Early 40's, 4 kids, small pension pot, small house and unsure what to prioritise!

T

tnegun

Registered User
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Personal details

Age: 43
Spouse’s/Partner's age: 41

Number and age of children: 4 - 15, 13, 11, 9


Income and expenditure
Annual gross income from employment or profession:120k
Annual gross income of spouse:45k

Monthly take-home pay 8.5-9k

Type of employment: Both Private Sector

In general are you:
Saving


Summary of Assets and Liabilities
Family home worth €430k with a €200k mortgage
Cash of €11k
Defined Contribution pension fund: €90k
No borrowings other than the home mortgage

Family home mortgage information
Lender: AIB
Interest rate 2.1%
Type of interest rate: Fixed
If fixed, what is the term remaining of the fixed rate? 3.5 years

Remaining term: 20 years
Monthly repayment: €1037

Other borrowings – car loans/personal loans etc

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


Buy to let properties
N/a

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: Basic mortgage cover ourselves and I've income protection with my employer.


What specific question do you have or what issues are of concern to you?
My wife returned to work in the last 12 months initially just to see how it worked for our family and if we could juggle family life with both parents working full time. It's worked so far so is now time to start planning for the future. Prior to returning to work we were a single income family for 15 years and following an accident our savings were drained 2 years ago. We're saving about 1k per month but this could be more if we had a proper plan.

I need to figure out now what our financial priorities should be? I've 90k in a pension fund with my employer that I contribute €1850 per month and my employer €460.
  • My wife currently has no pension and her employer doesn't offer one should she start a PRSA to stay in the 20% band?
  • Should I increase my own pension contributions?
  • Should we try pay down the mortgage sooner vs increasing pension contributions? I think no but am open to suggestions.
  • Our home is a small 3 bed and only getting smaller as the kids get bigger(3 are in one room), we'd love something bigger but would need to borrow another 200-250k to up size and stay in our locality. Is it feasible to even consider? I think not but would welcome thoughts on this.
  • The kids will likely need help with college etc. I've no provision for this but its 3-4 years away and would hope they will work part-time to subsidise this and we live in commuting distance Dublin so staying at home should be possible but this brings me back to the house being small!
  • What else should I be thinking about/planning for?
Thanks for making it this far!
 
Regarding trading up, you could borrow 575k (income x 3.5) for 20 years costing 3.5k per month. That is the worst case, based on above I think you've said a bigger house would cost 630 to 680k in your area? In that case you'd need to borrow 430-480k which would equate to a 2,950 monthly mortgage. If you get mortgage provider that would provide 24 yr mortgage (67- age) the mortgage could drop to as low as 2,360.

I think it is feasible to consider moving but it will certainly increase your monthly outgoings. Looking at your netpay it does look like you can afford a higher monthly pay with some lifestyle adjustments.
 
I agree that trading up is a feasible option.

I would have thought that you should be able to fairly comfortably service a mortgage of €400-450k with a joint income of €165k.

I think your wife should start a PRSA and contribute €250 a month. It may not sound like a lot but over time it will add up to a decent sum.

Your wife should also be entitled to PRSI credits for the child rearing years - that’s important when it comes to qualifying for a State (Contributory) pension.

Your own pension pot looks a little light for your age but your contribution levels are decent. It would be good to bump up your contributions a bit if you can but I would have thought that sorting out your housing situation should be your priority.

You’re actually doing fine financially given your circumstances- keep it up!
 
What life cover do you have in place?

Assuming your kids go to college your will have the 4 of them passing through in 10 year period with 6 years of 2 in college concurrently. The expense here cant be underestimated.
 
Can you port your mortgage if you move? If you can't, you will have a much higher mortgage interest rate.

Is building an extension / loft conversion an option to give you more space?
 
Moving house is probably going to be the most important for your family. No one will care about pensions when the kids can't have their friends over as there's no space.

You also need to start putting some money away for college. It won't be long coming and you need a few quid for that. Also try to make incremental increases to your pension.

You both need life cover too. It's a big risk just having mortgage protection when you have 4 kids.


Steven
www.bluewaterfp.ie
 
Thanks for the advice and comments all, I'm reassured now that doing something to improve our housing isn't a crazy idea. I spoke to the bank today and got similar advice re the mortgage 3.5 current income to a max of 540k. I'd be very nervous to take on anything like that level of debt though having struggled through the aftermath of 2008. If we moved it would be a new mortgage at current rates but a top up would just be the balance at the current rates and that seems much more palatable.

The attics can't be easily converted in these houses but we do love the area and the kids can walk to everything primary, secondary, sports etc. along with great public transport to Dublin. I spoke to an architect a long time ago and the biggest obstacle is planning but I think it would be worth submitting an application and see what the council come back with. The bank want me to start putting the savings into a dedicated account too, to prove capacity so I need 6 months of that too and that gives time to assess the feasibility of converting/renovating our existing house.

I do have some life cover with my employer from memory its 4x my salary lump sum and then 50% per year to pension age in the event of my death, there is also some cover for my wife on the policy but I will get details and ensure we have appropriate cover in place.
 
Last edited:
tnegun said:
Thanks for the advice and comments all, I'm reassured now that doing something to improve our housing isn't a crazy idea. I spoke to the bank today and got similar advice re the mortgage 3.5 current income to a max of 540k. I'd be very nervous to take on anything like that level of debt though having struggled through the aftermath of 2008. If we moved it would be a new mortgage at current rates but a top up would just be the balance at the current rates and that seems much more palatable.

The attics can't be easily converted in these houses but we do love the area and the kids can walk to everything primary, secondary, sports etc. along with great public transport to Dublin. I spoke to an architect a long time ago and the biggest obstacle is planning but I think it would be worth submitting an application and see what the council come back with. The bank want me to start putting the savings into a dedicated account too, to prove capacity so I need 6 months of that too and that gives time to assess the feasibility of converting/renovating our existing house.

I do have some life cover with my employer from memory its 4x my salary lump sum and then 50% per year to pension age in the event of my death, there is also some cover for my wife on the policy but I will get details and ensure we have appropriate cover in place.
Click to expand...

@tnegun we have moved on from 2008 but there are still risks involved. Residential planning permission should be fairly straight forward for attic / extensions especially if neighbours have done the same. However, to submit an application can be costly so you should only do so if you are 100% set on staying and renovating. It could cost up to 10k by the time you factor in drawings, engineer reports etc. This depends on the type of renovation you can do, if it is only an attic conversion it should be cheaper and quicker.

The easiest (and its free) thing you can do now is to have a look on daft with an upper budget of 750k (Max loan + Equity in current house) to see what is available that suits your family. It is inevitable that to get more space you will have to sacrifice some current conveniences to stay within the same price bracket. I'm not suggesting you do buy a house at 750k, but it is best to take in all available information before making a decision.
 
Wow I never thought it would be anything like 10k to get plans and permission. It would be complicated conversion as its a low hip roof so would need to be converted to a gable. No-one has done this in our estate to my knowledge but hipped and gable roof types are mixed throughout the estate so our house wouldn't look out of place. There are also several examples of a similar conversion when searching the planning files although one did need to go to ABP for approval!

I'm looking at moving too but there are just 20 properties under 750k with 4 beds in the area right now and these are either very similar in size to what we have now 130sqm, in neighboring towns or substantially outside of the town but I will keep looking there too.

Thanks again for the advice.
 
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