Mid 30s Couple - Saving & Renting - Anything we should change/do better?

[wrongnumber]

Personal details

Age: 36
Spouse’s/Partner's age: 34

Number and age of children: 1 (18 Months)

Income and expenditure
Annual gross income from employment or profession: €120k (c. €135k after discretionary bonus which would not be reliable in a recession)
Annual gross income of spouse: €80k (c. €90k with discretionary bonus which would not be reliable in a recession)

Monthly take-home pay: Combined, after pension, tax, BIK etc: €9,700 excl. bonuses.

Type of employment: Private industry - relatively stable employment - professionals

Saving €4k p/m currently, topped up with most of any bonuses received.

Creche: €600 p/m
Rent: €1,100 p/m
Other expenditure would be relatively normal - broadband, SKY, utilities, groceries, gym memberships, tennis club membership etc.

Summary of Assets and Liabilities
Cash of €160k, currently in very low interest instant access saving account with BOI
Defined Contribution pension fund: c. €180k combined
Pension contribution is set to match employer contributions (6.5%) and no more
Pension primarily invested in diversified equities with Irish Life

Other borrowings – car loans/personal loans etc

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

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

We currently live in Galway, where we met. Neither of us are from here. Our rent is reasonable so we never bought here (regretting that now but that is a moot point).

We plan to relocate to Dublin before our daughter starts school (so within the next two years or so). Hoping we can both get jobs and settle there so plan is to buy in Dublin when we do move. We are moving for a mutlitude of reasons (career & family) and that decision has been made.

My questions/concerns:

1) I think we made a mistake not buying a house here but I expect we definitely should not now as we expect to move within 2 years. I assume I am correct here given the relatively low rent we pay (and we are happy with our rental)? My fear is that we may end up staying here longer than two years if we cannot get jobs secured but we need to work to some plan and we are determined to move.

2) I believe we have a relatively high income but I feel like we are running to stand still with respect to house deposit saving as increasing prices and interest rates are eroding our buying power. Should we be saving more & should we be doing something different to keeping it in low interest saving accounts? I would like relatively instant access to it in case a job opportunity in Dublin arises earlier than expected and we need a deposit.

3) Is our pension pot ok for our age? It seems very small considering we have both been contributing since age 26. Should we be putting more into the pension pot and/or doing something differently here?


Appreciate any advice. Overall, we work hard and earn good money but I do not think we have been the smartest financially. We really have not built up any real wealth and I am thinking we may be doing something wrong.

 

[Sarenco]

You have a combined net worth of €340k in your mid-30’s.

I actually think that’s pretty impressive.

I don’t think you’re making any obvious mistakes - keep saving your house deposit for the Dublin move and contribute enough to your pensions to get the employer match.

 

[NoRegretsCoyote]

1) I think we made a mistake not buying a house here but I expect we definitely should not now as we expect to move within 2 years. I assume I am correct here given the relatively low rent we pay (and we are happy with our rental)? My fear is that we may end up staying here longer than two years if we cannot get jobs secured but we need to work to some plan and we are determined to move.

It depends a bit on what sector you work in but the job market is red hot in Dublin right now and it's a good time to be looking.

If there is a downturn your own job may be secure but job openings often dry up very quickly making it harder to make the move.

 

[misemoi]

Is there a reason you are waiting to move ? A lot of companies are very flexible on office attendance if you work is office based. Especially if you will both be looking for jobs I would consider applying for anything you are interested in and seeing what happens, I work .with people based all over the country who work remotely a lot of the time. If thinking of another child there are also plenty of companies that offer paid maternity with no minimum service first so don't totally discount a move now. The Dublin property market is awful but its very hard to see it changing anytime in rhe next couple of years. Childcare is a massive issue too so bear that in mind no matter when you move. And keep a good eye on school enrollment policies when you do find your Dublin home.

 

[Brendan Burgess]

The choreography is difficult here.

1) They both start applying for jobs at the same time
2) One gets a good job in Dublin but the other is still looking, what do they do?
3) One moves to Dublin - presumably renting
4) The other gets a job in Dublin and now the family is living in Dublin
5) Because they have just moved jobs, they won't get a mortgage for 6 months
6) Renting in Dublin for a family will be very difficult to find and very expensive

Possibly buy a property in Dublin now and let it out. That gives you a stake in the housing market. But the house might not be where your job is. So I don't think it's a good idea.

No option is without its drawbacks, but I think that both should start the process now.
1) The job market is good so it should be relatively easy to get jobs
2) The child is young so it's less disruptive moving now
3) When you know where you are living you can start looking for a school

Have you family or friends you can stay with in Dublin while moving here? Especially if he moves first.

Brendan

 

[interested21]

I believe we have a relatively high income but I feel like we are running to stand still with respect to house deposit saving as increasing prices and interest rates are eroding our buying power

I think you're being very hard on yourself. You have €160k saved and you're adding a significant amount to that each month.

What kind of areas would you be looking at in Dublin and what are your requirements? You could probably currently get a mortgage for a purchase of >900k based on your current situation, which would go a decent distance in many parts of Dublin.

 

[wrongnumber]

The choreography is difficult here.

1) They both start applying for jobs at the same time
2) One gets a good job in Dublin but the other is still looking, what do they do?
3) One moves to Dublin - presumably renting
4) The other gets a job in Dublin and now the family is living in Dublin
5) Because they have just moved jobs, they won't get a mortgage for 6 months
6) Renting in Dublin for a family will be very difficult to find and very expensive

You have hit the nail on the head here. We have no easy option to coordinate this.

There is acceptance that we may have a period of single income, perhaps aligned with a maternity leave. We have family in Dublin so will make it work.

We have commenced the process but it will take time, hence the two year window we are working to.

You could probably currently get a mortgage for a purchase of >900k based on your current situation, which would go a decent distance in many parts of Dublin.

This is far beyond what we would be comfortable with. We could probably get approved to that level but we would not see that as affordable.

The area would be dependent on jobs so no idea yet. Think our comfortable position would be 2x salary so maybe 450k mortgage and 200k deposit for max purchase of 650k .. increasing interest rates make even that seem very expensive. Alas, we have been blessed with relatively low housing costs to date.

I think you're being very hard on yourself.

It's more that we are saving a lot but not keeping up with property prices the last few years and cannot get a stake in the housing market easily, given our circumstances. Reflecting and trying to consider if we could be better with our money, given the nuances of our situation. We are very lucky, all things considered, so not feeling sorry for ourselves... just thinking perhaps we could punch smarter.

 

[misemoi]

Depending on your industry entirely possible that one or both of you could get Dublin based jobs now that only require a couple of days in the office. That could be managed with an early start, an overnight and a late evening for the short term. Especially handy if you have family to stay with. If planning for more kids, there would be merit in trying to get the father a new Dublin job while the maternity leave is happening. snd ...there is no obligation on the mother to return but there may be a stipulation on repaying any paid maternity leave.



If you are 100% about moving to Dublin I would just buy a house now. You have plenty of cash and salary to support it. If it lies empty or is used very occasionally while you move then so be it, your rent is very low.

 

[Brendan Burgess]

Annual gross income from employment or profession: €120k (c. €135k after discretionary bonus which would not be reliable in a recession)
Annual gross income of spouse: €80k (c. €90k with discretionary bonus which would not be reliable in a recession)

You could probably currently get a mortgage for a purchase of >900k based on your current situation,

This is far beyond what we would be comfortable with.

Think our comfortable position would be 2x salary so maybe 450k mortgage and 200k deposit for max purchase of 650k .

There is definitely risk in taking out a mortgage of €700k. But there is also risk in taking out a mortgage of €400k - that the house will be unsuitable and that you will have to move or trade up within a few years. Trading up is expensive and risky.

At your age, I wouldn't be worried about borrowing €600k to €700k. Contribute only the minimum you need to contribute to the pension and get the mortgage down to the level you are comfortable with.

Sure it could all go pear-shaped. But you are doing well and the most likely outcome is that you will both continue to do well.

Brendan

 

[wrongnumber]

At your age, I wouldn't be worried about borrowing €600k to €700k. Contribute only the minimum you need to contribute to the pension and get the mortgage down to the level you are comfortable with.

That would be a monthly payment of 3k - 3.5k at current interest rates (which are likely to rise further); maybe I am super conservative but a mortgage payment of 36% of combined take home seems excessive...if one of us lost our job, or needed to take a career break, we would be in trouble.

On the other hand, I think perhaps that conservative nature is why we have not made the most of our savings / salary... food for thought.

 

[Brendan Burgess]

It is definitely not without risk and if you can get the house you want with a mortgage of twice your income, that is the way to go.

If you are planning on taking a career break, that is also the way to go.

Your mortgage will be a burden. But over time, your salaries will rise and it will become less so.

36% is high, but on high salaries, you will have plenty left to meet the cost of living.

Brendan

 

[Blackrock1]

Personal details

Age: 36
Spouse’s/Partner's age: 34

Number and age of children: 1 (18 Months)

Income and expenditure
Annual gross income from employment or profession: €120k (c. €135k after discretionary bonus which would not be reliable in a recession)
Annual gross income of spouse: €80k (c. €90k with discretionary bonus which would not be reliable in a recession)

Monthly take-home pay: Combined, after pension, tax, BIK etc: €9,700 excl. bonuses.

Type of employment: Private industry - relatively stable employment - professionals

Saving €4k p/m currently, topped up with most of any bonuses received.

Creche: €600 p/m
Rent: €1,100 p/m
Other expenditure would be relatively normal - broadband, SKY, utilities, groceries, gym memberships, tennis club membership etc.

Summary of Assets and Liabilities
Cash of €160k, currently in very low interest instant access saving account with BOI
Defined Contribution pension fund: c. €180k combined
Pension contribution is set to match employer contributions (6.5%) and no more
Pension primarily invested in diversified equities with Irish Life

Other borrowings – car loans/personal loans etc

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

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

We currently live in Galway, where we met. Neither of us are from here. Our rent is reasonable so we never bought here (regretting that now but that is a moot point).

We plan to relocate to Dublin before our daughter starts school (so within the next two years or so). Hoping we can both get jobs and settle there so plan is to buy in Dublin when we do move. We are moving for a mutlitude of reasons (career & family) and that decision has been made.

My questions/concerns:

1) I think we made a mistake not buying a house here but I expect we definitely should not now as we expect to move within 2 years. I assume I am correct here given the relatively low rent we pay (and we are happy with our rental)? My fear is that we may end up staying here longer than two years if we cannot get jobs secured but we need to work to some plan and we are determined to move.

2) I believe we have a relatively high income but I feel like we are running to stand still with respect to house deposit saving as increasing prices and interest rates are eroding our buying power. Should we be saving more & should we be doing something different to keeping it in low interest saving accounts? I would like relatively instant access to it in case a job opportunity in Dublin arises earlier than expected and we need a deposit.

3) Is our pension pot ok for our age? It seems very small considering we have both been contributing since age 26. Should we be putting more into the pension pot and/or doing something differently here?


Appreciate any advice. Overall, we work hard and earn good money but I do not think we have been the smartest financially. We really have not built up any real wealth and I am thinking we may be doing something wrong.

The only point I'll make and you are probably well aware of this, while you are doing well and we'll paid, it will go a lot further in Galway, have you seen houses you would be happy to buy in dublin at the prices you want to spend?

 

[interested21]

That would be a monthly payment of 3k - 3.5k at current interest rates

700k for 30 years at 4% (a bit above the current rates) gives repayments of €3150, which is quite affordable for you. I know your instinct is probably that you don't want to take on a mortgage that runs until your mid 60s, but at that level of affordability of repayment you can easily overpay to reduce the term and/or repayments.

I'm not trying to convince you to take on a big mortgage for the sake of it. If you can find a home that meets your criteria in Dublin with a smaller mortgage then great, that is definitely the better option. Just make sure it's not a false economy. If you end up somewhere too small or needing lots of work or far from amenities then you will end up spending more money and going through a lot of hassle trying to rectify that.

 

[moneymakeover]

I'm guessing the most natural way to coordinate this would be

1 get a job in Dublin
2 get a rental property in Dublin
3 other partner quit Galway job/commute/remote working in Dublin

After that you have the slow process of buying a house in Dublin