Age: Both 38
Annual gross income from employment or profession: €75,000 as employee in a large company
Annual gross income of spouse: €55,000 as a public sector employee
Monthly take-home pay: c.€7,000
In general are you: (a) spending more than you earn, or (b) saving?
Saving. We have overpaid on our home mortgage for several years and have reduced the original balance from €550,000 (85% LTV in 2006) to €300,000 (still probably 85% LTV!). Also set aside €1,000-€1,500 a month on deposit which is drawn down for occasional outlays (tax return, property repairs, change of car, etc.)
Rough estimate of value of home: €350,000
Amount outstanding on your mortgage: €300,000, repaying c.€3,000 capital a month
What interest rate are you paying? ECB + 1.1%, €300 interest a month
Other borrowings – car loans/personal loans etc.: None. In early 2015 repaid a small top-up mortgage with €15,000 remaining that was on an SVR.
Do you pay off your full credit card balance each month? Yes, when used (rarely)
Savings and investments: c.€25,000 on deposit
Do you own any investment or other property? Yes, 3 x residential investment properties
Estimated Value: €750,000.
Loan: €950,000 (all properties are covered by the same loan).
Rate: ECB +0.75%.
Current repayment: €630 month interest only.
Monthly rent: €2,500. Properties are in long-term leases with the LA with three-year rent reviews (one due this year).
Do you have a pension scheme? Yes, both on defined benefit with 15 and 12 years’ service plus contributing €250 a month to a matching AVC scheme.
Ages of children: 9, 6, 3 (weekly cost of childcare is €370)
Life insurance: c.€475,000 life and accelerated serious illness cover. Taken out based on 35-year term for home mortgage but overpayments mean the cover now exceeds the balance.
What specific question do you have or what issues are of concern to you?
We bought the three investment properties between 2003 and 2006 and re-mortgaged them onto a 25-year interest-only loan in 2007 (combined LTV was 75%). The LTV is now probably 125% but this has not been a factor that affected our decisions.
For the past few years the mortgage on our home has been a priority. We now feel we have reduced that to a ‘safe’ level (relative to our incomes and house value etc.) and are considering scaling back the payments to match the original 35-year term which will be around €1,250 at the current ECB rate. Apart from making the interest-only payments we have taken no steps against the investment mortgage.
The monthly interest payment would be 80% of the rent if the ECB rate were to rise to 2% (leaving only 20% of the rent to cover costs and taxes etc.).
The rent will probably rise but the ECB rate may rise faster. Although unlikely in the medium term, we could handle an ECB rate of up to, say, 8% on our home mortgage but would not be in a position to do so on the investment mortgage unless the rental income rose significantly. The investment mortgage has 17 years left. We are happy to keep the properties even beyond the term of the existing loan but would also consider selling at some stage.
We know we are in a relatively fortunate position but some of that is down to just that, luck. Though we could continue as we are and overpay on our home mortgage we have two issues we want to give some thought to in relation to the investment properties and how they might impact on other things (such as children's education etc.):
1) What happens if interest rates are significantly higher?
2) What happens when the current loan expires in 17 years?
The answer to (1) seems straightforward – save surplus rent now – but what to do about (2)?
Annual gross income from employment or profession: €75,000 as employee in a large company
Annual gross income of spouse: €55,000 as a public sector employee
Monthly take-home pay: c.€7,000
In general are you: (a) spending more than you earn, or (b) saving?
Saving. We have overpaid on our home mortgage for several years and have reduced the original balance from €550,000 (85% LTV in 2006) to €300,000 (still probably 85% LTV!). Also set aside €1,000-€1,500 a month on deposit which is drawn down for occasional outlays (tax return, property repairs, change of car, etc.)
Rough estimate of value of home: €350,000
Amount outstanding on your mortgage: €300,000, repaying c.€3,000 capital a month
What interest rate are you paying? ECB + 1.1%, €300 interest a month
Other borrowings – car loans/personal loans etc.: None. In early 2015 repaid a small top-up mortgage with €15,000 remaining that was on an SVR.
Do you pay off your full credit card balance each month? Yes, when used (rarely)
Savings and investments: c.€25,000 on deposit
Do you own any investment or other property? Yes, 3 x residential investment properties
Estimated Value: €750,000.
Loan: €950,000 (all properties are covered by the same loan).
Rate: ECB +0.75%.
Current repayment: €630 month interest only.
Monthly rent: €2,500. Properties are in long-term leases with the LA with three-year rent reviews (one due this year).
Do you have a pension scheme? Yes, both on defined benefit with 15 and 12 years’ service plus contributing €250 a month to a matching AVC scheme.
Ages of children: 9, 6, 3 (weekly cost of childcare is €370)
Life insurance: c.€475,000 life and accelerated serious illness cover. Taken out based on 35-year term for home mortgage but overpayments mean the cover now exceeds the balance.
What specific question do you have or what issues are of concern to you?
We bought the three investment properties between 2003 and 2006 and re-mortgaged them onto a 25-year interest-only loan in 2007 (combined LTV was 75%). The LTV is now probably 125% but this has not been a factor that affected our decisions.
For the past few years the mortgage on our home has been a priority. We now feel we have reduced that to a ‘safe’ level (relative to our incomes and house value etc.) and are considering scaling back the payments to match the original 35-year term which will be around €1,250 at the current ECB rate. Apart from making the interest-only payments we have taken no steps against the investment mortgage.
The monthly interest payment would be 80% of the rent if the ECB rate were to rise to 2% (leaving only 20% of the rent to cover costs and taxes etc.).
The rent will probably rise but the ECB rate may rise faster. Although unlikely in the medium term, we could handle an ECB rate of up to, say, 8% on our home mortgage but would not be in a position to do so on the investment mortgage unless the rental income rose significantly. The investment mortgage has 17 years left. We are happy to keep the properties even beyond the term of the existing loan but would also consider selling at some stage.
We know we are in a relatively fortunate position but some of that is down to just that, luck. Though we could continue as we are and overpay on our home mortgage we have two issues we want to give some thought to in relation to the investment properties and how they might impact on other things (such as children's education etc.):
1) What happens if interest rates are significantly higher?
2) What happens when the current loan expires in 17 years?
The answer to (1) seems straightforward – save surplus rent now – but what to do about (2)?