I was thinking of paying off a portion of my variable-rate mortgage of €204,000 costing €844pm or putting it into the government 10-year bond. Which would you suggest? I'm 32 years old.

Reducing your mortgage by the lump sum would drop your monthly payment to €619.93, saving a total of more than €38,000 in interest over the term. However, if you maintain your mortgage payments also, your savings on mortgage interest would rise to €84,000, chopping more than 14 years off your loan. It's certainly something to be considered, especially with interest rates dropping.

In terms of the solidarity bond, I'm not a huge fan because 10 years is a very long time to lock in money, even for a 50pc return. The rate is a paltry 1pc pa, subject to DIRT, and the remaining 40pc is only paid at the very end. You are young enough if you want to do it, though. The €54,000 would gain you €25,542 net, assuming DIRT stays at its current 27pc rate.

What about a half-and-half approach? Pay half off the mortgage and put the rest into An Post's attractive 5.5-year Savings Certificate at 21pc, tax free. This gives you €5,670 at maturity and you're not tied in until your 40s.

I am in some arrears with my mortgage. My current account is in the same branch as my mortgage and I see the bank has taken funds from this without my permission to pay some of the arrears. Now two utility bills bounced because the direct debit wasn't paid. Can they do this?

Without more information it's hard to know how this happened, but I suspect that the account 'feeding' the mortgage is not your current account. Or perhaps the bank emptied whatever surplus it found, leaving you short.

You're asking if they can do this and, increasingly, the answer seems to be yes. Banks can indeed transfer funds from one account to another, says Noeleen Blackwell of the Free Legal Advice Centre (FLAC). "Look at the small print, where there is sometimes a facility. It could be that, on taking out the mortgage, you authorised it or it may be in the current-account authorisation."

If not, and your account was summarily stripped, then you should complain to the lender's Appeal Board and then the Financial Ombudsman.

Ms Blackwell adds that arrears would normally trigger the Mortgage Arrears Resolution process (MARP). "It applies only to principal private residences so it depends on whether this mortgage is on your family home. If so, the arrears should have alerted the bank's recognition of a mortgage in trouble and the MARP would apply."

Your bank is obliged to give you information on this and how to claim for Mortgage Interest Supplement. It is obliged to write and tell you that you are in arrears within three days, which you do not indicate.

The lender must explore options you offer to it, such as an interest-only option, a reduced payment or deferring interest. In the absence of any engagement by the borrower, the bank will seek to recover its money. I advise you to get in touch with FLAC or MABS immediately and contact your bank.

www.flac.ie 1890 350 250. www.mabs.ie 1890 283 438

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