44 year old + two kids, hoping to move house

S

Southwesterner

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Personal details
Age: 44
Spouse’s/Partner's age: 45
Number and age of children: 2 children ages 6 and 9

Income and expenditure
Annual gross income from employment or profession: 145k
Annual gross income of spouse: 36k

Monthly take-home pay: 9000 euro (both incomes)

Type of employment:
Me-- Public sector permanent,
Spouse: Self Employed

In general are you:
(a) spending more than you earn, or
(b) saving?
Saving

Summary of Assets and Liabilities
Family home worth €350k with a €176k mortgage
Cash of €90k
An post state savings: 250k
Zurich Life investment: 50k

Pension fund:
self: paying in since 2009 to defined benefit matching employers contributions, no AVCs
Spouse: 45k (1k per month since mid 2018, private pension)

Company shares : €0k
Buy to Let Property: None

Family home mortgage information
Lender: Ulster bank (currently)
Split between 2 accounts
125,000 on a tracker rate of ECB +1.125,
51,000 on a tracker rate of ECB +0.75.
25 years left

Other borrowings – car loans/personal loans etc:
Personal loan 305k, repaying 700 per month at 0.25% interest. 36 years remaining

Do you pay off your full credit card balance each month?: Yes

Other savings and investments:
Do you have a pension scheme? Yes
Do you own any investment or other property? no

Other information which might be relevant

Life insurance: Yes

What specific question do you have or what issues are of concern to you?

We have been hoping to move house. We plan to buy a new house in the next year or two for approx. 900k (at current rates), when the right one comes up

Questions are: What is best to do with the mortgage/ savings.
Should we pay down our mortgage with the cash/ savings now? Or some of it? Or start buying AVCs for the pension fund? Or keep that money available for the house purchase. Hoping to send both kids to college.
 
Clear the mortgage, as it reduces a monthly outgoing which will strengthen your new mortgage application.
 
You say that you are a permanent PS, and you also say that you are in a DB pension scheme, "matching the employer's contributions".

The vast majority of PS pension schemes are unfunded, with no employer contributions, so there seems to be a confusion there.
 
I suspect most mortgage lenders will be very nervous to see 305k debt over 36 years, even if it's at 0.25%.

Is that loan a mortgage?
 
The focus has to be on moving house.
So no more AVCs which are not matched by your employer.
Don't repay your mortgage until things are sorted out. Cash gives you flexibility to pay the deposit.

Your current position appears to be:

House €350k
Savings: €390k
Mortgage -€176k
Personal loan: -€305k
Net assets: €250k

Target house price: €900k
Net assets: -€250k
Personal loan : -300k
Mortgage required: €350k

You should be able to get mortgage easily enough.
However, if they insist that the personal loan be repaid, then you would need a mortgage of €650k which would not be possible.

So, it all comes down to the nature of the personal loan. When the lender sees €700 a month going out to someone, they will want to know the nature of that commitment.

Given your odd circumstances, you should see a mortgage broker now and apply for a mortgage to see where you stand.
 
Check with the broker if it's possible to buy another home without selling your own home first.

For example:
House €900k
less cash: €390k
Additional mortgage :€510k
Existing mortgage: €176k
Total: €700k
Salary: €180k
Multiple: 3.9 times

If that is possible, then hold onto your cash.
As soon as you exchange contracts on the new house, put your existing house on the market and sell it.
It's much easier to move from one house to another rather than trying to synchronise the sale of your own home with the purchase of the new one.

If that is not possible, then pay off your mortgage immediately.

Brendan
 
Protocol said:
You say that you are a permanent PS, and you also say that you are in a DB pension scheme, "matching the employer's contributions".

The vast majority of PS pension schemes are unfunded, with no employer contributions, so there seems to be a confusion there.
Click to expand...
Probably a commercial semi state, they are public sector and have funded pension schemes. The thread starter did say public sector, not public service. Also, only a very small percentage of public servants earn 145k, the percentage would be higher in the semi states.
 
first, thanks very much all for your replies. I appreciate it very much and I apologise for the errors. to clarify

1. The personal loan of 305k tracks ECB rates as per revenue requirement-- it was lower but now is 1.25% interest over the 36 years - family loan

2. My pension is a standard single public service pension, contributing 5.5% of gross pay every month, no additional contributions.
 
It's 6.5%, plus the ASC Additional Superannuation Contributions.

ASC should be listed on your payslip.
 
Southwesterner said:
1. The personal loan of 305k tracks ECB rates as per revenue requirement-- it was lower but now is 1.25% interest over the 36 years - family loan
Click to expand...
Revenue requirements are only that it tracks deposit interest rates, not the ECB refinancing rates.


It's a very good rate but over 36 years many things could happen. Can the loan be called when the lender passes away or needs the money? Even if there's nothing in the loan agreement to that effect you could come under a lot of moral pressure at some point to repay. The loan also takes you into your eighties - banks will really limit your borrowing capacity if they are aware of this.
 
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