# Help- In over our heads !



## Needtomove (25 Jul 2014)

Age: 39
Spouse’s/Partner's age: 35
Annual gross income from employment or profession: €33 727
Annual gross income of spouse: 33,000

Monthly take-home pay €4000
child benefit : €260


Type of employment: both private employees, one works a 4 day week only - 5th day at home caring for the kids- salary quoted for 4 days.

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

spending MUCH MORE and feel like sinking deeper every day 




Rough estimate of value of home €300k
Amount outstanding on your mortgage: €205,000
cost €900pm ( after TRS taken off) 

What interest rate are you paying? 4.35%

Other borrowings – car loans/personal loans etc

Car €275 pm 4 years remaining ( 12k remaining)
home improvement loan €335 pm 3 years remaining ( 14.5k remaining)
work loan €190pm 3 years remaining ( 6.5k remaining) 
credit union loan 2 €180pm ( 4.3k remaining) 

Do you pay off your full credit card balance each month? no
If not, what is the balance on your credit card? €1400

Savings and investments: €11k cant be touch in credit union- tied to loans

Do you have a pension scheme? yes....pay 5% myself, comapny pay 10%- €45k in the fund
husband pays similar


Do you own any investment or other property? yes

owe €100k
worth €85k
rate 2.75%
Repayment €650pm, rent received €850pm, extra used towards letting agent fees/property tax pm ( as live 30 miles away and with 2 jobs and 2 young kids cant take any job ourselves. )


Ages of children: 3 and 1- creche for 4 days pw- cost €1,400 pm


Life insurance: yes



Hi everyone
What specific question do you have or what issues are of concern to you? 
obviously we are in over our heads, havent bought clothes in so long, have applied for GP card and been rejected, can't afford to pay doctor when sick so have to continue on for weeks with infected throats etc as need to keep back the cash for the kids in case they get sick.

have no access to any continguency fund, right now we are struggling to pay utilities or even buy a weekly food shop!, seriously starting to despair and effect both our health!....just don't know what to do!

thanks everyone.


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## Guns N Roses (25 Jul 2014)

My advice would be sell the family home and either rent for a while or move into the investment property. This would free up €95,000 which could be used to pay off the combined €38,700 in unsecured debt (loans & credit card)

An alternative would be to talk to the credit union to see if they will let you use your savings to clear or partially clear your loans with them. Make it clear to them how serious your financial situation is.


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## STEINER (25 Jul 2014)

mortgage 900pm + loans 980pm + creche 1400 pm = 3,280 pm

income 4,260 pm - 3,280pm = 980pm which is not a lot left.

You are in a hole until you pay off those 4 loans as they are taking €980 off you every month.  When those loans are gone you will have €1,960 to spend every month after creche and mortgage paid for.

The 5% of €66k that ye are paying into a pension, can this be put on hold perhaps?  It is only €275 gross per month, but you can't afford to visit the doctor when you need to or pay bills.

Are all the loans CU?  Can you offset the 11k savings to clear the last 2 of these loans?  That would free up an extra €370 per month to live on.

The investment property is not costing anything.  There should be a surplus after paying the agent and LPT for an €85k property.

A mortgage with a €900 monthly repayment is fine, I wish I had that.


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## michaelm (25 Jul 2014)

STEINER said:


> Can you offset the 11k savings to clear the last 2 of these loans?  That would free up an extra €370 per month to live on.


The above is what you need to insist on.  Then you should be able to review all your spending and come up with a budget you can live on whilst plugging away at the other two loans.  Any chance that the car is worth more than the outstanding car loan?  If so, and it were me, I'd sell it and buy a cheap runabout.


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## Steven Barrett (25 Jul 2014)

Have you spoken to your bank about debt consolidation? If you can get those short term loans rolled up into your mortgage you will get some breathing space. You'll pay more in the long run but at least you'll be able to go to the doctor if sick. 



Steven
www.bluewaterfp.ie


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## Brendan Burgess (25 Jul 2014)

Hi Needtomove

You should not be in a bad financial position.  

You have a net income of €4,000 a month
You have mortgage repayments of €900 a month

You have a cheap tracker on your investment where the rent is covering the mortgage. This is very profitable for you.

There are many, many people who would love to be in this position. 

Other loans 



 |balance|repayment
Car loan|€12k|€275
Home improvement|€14k|€335
Work|€7|€190
Credit Union|€4k|€180
Savings|(€11k)
Total|€26k|€980You have net loans of €26k which you are paying off over two years on average.  This makes no sense as many of these loans are for capital assets - home improvement and buying a car. 

You are paying more per month on net loans of €26k than you are paying on your mortgage of €205k!

You must sit down with your credit union and reschedule the loans. It is crazy to be paying these loans in full, while not being able to afford to go to the doctor. 

1) Insist that they set the savings against your most expensive loan.  
2) Ask them to extend all loans to 5 years 

At the same time talk to you lender.  Tell them that you are trying to sort out your finances.  Ask them to for a payment moratorium for 6 months. They will probably refuse, but if they agree, it would allow you knock €6k off your other loans.  

As you have plenty of equity in your home, ask them to switch to interest only or extend the term.

*Do not sell your house!

*
Rough estimate of value of home €300k
Amount outstanding on your mortgage: €205,000
cost €900pm ( after TRS taken off) 

What interest rate are you paying? 4.35%The true cost of your accommodation is €750 per month before TRS ( €205k @4.35% /12) 

It is much cheaper to rent money than to rent property.  I am guessing that it would cost at least €1,200 a month to rent a similar property, if you could find one. 

*Talk to MABS 
*Mabs will help you budget and will help you see your way through this. 

*Do not be afraid of going into arrears if you have to 
*It is best to avoid arrears by asking your lenders to reschedule your loans.
However, if they don't, then you must prioritise your expenditure.  Your family's essential needs e.g. medical visits are a far higher priority.


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## Needtomove (25 Jul 2014)

Thank you so much for all the replies, and in particular to you Brendan for the detailed number crunching

Just to add when I say net €4k pm, there are obviously outgoings like 2 property insurances/one car insurance/1 property tax ( investment rent covering that tax), mobile phone bills/house phone and Internet/sky/life assurance/utilities/tv license pm/car tax pm.....and food...and any doctor visits and prescription that may crop up!!


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## Bronte (28 Jul 2014)

Can the person working 4 days go back to 5? How much would this bring in and how much would the extra day at the creche cost?

Don't understand why you have the unnecessary cost of an agent when the property is so close?

What is happening the credit card debt?


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## Needtomove (8 Aug 2014)

Hi Bronte....if the person working 4 days increased to 5, they would earn €400 extra pm. .however...childcare would increase by €250!! (Creche fees are not pro rata)....so.an extra €150pm minus work costs is not worth it for our family dynamics...ie our two under 3 years old would spend a further 10.5 hrs in a creche per week....just couldn't justify it...as this is quality mammy/kiddies day but thank for the suggestion, i have brain stormed and thought out of desperation i may do this but not nice/fair to drag kids out of bed half asleep on that 5th day pw for such little gain

We have approached MABS who hopefully can help get the credit unions to agree to extend the terms of 2 of the loans...they wont do so for the €4k one as less than 6 months old .

Thanks


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## Ihana (8 Aug 2014)

I agree with Brendan, you actually should be in a decent position but are totally overextended on the loans.  Cut into those loans and your quality of life will improve no end.  I too would push the credit union to release the pressure.


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## no_moolah (8 Aug 2014)

This might not sound ideal but in my experience - creditors are usually more open to negotiation after the loan goes into arrears. The credit unions can be a bit funny about off setting the shares against the loan. They usually only do this if the account has gone legal.

I definitely agree with applying for a moratorium on your mortgage or even interest only. My bank refused me a moratorium but suggested interest only for a few months. That will free up some income.


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## kennyb3 (8 Aug 2014)

If you are going sick, struggling with food bills I see no point in paying 5% of income each into a pension - i know you lose the 10% employer element and I wouldn't normally recommend such short sighted measures but in your case it sound merited. As you are both are just over the 20% rate it would make even more sense. (obviously rental property profit could affect this)

Is there scope for wage increases?

Have you family that could possibly help with one days childcare?

How much would a childminder work out at in comparison to a creche?

I'd focus on the credit card, then the hisghest interest loan and work from there.

As suggested don't sell the house and consider missing (ideally approaching bank re break/IO) couple of mortgage payments to help.


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## ashambles (11 Sep 2014)

I realize this post may seem the opposite of help but anyway:-


> owe €100k
> worth €85k
> rate 2.75%
> Repayment €650pm, rent received €850pm, extra used towards letting agent fees/property tax pm


From those figures it looks as if there is no tax being paid on the rental income. 

I'd have thought that after 75% tax relief on interest the basic net income would be around 
(850 * 0.48) + (0.75 * 0.0275 * 100000)/12 = 580 euro?

My numbers may be totally inaccurate as I'm not a landlord and there's an array of extras than can reduce the tax bill, but perhaps a tax compliant landlord could comment on what sort of income they'd expect to make in this situation?


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## kmick (11 Sep 2014)

Investment Property
Repayment €650pm, rent received €850pm, extra used towards letting agent fees/property tax pm ( as live 30 miles away and with 2 jobs and 2 young kids cant take any job ourselves)

Property tax on this is 90euro.
Fire the lettig agent and use the excess to pay off your loans more quickly (startin with cc)
Up the rent 50 or 100 euro and that gets you a doctors fee once a month.


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## Needtomove (11 Sep 2014)

Thanks for replies...absolutely all "landlord committments"above board and up to date....NPPR...tenancy board etc etc....honest to a fault here so no worries on that front 

Coming up to 1st liable for income tax...will be paid too...at this stage ...don't know how?!

Am looking in to getting rid of letting agent at present. ...nice thinking about upping the rent to pay doctor fees!!...


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## mammyof2 (11 Sep 2014)

Needtomove said:


> Thanks for replies...absolutely all "landlord committments"above board and up to date....NPPR...tenancy board etc etc....honest to a fault here so no worries on that front
> 
> Coming up to 1st liable for income tax...will be paid too...at this stage ...don't know how?!
> 
> Am looking in to getting rid of letting agent at present. ...nice thinking about upping the rent to pay doctor fees!!...


 
You can deduct the cost of the agent against the tax owed, so ultimately it may not make much of a difference to your overall costs. Make sure you are also deducting PRTB registration fee, rental house insurance, maintenance costs, wear and tear, costs of advertising the property for rent, mortgage protection policy costs and repairs (good guide to what is eligible for deduction is at http://www.revenue.ie/en/tax/it/leaflets/it70.html#section3). Plus of course 75% of your interest payments on the mortgage. You can't deduct Local Property tax unfortunately


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