Approx 40 Year Old Couple – New Financial Targets?

[WhereToNext]

Age: Early 40s
Spouse’s/Partner's age: Late 30s

Number and age of children: 2 kids (7 and 3)

Income and expenditure
Income

Annual gross income from employment or profession: ~ €120k plus bonus of up to 10%
Annual Car Allowance : €10k
Annual gross income of spouse: ~ €120k plus bonus of up to 10%

Monthly take-home pay ~ €11k

Income from rental property ~1500 pm

Expenditure

Childcare ~€1800 pm

Mortgage repayment of €2,550 pm (PPR)

Mortgage repayment on rental property - €1250 pm

Type of employment: e.g. Civil Servant, self-employed

Public Servant

In general are you:
(a) spending more than you earn, or
(b) saving?
Saving approx. €3k per month


Summary of Assets and Liabilities
Family home worth ~ €1,300,000k with a €650k mortgage over 28 years

Cash of €10k
Defined Benefit pension funds x 2


Buy to Let Property worth approx. €320 - 350k with mortgage of €240k, rental income per year €18k. Tracker mortgage (ECB + 1.35%)


Family home mortgage information
Fixed Rate at 2.1% for next 5 years


Other borrowings – car loans/personal loans etc
No other loans
Do you pay off your full credit card balance each month? Yes, always


Other information which might be relevant

We have income protection etc. in place.



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

• We have toyed with the idea of selling our investment property – we are accidental landlords and are concerned that conditions are getting more and more restrictive e.g. rent cap due to rent pressure zone, more restrictive tenancy obligations. At the same time not sure we want that much cash in a high inflation environment. We would love to hear people’s thoughts.
• We are not sure where to go next with our financial planning once we achieve our rainyday fund target in the coming months (want to have €25k cash on deposit; €20k on unused credit card limits). Should we overpay mortgage each month, put money into pension avcs, one of us work reduced hours (finding it a struggle at the moment both of us working full time in senior roles) etc. We don’t want to be aimless when it comes to our finances. Again, would love to hear peoples’ thoughts.

Thanks for any advice – have to say this is a fantastic resource and a great community

 

[NoRegretsCoyote]

Buy to Let Property worth approx. €320 - 350k with mortgage of €240k, rental income per year €18k. Tracker mortgage (ECB + 1.35%)

It's net income of €9k with €16k of a mortgage. It's cash-flow negative but you are paying down capital. A tracker of 135bps is good but not great and if ECB rates rise a lot you'll be paying several hundred a month more with little ability to increase rates. You are at least not in negative equity so can sell at any time. I would hold for another year or two and reassess at that stage given interest rates. Your mortgage is high but serviceable on those incomes. Still, you could make a big dent in it by selling off the investment property.

 

[Brendan Burgess]

Buy to Let Property worth approx. €320 - 350k with mortgage of €240k, rental income per year €18k. Tracker mortgage (ECB + 1.35%)

Family home mortgage information
Fixed Rate at 2.1% for next 5 years

First, look at whether the Buy to Let is worth keeping

Rental income: €18k
Interest assuming ECB of 2% - €8k (240 @3.35%)
Other expenses: €3k
Profit before tax: €7k
Profit after tax: €3,500

Equity investment: €100k

If you sell and pay down your home loan, you will save €2,100 a year.

So, it's very close. Your net benefit is about €1,400 a year.

Brendan

 

[Brendan Burgess]

With a family home of €1.3m and a buy to let worth €350k, that is an exposure of €1.65m to Irish property.

There are calls for not allowing landlords to use the sale as an excuse for getting vacant possession. If that comes in, your property becomes worth a lot less as you can only sell it to another investor and there aren't many of them.

So, all in all, sell it while it's still possible.

Brendan

 

[Blackrock1]

Age: Early 40s
Spouse’s/Partner's age: Late 30s

Number and age of children: 2 kids (7 and 3)

Income and expenditure
Income

Annual gross income from employment or profession: ~ €120k plus bonus of up to 10%
Annual Car Allowance : €10k
Annual gross income of spouse: ~ €120k plus bonus of up to 10%

Monthly take-home pay ~ €11k

Income from rental property ~1500 pm

Expenditure

Childcare ~€1800 pm

Mortgage repayment of €2,550 pm (PPR)

Mortgage repayment on rental property - €1250 pm

Type of employment: e.g. Civil Servant, self-employed

Public Servant

In general are you:
(a) spending more than you earn, or
(b) saving?
Saving approx. €3k per month


Summary of Assets and Liabilities
Family home worth ~ €1,300,000k with a €650k mortgage over 28 years

Cash of €10k
Defined Benefit pension funds x 2


Buy to Let Property worth approx. €320 - 350k with mortgage of €240k, rental income per year €18k. Tracker mortgage (ECB + 1.35%)


Family home mortgage information
Fixed Rate at 2.1% for next 5 years


Other borrowings – car loans/personal loans etc
No other loans
Do you pay off your full credit card balance each month? Yes, always


Other information which might be relevant

We have income protection etc. in place.



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

• We have toyed with the idea of selling our investment property – we are accidental landlords and are concerned that conditions are getting more and more restrictive e.g. rent cap due to rent pressure zone, more restrictive tenancy obligations. At the same time not sure we want that much cash in a high inflation environment. We would love to hear people’s thoughts.
• We are not sure where to go next with our financial planning once we achieve our rainyday fund target in the coming months (want to have €25k cash on deposit; €20k on unused credit card limits). Should we overpay mortgage each month, put money into pension avcs, one of us work reduced hours (finding it a struggle at the moment both of us working full time in senior roles) etc. We don’t want to be aimless when it comes to our finances. Again, would love to hear peoples’ thoughts.

Thanks for any advice – have to say this is a fantastic resource and a great community

Everyone is different but for our family one of the best uses of our money was to ‘spend (or leave it unearned )’ it on one of us taking time out of the work place to spend the time with the kids.

If you can manage that at the age they are it’s worth more than anything else imo.

 

[sharkattack]

I didn't realise bonuses were are feature of the Public Service. Can these be relied on going forward. You have 250K Gross in secure jobs. Enjoy life. You don't have any financial worries from what I can see.

 

[WhereToNext]

Thanks to everyone for their comments. Really good to hear someone else's perspective on our financial position - so hard to be objective!!

There are calls for not allowing landlords to use the sale as an excuse for getting vacant possession. If that comes in, your property becomes worth a lot less as you can only sell it to another investor and there aren't many of them.

Is this actually something that could be legally put in place given Irelands property laws, constitution? I am conscious there is a general consensus that SF will shake this area up if they gain power but, even at that, it appears like a huge step to take and feels like scaremongering.

At the moment we have 2 life insurance policies (dual life cover with conversion options) in place (by accident, we transferred mortgage recently).
- Is there advantage to maintaining both policies?
- We also have death in service cover - however how much overall cover would be recommended for a couple?

 

[help999]

A tracker of 135bps is good but not great and if ECB rates rise a lot you'll be paying several hundred a month more with little ability to increase rates.

Don't Landlord get interest relief on the interest charged on the mortgage used for the rental property.
So if rates went up to 20% they would still be able to claim back 100% of the interest paid.

As per revenue webiste-Mortgage interest​

You may be allowed claim Mortgage Interest Relief against your rental income. The interest must be from a mortgage that is used to purchase, improve or repair your rental property.
ou can claim Mortgage Interest Relief if you are registered with the Residential Tenancies Board (RTB):

• while your property is rented out
• in between renting out the property as long as you do not live in it during that time.