Next move, new home

[LadyAnn2022]

Personal details

Age: 36
Spouse’s/Partner's age: 36

Number and age of children: 3 (age 7, 5 & 2) finished


Income and expenditure
Annual gross income from employment or profession: 40k part time
Annual gross income of spouse: 100k, RSUs 30k

Monthly take-home pay: 7600

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

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


Summary of Assets and Liabilities
Potential House purchase 880k
Potential mortgage 440k
Savings 495k (trading up , sold PPR)

Family home mortgage information
Lender AIB
Interest rate 2.35
If fixed, what is the term remaining of the fixed rate? 5 / 30



(No need to tell us the monthly repayments or what term is left)

Other borrowings – car loans/personal loans etc

Do you pay off your full credit card balance each month? Yes
No loans, 2 cars
Childcare 800 per month


Buy to let properties - None
Other savings and investments:

Do you have a pension scheme? Yes , fund ~110k. Only match employer’s contributions

Do you own any investment or other property? No

Other information which might be relevant

Life insurance: Mortgage protection
Income protection
5 x salary partner
Family health insurance

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

We sold our PPR as we had outgrown it and now looking for a new one close to current primary and potential secondary schools in Dublin. The potential house is large enough for us now and in v good cond. but perhaps the attic may need to be converted in 8-10 years for a larger 4th bedroom. Downstairs is already extended and perfect.
We’ve looked at a lot of houses and recently got turned off probate houses due to increasing renovation costs (and time) and ultimately they would need to be extended downstairs for the layout we want - 150k could easily turn into 250k or more. So we’ve comprised slightly on location (<700m).
Currently caretaking a house but that will run out in around 4 months and don’t want to rent. Important to us is living near schools (walk or cycle) right space and a comfortable home.
Plan would be to save around 40-50k and pay it off mortgage in 5 years , leaving around 350k in 5 years so less exposed to interest rates (or 10k per year if no penalties). It’s also likely both of us will increase our salaries over the next few years.
Are we on the right track before we push on ?

 

[Brendan Burgess]

Potential mortgage 440k

Annual gross income from employment or profession: 40k part time
Annual gross income of spouse: 100k, RSUs 30k

3.2 times salary is a bit high, but ok. Any drop in income or increase in expenditure and you would be under pressure.

So, yes prioritise paying down your mortgage ahead of additional pension contributions as you are relatively young and can catch up with the pension contributions later.

 

[Brendan Burgess]

Plan would be to save around 40-50k and pay it off mortgage in 5 years ,

Why would you save it up to pay it off?
The earlier you pay it off, the less interest you pay.

Some people think that they must wait for the fixed term to finish before making an overpayment. You don't. You can pay it off at any time but will be subject to an early repayment fee. That should be less than the interest you would pay anyway, so it's usually a good idea to overpay a fixed mortgage despite the early repayment fee.


I think that AIB will do a split interest rate mortgage e.g. €400k @ fixed rate and €40k at variable 2.75%.

So that is another option.

If only €40k is at variable rate, you won't be too vulnerable to rising interest rates.

Brendan

 

[Clamball]

Of the 7600 in take home what amount will you put towards the mortgage? You are planning €800 is extra payment per month? Why not set that as your monthly repayment while keeping the term of the mortgage constant.

Do you both have pensions? It was hard to tell, but even starting one on a minimal employer matching amount would be another big consideration. Then when you have paid off that €50k off the mortgage re-evaluate the pension situation.

 

[LadyAnn2022]

Why would you save it up to pay it off?
The earlier you pay it off, the less interest you pay.

Some people think that they must wait for the fixed term to finish before making an overpayment. You don't. You can pay it off at any time but will be subject to an early repayment fee. That should be less than the interest you would pay anyway, so it's usually a good idea to overpay a fixed mortgage despite the early repayment fee.


I think that AIB will do a split interest rate mortgage e.g. €400k @ fixed rate and €40k at variable 2.75%.

So that is another option.

If only €40k is at variable rate, you won't be too vulnerable to rising interest rates.

Brendan

Will ask re the option of a split rate and consider it . The main reason re lump sum was from other half’s RSU sales and agree better to pay off each year. With rising cost of living, a larger house, interest rates , we’ve a few unknowns.

 

[Brendan Burgess]

other half’s RSU sales

OK. I had assumed fairly regular savings.

But the principle is to pay it off as soon as you have the money.

A key thing about RSUs is that you should sell them as soon as it's tax-efficient to do so. A lot of people don't because of a combination of misplaced loyalty to their employer and optimism about the company's prospects. But when you have a mortgage, you are effectively borrowing to invest in shares, which is not a good idea, without a tax break.

Brendan

 

[_OkGo_]

Potential House purchase 880k

How realistic is this figure? Is it your limit or is it the asking price of properties that suit your needs?

You have sold your own house recently so you have some idea of how much above asking it went for. Just be careful not to get your hopes up on a property that has an asking price in your range because bidding could easily drive it up

Lender AIB
Interest rate 2.35
If fixed, what is the term remaining of the fixed rate? 5 / 30

I don't think you will face any ERC's with the 5 year rate because of the quirk in AIB's calculations (see link below). And also you have the option of the 4 year High value mortgage at 2.15%. Its a toss up between the 4 & 5 year rates really, you get a slightly cheaper rate or an additional year of security.

Overpayment / re-fix flexibility of AIB's green 5yr fixed rate (and some other rates)

Moderator's note: Because of a quirk in how AIB calculate their break fee / early redemption charge, you can make unlimited overpayments on some of their fixed rates without penalty. Or you can break out of your existing AIB fixed rate and re-fix on a different rate, again without penalty. (You...

www.askaboutmoney.com

Do you have a pension scheme? Yes , fund ~110k. Only match employer’s contributions

Does your spouse have a pension fund? If your spouse has a similar or better fund then I wouldn't be too worried about borrowing €440k.

If your spouse has no fund at all then you will start to feel the pinch when you try to start funding it in 5-10 years time

It’s also likely both of us will increase our salaries over the next few years.

Your own current salary is €40k part time. Would this be €60k+ full time? And beyond that you both have reasonable scope to progress and further increase your base salary?

While nothing is guaranteed, I think you should be fairly comfortable with a mortgage below €400k and base income of somewhere between €160-200k in 5 years time

 

[LadyAnn2022]

Hey all ,
Brief update - we ended up paying 885 k and now living in our new home for just over 6 months. Since moving in we’ve spent about 7k on maintenance items but everything is in pretty good order, no major surprises yet!
Locked in a 440k mortgage at 2.35 for 5 years and will target to overpay by 5-10k a year. We want to stick to circa 1700 per month repayments. We will review pensions next year (only paying matched contributions at the moment).
We absolutely love our new home, great area with great neighbours. We love walking the kids to school and luckily we haven’t needed to do major renovations
For anyone on the fence , I’d go for it but of course budget accordingly! E.g. We started to track all expenditure on an app and it has helped understand the “new running costs” of our larger home and has helped to build back our rainy day fund.
Thanks for the tips here , helped us push on with our new home purchase.

 

[PaddyW]

Congratulations, keep up the good work!