# 28, Hoping to clear all debts by next year



## flossie (22 Apr 2011)

Hi, i posted a post ytesterday on whether i should plough every € into clearing ALL my debt before going in to apply for a mortgage (currently on rent to buy, lease ends end of January 2012 - however, some people on the development have been denied mortgages and deal has been struck with developer to extend lease period by 6 months initially which could help). 

Once my CC debt is cleared (this was originally for paying off some tuition fees overseas which had to be paid upfront, I didn't finish the course and they won't return money - I don't want to try anymore as it was during a very bad time in life and i really don't want to revisit), which all going well i hope to be by August time, I intend to plough every € into my car loan, so could potentially be paying a minimum of €1600 per month instead of €500. All going well, this could be cleared by September next year. But should i be saving instead? (All CCs are now cut up so i can't spend on them, except for one whch is for emergency use only now)

I give myself about €400 per month to live on. The day after payday I transfer €x into my DD account. This covers rent, insurance, VHI, bills etc. I have also included car servicing, tax, heating for the year (I pay €80 per month in electric to avoid big bills in winter). 

I think i have started being very sensible in relation to money, and believe I have come about it logiccally, but any comments so far? Thanks in advance....


Age: *28*
   Spouse’s/Partner's age: *N/A*

   Annual gross income from employment or profession: *68,000 + Expenses + Bonus (typically 5 weeks salary)*
   Annual gross income of spouse: *N/A*

   Type of employment: e.g. Civil Servant,  self-employed *Private Sector - Insurance Industry, they are in a very strong financial position (rated very highly by Fitch rating)*

In general are you: *Currently diverting all savings to pay off debts due to higher interest rates, but not living beyond means*
(a) spending more than you earn, or 
(b) saving?

   Rough estimate of value of home *€300,000 (although on RTB scheme so this is the intended purchase price)*. Currently paying €1000 'rent' of which 50% is returned to me if i purchase this home.
   Amount outstanding on your mortgage: 
*What interest rate    are you paying? *

   Other borrowings – car loans/personal loans etc
*Car Loan - €23,000 */ *€513* per month (originally €24,000 taken out last year, then topped up by €4,000 to move into home and purchase kitchen appliances etc)
*Next Furniture - €1.600* paying €82 per month over 2 years on 0% interest

   Do you pay off your full credit card balance each month? *No*
   If not, what is the balance on your credit card? 
*MBNA - €2,300* (DD set up for €300 per month, plus i put money from expenses into it, as well as €600 savings every month. This should be cleared in the next 2 months)
*AIB Credit Card - €4,900* This was a transfer from the MBNA when the promotional rate ran out - 3.9% for 12 months. I currently pay €250 per month off but when MBNA is cleared i will divert all the money i had been paying into clearing this off

   Savings and investments: *No savings,* used as deposit on RTB scheme, helped out my parents a little bit buying oil etc in the winter, using what i used to save - €600, to clear debts off

   Do you have a pension scheme? *Yes - company contribute 8%, i contribute 7%, around €380* (I am hoping to continue maxing out my pension throughout my employment, making full use of relief available). I did think about dropping my contribution to 0 and then making ACV into it once debt is cleared, but if i don't see the money i can't spend it.

   Do you own any investment or other property? *No*

   Ages of children: *N/A*

   Life insurance: *Work policy - 5x salary tax free upon death.* They will also pension me off for medical reasons on 66% of salary if i am off sick for a certain period of time. I think this is sufficient for now, until i actually have a mortgage.


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


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## eirefinq (22 Apr 2011)

flossie said:


> Other borrowings – car loans/personal loans etc
> *Car Loan - €23,000 */ *€513* per month


 
what kind of car did you buy, what kind of running expenses are there? tax/insurance/service/petrol/NCT/parking.....?


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## flossie (22 Apr 2011)

Got a 09 Passat Highline....it was less than 6 months old when i got it. Runnign costs are fairly OK, i can get up to 1200km form a tank of diesel (€104 to fill at the moment) but i get re-imbursed at 59c per km, which all goes into paying off debts as well. Insurance is €780 per annum, wwhich includes no excess, full breakdown cover for EU etc. I budget in for 2 full services per year due to high mileage. Tax is €303 i think....

Due to the amount of time i can spend travelling, it's paramount i have a reliable car. Sounds silly, but i had an accident when overseas in my Golf which didn't cause too much damage to the car so i wanted to stick to a strong car. 

No NCT, no parking, all toll bridges reimbursed etc.


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## Guest105 (23 Apr 2011)

You are on a good salary with plenty of perks. Is the RTB scheme the right option for you? 

How can you be sure in a time of falling property prices that the intended purchase price of €300,000 is correct. It is quite possible you could buy a house far cheaper in the open market.

You may currently be paying over the odds in renting this property.

Would you consider renting a smaller place while you saved for a deposit?


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## flossie (23 Apr 2011)

Hi Cashier,

The house is pricey, i admit - it's a 4 bed detached, very nice house, very nice area with good neighbours etc. I trawled through the contracts on the RTB scheme and couldn't actually find something to put me off. I thought if i can rent for the 2 years, and then get 50% of my money back (€12,000) technically i would have only been paying €500 rent per month - not bad. 

I have a clause put into the contract that when we go to close the deal, if the house has dropped in value, or if anybody else has entered onto RTB for a lower purchase price, i will purchase at that lower price. This has to be in writing from the developer and the solicitor. Given that houses on this development were selling for €520,000 at the peak, i thought it was a goood deal - i actually managed to get the price down from  €363,000 for them. Although i don't see this as an investment property, I have gone for a big house as I work from home so want to have a dedicated office area, if i do settle down and want a family in the future i won't have to move (unless I have 3+ kids!), and if i am posted overseas again it is a very family friendly house to rent out. Perhaps my logic is a little weird in that sense, but I thought it made sense at the time!


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## Guest105 (23 Apr 2011)

Hi flossie, 

I will admit I don't know a whole deal about the RTB scheme and I doubt if many people do. These schemes first made an emergence in Ireland at the start of the recession a few years ago . I think they may have some merit at a time of stability or rising house prices but definitely not a good option at the moment when prices are continuing to fall. 

While AAM does not allow the discussion of house prices, I think in this instance it is worth pointing out to you that the CENTRAL Bank recently stress-testing the Irish banks for a worst case scenario where residential property prices would fall 60 per cent from their peak. So forget about mentioning the price of your house when it was at its peak as I am afraid for the vast majority of the population the days of the half million euro priced houses are well and truely over.

You say you work from home and yet in your opening post you imply you do a alot of milage hense the need for an expensive car. Technically you don't need a large house if you work form home just a requirement for a spare room so you can hold your computer and files.

Even if you do decide to carry on renting this house for two years and you get your €12,000 refunded, remember the banks may well demand that you come up with a very hefty deposit before they will award you the mortgage.

There is huge bother renting out a house in Ireland if you do intend working abroad again in the future, it is not all plain sailing and you would be well advised to read the other post re renting out houses elsewhere on this forum.

I wish you well in whatever you decide to do but if I were you I would tread very carefully with regards this RTB venture you are currently wrapped up in.


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## flossie (23 Apr 2011)

Thanks for the input Cashier.

Sorry, i didn't make myself too clear. I'm an engineer, normal base is at home, although out at clients normally once or twice a week, which is anywhere in the country. 

I know i shouldn't point out 'peak' house prices, as that is irrelevant these days. I'm hoping to clear every penny of debt by next year so that i can save (hoping to save up to €2000 per month) which will be in addition to the RTB scheme of €12,000. I want to get as much of a deposit saved so that i can get a smaller mortgage. 

I have friends who have gone through the RTB scheme and purchases have gone through OK. I am very pessimistic about the scheme, or i was initially, but after trawling through the contracts, sitting with solictor etc. I actually couldn't find anything that seemed like a con. Perhaps i'm wrong....

Anyhows, once again thanks for the responses....


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## Guest105 (23 Apr 2011)

Well when the time comes for you to purchase the house and seeing you have put in a clause to negotiate the final purchase price, you should be ok.  You seem to be far more au fait with the whole scheme than I am. 

Once you have the car loan paid off you will be in a better financial position to put far more towards your savings.   Goodluck with it and enjoy the challenge you have set yourself


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## Macstuff (25 Apr 2011)

As far as I know banks are looking for three things when it comes to lending... one, a clear credit history, two, little or no loans and three a deposit of anywhere between 10 and 20 percent. 

IF that is correct (bank lending is being influenced by so many external factors today that we don't really know where they stand) then you need to keep doing what you're doing i.e. paying down the debt as fast as possible (and paying off the most expensive loans first) and THEN saving. Can you extend the RTB contract to buy you the time you'd need to do this?

It could be worthwhile going into a bank at this stage or talking to a broker as your situation is a little unconvential i.e. you have a "deposit" of sorts through the RTB scheme. They might be able to give you some clearer information on how your application would be viewed. 

As an aside, I too am in a similar position i.e. I am trying to pay off large amts. of debt per month and got some good advice from AAM that I think is worth sharing. Like me you are young, you have a great salary, with a good company. You will pay off the current debt but just don't forget to LIVE and ENJOY your salary between now and then. 

Ultimately if you stick with your plan and do pay it off, you will only take on more debt through a large mortgage. Is that what you really want? If so, go for it. 

Just don't try to plan for everything at this young stage in life ie the perfect house, the family, the big car, the great pension, otherwise by the time you get it and can really enjoy it you may have lost some great years. 

I was paying back HUGE amts every month from my 3K net monthly salary and realised on posting here that I was doing too much. I've now cut back the repayments a little (by reducing the overpayments) and have as a result been able to do a few more nice things. 

Best of luck with what you decide.


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## flossie (25 Apr 2011)

Macstuff....thank you so much for your words there. Good to hear somebody else in similar position. I hadn't actually thought too much about myself to be honest so that's an interesting perspective to put out there. Perhaps once i have cleared off the CC debts i could cut back on the overpayments to the car loan. I will also look to have a word with bank/broker about financial position very soon. A friend on the same development recently managed to extend her RTB tenancy for 6 months so might look to that.

Am going to call Pension advisor as well about possibly cutting back my contribution to allow some extra cash flow in the meantime, then possibly do an ACV at the end.

Once again, thanks for the responses - much appreciated


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## flossie (27 May 2011)

*Update to situation....*

Well, my MBNA card is fully paid off this month!!  I feel fairly proud of myself for doing it! Last month there were a few blips on the radar when a good friend came to visit, so enjyed ourselves for a weekend (nothinig too extravagent, but it actually shocked me how much it costs to eat out twice in the space of a few days, a few drinks, additional fuel etc!). Plus a couple of new tyres (€200 each!) but I can't compromise on ssafety I guess. Anyways, next month is the start of focusing on the 3.9% CC debt.

I called MBNA up and increased my CC limit to €15,000. They have said they will offer me a 0% deal on balance transfers again, so once the CC is pretty much cleared, I am going to take €15,000 of my car loan (it's on variable rate) and throw it on there to stop the interest, and pay it back over 10 months. There looks to be a light at the end of the tunnel 

One thing I have done is to put my MBNA card (which i was using for purchases) and my Laser card into the fridge, so they are out of sight, out of mind. I have started giving myself a fixed sum of money every week and generally sticking to it. I am finding as much pleasure now by not spending then I do when i spend. I actually feel a bit guilty if i spend anything ober €10 these days!


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## so-crates (15 Jun 2011)

hi flossie, well done on getting rid of the MBNA debt. Was just looking back at your original post and I had a note of caution. In your original post you said you planned to devote all the money you had been using to clear the MBNA debt to the AIB CC debt once the MBNA was cleared but now you are saying you plan to load the MBNA card (to take advantage of the balance transfer) to try and accelerate your car repayments by removing the interest charge on 15k of the debt? You now plan to clear that 15k in 10 months. Given that your repayments are currently €513 and you won't be able to put all of the car loan into the CC you are now planning to payback quite a large amount in a pretty short time. Are you still planning to clear the AIB CC debt at the same time as the car debt on your MBNA card?


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## steph1 (30 Jun 2011)

Off topic!!


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## choccy (30 Jun 2011)

hi flossie-it sounds like you're doing well at getting your finances back in control- the only thing i have to add is as some other people have said about your rent to buy scheme- keep an open mind on actaully buying it as you might find the negioted price is not that competitiive in a couple of years time. also consider wher you are in your life as a single 28 yr old bloke with good job- although its commendable you're thinknig of your family and future-unless you have a steady girlfriend you don't mention you have no idea whats around the corner - you could meet a girl from down the country  and move there.....get transfered to qatar and live over there a couple of years- meet some foreign chick in copper face jacks and leave ireland - who knows- you're young and free with a good job. if in the future when you have a wife and family you want to still live in that area you can do so then- but you're probably at least 5 yrs off settlnig down and having kids.

1000 per month rent is a huge rent for 1 person when you're clearing debt
if you moved to a cheaper 1 bed rental ( 600- 700) or even go into a house share ( about 400 depending on location) which can be really good fun if you get the right house you could have an extra 600 a month to do stuff with- even if its just the odd pint with your mates !


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## Guest105 (30 Jun 2011)

choccy said:


> you could meet a girl from down the country and move there.....get transfered to qatar and live over there a couple of years- meet some foreign chick in copper face jacks and leave ireland - who knows- !


 
Hey Choccy - I reckon the OP is in your own words 'a chick' so I doubt she will be looking out for another one


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## choccy (30 Jun 2011)

oops !!!!!!...........sorry flossie !


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## flossie (1 Jul 2011)

No worries!  Last time i checked i was indeed a 'chick', and not in the process of looking for another one (although the male version is being sought! )

Current situation is that i allowed myself a bit of a free month last month, and bought garden furniture and some furniture for the house (spare bed, mattress etc.) so i did admittedly put that onto the MBNA - but that will again be cleared next month.

I see where so-crates is coming from and have decided to hold off loading the MBNA with the car loan for a while - keep it clear for emergencies and avoid having to pay 2 lots of monthly minimum payments. Will just load up the loan account instead - thank god in a way for variable rate loans!


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