Any improvements I could make to protect and prepare for future

F

Faointeach

Registered User
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4
Age: 41
Spouse’s/Partner's age: 40
Annual gross income from employment or profession: 110,000
Annual gross income of spouse, varies, affected by covid so conservatively saying: 40,000
Monthly take-home pay 5300 (me) 2,500 (partner)
Type of employment:
Me, Public sector , spouse self employed

In general are you, (a) spending more than you earn, or (b) saving?
Saving but without a focus and not particularly strict, just living a quiet life!
Rough estimate of value of home 500,000
Amount outstanding on your mortgage: 168,000
What interest rate are you paying? 2.75
Other borrowings – car loans/personal loans etc none
Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card
Savings and investments:
90,000 cash savings
20,000 in kids names saved from child benefit and gifts they have received from grandparents.
Do you have a pension scheme? Yes, defined benefit with death in service benefit for husband. partner no
Do you own any investment or other property? No
Ages of children: 6 and 3
Life insurance: yes for mortgage value and income protection, partner none and not on mortgage

What specific question do you have or what issues are of concern to you?
1)Children’s savings are in an post state savings, should I move this lump sum somewhere?

2)We either need to extend house or buy a bigger one. To do extension would be about 150,00 and to move would need to buy a house with about a 750,000 value. Any advice on how to bridge gap of current savings and money needed for either of these options?

3)Pie in the sky stuff possibly, but was wondering should we aim to pay off mortgage ( that would serve as spouse’s pension in the future (college area/near centre so think will always be able to rent out) and save up over next 5 - 10 years for new house....

4) think as I write this, obvious that I need to sort out life insurance for spouse for mortgage.
 
#1 -its the best low risk return you can get on it and safe.
#3- you won't get 2.75 return on your 90,000 cash so perhaps a lump of the mortgage
 
Why do you need income protection if you are a civil servant.

How much will the house be worth if you put 150k into it. What kind of work needs to be done. I’m amazed a half million home is not suitable for 2 adults and 2 children?

One would imagine renting out your home at that value wouldn’t get you a good enough return.
 
You are making the classic mistake, and Pinoy is reinforcing it, of silo thinking about your finances.

It makes no sense to have money on deposit at very low rates while you are paying 2.75% interest on your mortgage. Putting a label "children's education fund" on it, does not magically turn this wrong strategy into the correct strategy.

What you should do depends on whether you buy or extend.

1) If you decide to buy for €700k, you will need a deposit of €140k and a mortgage of €560k. You won't be able to get this if you want to keep your own home.

So if you decide to buy, then you should set all your savings, whatever labels you have on the jars, against your mortgage. The small exception to this is that you might want to keep the booking deposit in cash if you are about to trade up soon.

2) If you decide to extend, it will cost you €150k and you have €110k. With your income, the shortfall of €40k should be easy to bridge and repay fairly quickly. Given that you don't appear to be doing it imminently, it gives you some time to save a bit more aggressively towards it.

Your options for the shortfall when you need it are
1) Ask your lender for a top-up. You should get it easily enough. Not sure if there are any costs associated with setting this up.
2) A credit union loan over 7 years. But you will probably pay it off quicker. The Civil Service Credit Union charges 6.9%.
3) A family loan - probably by far the simplest. And it would be interest-free.
 
Faointeach said:
3)Pie in the sky stuff possibly, but was wondering should we aim to pay off mortgage ( that would serve as spouse’s pension in the future (college area/near centre so think will always be able to rent out) and save up over next 5 - 10 years for new house....
Click to expand...

No idea what you are asking here. Are you saying that the house your spouse had before you got married is now rented? Or is the fact that would not have a mortgage equivalent to your spouse having a pension?

Maybe edit the post to clarify what you mean. The brackets are confusing.
 
Faointeach said:
4) think as I write this, obvious that I need to sort out life insurance for spouse for mortgage.
Click to expand...

If you die, the mortgage will be paid off because you have mortgage protection in place.

If your spouse dies, you will lose an income of €2,500 a month. If you want to take out life insurance for this fine. But it's not directly related to the mortgage and should not be. It should be cheap enough, but if your spouse is in good health, then maybe you don't need to insure their life.


Use the premium to pay down the mortgage or to max out the tax-efficient pension contributions.

Brendan
 
OP needs to be strict on savings, I suspect that comment means lackadaisical overall financially. Savings should go out directly the salary comes in.
 
Bronte said:
OP needs to be strict on savings, I suspect that comment means lackadaisical overall financially. Savings should go out directly the salary comes in.
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Yet they have 110k savings and positive equity to tune of 330k in property, gold plated and very valuable PS pension... I think a lot of people would accept that level of lackadaisical. They're in their early forties with young kids and yes on decent salaries, but not a mind blowing combined salary...
 
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gianni said:
Income protection provides a proportion of your income should you become incapacitated and be unable to work. I wouldn't think civil servants are immune from career ending illness!
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That’s right, means could get 75% of income if become sick. it’s not costing much more than a coffee a week so seemed to make sense.
 
Brendan Burgess said:
If you die, the mortgage will be paid off because you have mortgage protection in place.

If your spouse dies, you will lose an income of €2,500 a month. If you want to take out life insurance for this fine. But it's not directly related to the mortgage and should not be. It should be cheap enough, but if your spouse is in good health, then maybe you don't need to insure their life.


Use the premium to pay down the mortgage or to max out the tax-efficient pension contributions.

Brendan
Click to expand...
Thank you Brendan that’s really helpful
 
Faointeach said:
Age: 41
Spouse’s/Partner's age: 40
Annual gross income from employment or profession: 110,000
Annual gross income of spouse, varies, affected by covid so conservatively saying: 40,000
Monthly take-home pay 5300 (me) 2,500 (partner)
Type of employment:
Me, Public sector , spouse self employed

In general are you, (a) spending more than you earn, or (b) saving?
Saving but without a focus and not particularly strict, just living a quiet life!
Rough estimate of value of home 500,000
Amount outstanding on your mortgage: 168,000
What interest rate are you paying? 2.75
Other borrowings – car loans/personal loans etc none
Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card
Savings and investments:
90,000 cash savings
20,000 in kids names saved from child benefit and gifts they have received from grandparents.
Do you have a pension scheme? Yes, defined benefit with death in service benefit for husband. partner no
Do you own any investment or other property? No
Ages of children: 6 and 3
Life insurance: yes for mortgage value and income protection, partner none and not on mortgage

What specific question do you have or what issues are of concern to you?
1)Children’s savings are in an post state savings, should I move this lump sum somewhere?

2)We either need to extend house or buy a bigger one. To do extension would be about 150,00 and to move would need to buy a house with about a 750,000 value. Any advice on how to bridge gap of current savings and money needed for either of these options?

3)Pie in the sky stuff possibly, but was wondering should we aim to pay off mortgage ( that would serve as spouse’s pension in the future (college area/near centre so think will always be able to rent out) and save up over next 5 - 10 years for new house....

4) think as I write this, obvious that I need to sort out life insurance for spouse for mortgage.
Click to expand...
Brendan Burgess said:
No idea what you are asking here. Are you saying that the house your spouse had before you got married is now rented? Or is the fact that would not have a mortgage equivalent to your spouse having a pension?

Maybe edit the post to clarify what you mean. The brackets are confusing.
Click to expand...
thank you , yes can see that is confusing! I think you have crystallised the issues for me, need to decide if extending or buying. Apart from these two options, I was trying in question 3) to see if we could pay off mortgage, save up again and get a mortgage for a new place and use rental income from the old house instead of pension for husband who is self employed.
 
Faointeach said:
That’s right, means could get 75% of income if become sick. it’s not costing much more than a coffee a week so seemed to make sense.
Click to expand...

Really?? I highly doubt you are getting income protection for €75/80k for €3/wk
 
Faointeach said:
Age: 41
Spouse’s/Partner's age: 40
Annual gross income from employment or profession: 110,000
Annual gross income of spouse, varies, affected by covid so conservatively saying: 40,000
Monthly take-home pay 5300 (me) 2,500 (partner)
Type of employment:
Me, Public sector , spouse self employed

In general are you, (a) spending more than you earn, or (b) saving?
Saving but without a focus and not particularly strict, just living a quiet life!
Rough estimate of value of home 500,000
Amount outstanding on your mortgage: 168,000
What interest rate are you paying? 2.75
Other borrowings – car loans/personal loans etc none
Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card
Savings and investments:
90,000 cash savings
20,000 in kids names saved from child benefit and gifts they have received from grandparents.
Do you have a pension scheme? Yes, defined benefit with death in service benefit for husband. partner no
Do you own any investment or other property? No
Ages of children: 6 and 3
Life insurance: yes for mortgage value and income protection, partner none and not on mortgage

What specific question do you have or what issues are of concern to you?
1)Children’s savings are in an post state savings, should I move this lump sum somewhere?

2)We either need to extend house or buy a bigger one. To do extension would be about 150,00 and to move would need to buy a house with about a 750,000 value. Any advice on how to bridge gap of current savings and money needed for either of these options?

3)Pie in the sky stuff possibly, but was wondering should we aim to pay off mortgage ( that would serve as spouse’s pension in the future (college area/near centre so think will always be able to rent out) and save up over next 5 - 10 years for new house....

4) think as I write this, obvious that I need to sort out life insurance for spouse for mortgage.
Click to expand...
I suggest that if you are moving into a new house, have your previous house/new house rented so any mortgage you'll have to pay will be paid by your tenants. Since your interest rate is quite low at 2.75%, it's ok not to pay off your mortgage right away and instead invest in on a fund higher than the interest rate of your mortgage. If you are interested on being financially free, watch this video also, tips from the best, it's not too late my friend.
 
_OkGo_ said:
Really?? I highly doubt you are getting income protection for €75/80k for €3/wk
Click to expand...
Public sector is significantly cheaper; some unions / staff associations offer very good deals.

For what its worth re buying / extending; you are almost always better to buy. You'll rarely get the cost of your extension back.

@Bronte - it depends where the property is - €500k for (say) 3 bed in a central location isn't that hard to imagine.
 
are you sure 150k will cover the extension you have planned, costs of refurbs / extensions have increased. Might be something look into in detail when making the refurb or move decision.
 
Just curious.. what would be considered a mind blowing combined salary?

goingforgold said:
Yet they have 110k savings and positive equity to tune of 330k in property, gold plated and very valuable PS pension... I think a lot of people would accept that level of lackadaisical. They're in their early forties with young kids and yes on decent salaries, but not a mind blowing combined salary...
Click to expand...
 
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