# Keen to make right choices at important stage in life



## INYWIFNW (12 Jul 2021)

Age: 34
Spouse’s/Partner's age: 33

Annual gross income from employment or profession: 120,000
Annual gross income of spouse: 65,000

Monthly take-home pay 9,500ish

Type of employment: e.g. Civil Servant, self-employed
Me public sector, wife private sector

In general are you:
(a) spending more than you earn, or
(b) saving?
Saving about 2,500 per month

Rough estimate of value of home 600,000
Amount outstanding on your mortgage: 300,000
*What interest rate are you paying? *2.9% with BoI, 1 year fixed. Overpay by 10% monthly (most permitted). Obviously considerably higher rate than we would like, but there are reasons for this.  We switched from AIB 3 years ago for 3% cash back.  We got 2% immediately, with the other 1% if you're still with BoI after 5 years, so 2 more years to go before we get approx 3,500. Also, we have both changed jobs in the last 12 months so between probation periods and that kind of thing, we would have been unable to switch.  We will go to Avant as soon as we get the 3,500 from BoI.

Other borrowings – car loans/personal loans etc
None

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? Zero

Savings and investments:
Prize bonds 80,000
Cash 40,000

Do you have a pension scheme?
I have a PRSA pension from when I was in the private sector and it's worth circa 100,000, no more contributions being made obviously but I left it with the PRSA provider in one of the high growth/risk funds and it will continue to be managed. I am in a DB career average public sector scheme now. No AVCs set up yet.
My wife is in a DC scheme and it's worth approx 40,000, she only recently maxed pension contributions.

Do you own any investment or other property?
No.

Ages of children: 3 and 1, unlikely to have any more.

Life insurance: Both my wife and I have 3x salary.


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

We feel like we are at a crossroads in our lives now, and if we make some good decisions at this stage, they will pay dividends in the next 10/20/30 years and beyond. The specific questions I would really appreciate people's views on are:

1. We're looking at picking one of the following options in the next 12 months.  Should we (a) trade up our PPR (principal private residence), (b) buy a second property as an investment/headstart for kids or (c) buy a place abroad for pleasure?  Or any other suggestions welcome!  Just to give some further information:

(a) Trade up PPR

Our PPR is in a decent area of Dublin (one of the many Dublin areas that is within 1km of €1m houses and also of very disadvantaged areas) and it's a fairly nice house.  It's a 1960s house and has a few problems (e.g. small leak in extension), it's perhaps a little smaller upstairs than we'd like (it's a dormer bungalow), so we would quite like a slightly bigger house in a slightly better area, although the house and area are perfectly adequate.  We have decent equity in our PPR having bought in 2015, so although the market is hot right now, we would be benefiting on the sell side as well as paying for it on the buy side.  We would be thinking of buying something in the 750,000-850,000 range.

(b) Buy a second property

Neither of us are particularly keen to be landlords, but we like the idea of having a second property if our kids need a headstart in a few years, somewhere they could move into during college or with their partner to save for a deposit.  I know this is a fairly long-term view, but I think we could afford to buy a 2 bed property within the canals or on the LUAS line, rent it for a good few years, and then turn it over to our kids for their use when they need it in the future, before returning it to us to form some part of our pension income in future.  We'd be thinking of buying something in the 240,000-320,000 range.  It would not be a pure investment play, as we appreciate the fact that income tax is paid on rental income and that it would be unlikely to fully wash its face.

(c) Buy a place abroad

We both like the idea of having a place in Spain and having it in the family.  We think we would use it plenty (or as much as our annual leave allows), our parents are alive and would get plenty of use out of it, and we would both love to spend 6 months a year in Spain when we eventually retire.  That's obviously a long time away, but if we're going to buy a place abroad, we'd like to do it when our kids are young so we could enjoy it and create loads of invaluable family memories there.  This option obviously makes the least sense financially!

2. We have too much tied in prizebonds/cash but what else can we do with it for the next 12 months?

We have 120,000 between prizebonds and cash which is obviously too much. We will be using it in about a year or so to avail of one of the options outlined above.  Is there anything we can do in the meantime?  I feel we have adequate exposure to equities via my PRSA and my wife's pension (please feel free to disagree) and I don't understand crypto so don't want to invest in it.  Maybe we should just leave it be for now?

3. Would it make sense for us to meet a financial adviser and, if so, could anyone recommend one?

I'm very happy to pay for financial advice on an hourly basis but I not interested in paying trail/continuing fees (whatever they are called, the ones that keep paying the adviser for years after the product is chosen).  I also sometimes feel that we don't earn enough/have enough wealth to justify going to a financial adviser.  What do people think?  Ideally, I'd like someone who understands public sector pensions, but I understand from reading that forum that such people are thin on the ground.

Thank you for reading.


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## Brendan Burgess (12 Jul 2021)

INYWIFNW said:


> 2 more years to go before we get approx 3,500.





INYWIFNW said:


> Amount outstanding on your mortgage: 300,000





INYWIFNW said:


> 2.9% with BoI, 1 year fixed.



But you would save 1% a year by switching to Avant. 

So you will save €6,000 but lose €3,500 + any break fee. 

You should check the break fee. 

If you trade up before the two years, that makes the switch calculation more complicated.

For example, if you switch now and pay €1,500 in legal fees and trade up after a year, it will be worth it. 

Brendan


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## Brendan Burgess (12 Jul 2021)

You should also check if there is a break fee for paying €120k off the balance early. 

I would guess that it's well worth it. 

Brendan


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## Brendan Burgess (12 Jul 2021)

It's probably easier to advise you what not to do.

You should not buy an investment property in case your 3 year old might benefit from it in 15 years. 

Clear the mortgage on your home or trading up is a much higher priority.

If you pay €100k off your mortgage, you are getting a tax-free return equal to the mortgage rate - say 1.95%.  This is also a risk-free and hassle-free return.

In 15 years, if it makes sense to buy a property for your child to use in College, well buy it then.  And it might be DCU or Belfield or the UK.   Don't pick their university for them now. 

If you have say €300k to "invest" , buy a bigger home.  You get a tax-free return in terms of the extra benefit of a more expensive house. And any capital gain will be tax-free.


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## Brendan Burgess (12 Jul 2021)

Now let's look at trading up.

Current situation
House value: €600k
Savings: €120k
Mortgage €300k
Net equity: €400k

Buy a house for €850k
Mortgage required: €450k 

Loan to value :53%
Loan to income:  2 1/2 times 

This is ok, but not comfortable enough that you can borrow €300k to buy an investment property or borrow to buy a property in Spain which you will use 6 months of the year in 30 years' time. 

*Conclusion *
Trade up to the house you want. 
Forget about buying an investment or a holiday home
After trading up, get your mortgage down to a more comfortable level than €450k 

In the meantime, check the break fee with BoI and consider switching to a much cheaper mortgage.


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## Brendan Burgess (12 Jul 2021)

Don't worry about pensions until you have sorted out your trade up. 

You have plenty of time to max your contributions.  

Your priority is to trade up and get your mortgage down to a very comfortable level.

Brendan


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## INYWIFNW (25 Apr 2022)

Thanks very much for the suggestions, Brendan - and apologies for the long delay in responding, life has been getting in the way!

So, having considered all of our options, we are probably going to trade up, but I would still appreciate some impartial views on how far we should push ourselves financially.  Since my original post, I'd say our house is worth around €625k, our mortgage is €295k, but the big point of difference is that the houses we have decided we would like to trade up to are probably in the region of €950k-€1,050k.  

So, to summarise, our situation is basically this:

House value: €625k
Savings: €120k
Mortgage €295k
Net equity: €450k

Buy a house for €1,050k
Mortgage required: €600k

Loan to value : 57%
Loan to income: 3.16 times our combined salaries

Does this sound very risky to an impartial observer?  Are you inclined to think, these guys are stretching themselves too far?

A few other points to note if it makes any difference:  We won't be having any more kids.  My job is public sector and there is a likelihood of a promotion in a few years which should increase my salary by €20-30k.  My wife's salary is lower than it could be if she were to change jobs, which she hasn't really been able to do due to maternity leaves etc, but she probably will in 2023 and her salary should increase by €20-30k, with potential to increase further in the future.  Basically what I'm getting at is that we have a level of security in our jobs and we haven't maxed out our salary ceilings yet.

I'm acutely aware that things can happen in life, one or both of us could get sick, or (God forbid) one of the kids could get sick or have additional needs down the line, or one of us might want to cut back the hours in a few years, or whatever.  I'm worried that taking on this trade up could leave us too exposed in case something goes wrong.

Thanks again.


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## Gordon Gekko (25 Apr 2022)

It doesn’t sound risky at all.

It sounds sensible.


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## NoRegretsCoyote (25 Apr 2022)

INYWIFNW said:


> Buy a house for €1,050k
> Mortgage required: €600k
> 
> Loan to value : 57%
> Loan to income: 3.16 times our combined salaries


It's a lot of house, but with kids your age that's the time of life where you'll get most value out of the space. We're heavily mortgaged and maybe a bit overhoused but with young kids I don't find that space is wasted.


Your mortgage will be big but with joint income touching €200k in your mid-thirties it's more than manageable. I'd go for it.


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## Clamball (26 Apr 2022)

Did you not save anything more in the last year?  You had €120K then, you have €220K now?  You should have another €25K because you were saving €2500 per month.  Maybe you just didn’t update the figure for us.

If you have continued to save, I would be all for trading up.  Make it the home you want to bring your kids up in the next 20 years, where they can get to know the local kids and amenities and have wonderful memories.


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## Brendan Burgess (26 Apr 2022)

INYWIFNW said:


> Annual gross income from employment or profession: 120,000
> Annual gross income of spouse: 65,000





INYWIFNW said:


> Loan to value : 57%
> Loan to income: 3.16 times our combined salaries





INYWIFNW said:


> Buy a house for €1,050k
> Mortgage required: €600k



€600k is not a big mortgage in relation to combined salaries of €185k , especially when you expect those salaries to increase and you have secure jobs.  And you are in your 30s so you have plenty of time. 

So go for it.

However, €600k is a big salary in relation to one income of €150k (your salary after promotion).  So after you have traded up, pay down the mortgage so that you will be in a position that your wife can take a career break or reduce her hours. 

Brendan


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## Peanuts20 (26 Apr 2022)

First things first, you are in a fantastic position in comparison with most people of your age so well done. 

Start with the basics,, ensure you have a will in place, adequate health insurance and do a full end to end tax review to ensure you have and are claiming for everything you can and have your tax credits set up in the most beneficial manner

Don't worry about buying a property for college, instead take the childrens allowance (at a minimum) and invest it in a longer term investment scheme. I'm not an advisor so can't tell you what but take your time and shop around. Or put it aside and use it to pay for a trip to Disneyland in a few years !

You have 80k invested in ongoing raffle tickets, you might get lucky but it's a long shot. That also needs to be invested properly and those 2 investments, if done right, will cover college

Are there any other major purchases you need to get sorted, cars for example.


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## INYWIFNW (26 Apr 2022)

Thanks very much for all the replies - greatly appreciated.

Just to reply to some of the queries:



Clamball said:


> Did you not save anything more in the last year? You had €120K then, you have €220K now? You should have another €25K because you were saving €2500 per month. Maybe you just didn’t update the figure for us.



Good question.  We haven't been saving as much since my original post for a number of reasons.  Firstly, I took about €5k of savings and all of the childrens allowance to date (another €4k or so) and put it into a Zurich savings fund, into which the childrens allowance will continue to go.  Technically, we could get our hands on this if we needed it, but I'm no longer classifying those funds as savings per se, because I consider them locked away for a decade at least.  Secondly, we had to buy a second car, which we did from our savings (rather than financing it).  Thirdly, my wife was on maternity leave and was paid for 6 months, but then had a few months off unpaid.  So that explains the lack of saving anything more in the last year.  Now that my wife is back in work and earning again, we should be well able to resume the €2-€2.5k savings.



Peanuts20 said:


> Start with the basics,, ensure you have a will in place, adequate health insurance and do a full end to end tax review to ensure you have and are claiming for everything you can and have your tax credits set up in the most beneficial manner



Can I ask a really basic question?  We have a will in place and good health insurance, but my wife and I are both weak on the personal tax side of things and I suspect we are not claiming everything we can and our tax credits aren't set up right.  I know it's really basic for most people, but is there a kind of service provider we could engage to do a proper once-over on our personal finances?  Or do we just need to cop on and get stuck into it ourselves?



Peanuts20 said:


> You have 80k invested in ongoing raffle tickets, you might get lucky but it's a long shot. That also needs to be invested properly and those 2 investments, if done right, will cover college



I think, realistically, this €80k will be used to part-fund the trade up.  If our mortgage interest rate is 1.95%, am I right in saying we would need a guaranteed return of better than that to justify investing it, rather than ploughing it into the trade up?



Peanuts20 said:


> Are there any other major purchases you need to get sorted, cars for example.



I think we're okay on this, we bought a cheap second-hand second car during the year so we're okay regarding cars and other big purchases.  The plan would be to buy a new electric or hybrid car in a few years, but we have no requirements in the immediate short-term.

Thanks again.


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## Brendan Burgess (26 Apr 2022)

INYWIFNW said:


> Firstly, I took about €5k of savings and all of the childrens allowance to date (another €4k or so) and put it into a Zurich savings fund, into which the childrens allowance will continue to go. Technically, we could get our hands on this if we needed it, but I'm no longer classifying those funds as savings per se, because I consider them locked away for a decade at least.



And the best place to lock them away?  Is to pay down your mortgage. 

You get a guaranteed 3% or 2% return. It's risk-free. And it's tax free.
Make a mental note that this €9k belongs to your kids. 
By the time they need it, you will have saved a lot of mortgage interest and could then reduce your repayments.

It may also make it easier for you to switch mortgages to the cheapest rate, though at 57% Loan to Value, you are close to the cheapest rate anyway.

Brendan


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## so-crates (26 Apr 2022)

INYWIFNW said:


> ...
> Can I ask a really basic question?  We have a will in place and good health insurance, but my wife and I are both weak on the personal tax side of things and I suspect we are not claiming everything we can and our tax credits aren't set up right.  I know it's really basic for most people, but is there a kind of service provider we could engage to do a proper once-over on our personal finances?  Or do we just need to cop on and get stuck into it ourselves?
> ...


I think what you are looking for there is a consultation with a financial planner. You can do most of these things yourself but engaging a CFP might be the look-over you are seeking. Maybe though start cheaper, on the RTÉ player, run through the back catalogue of "How to Be Good With Money" and see what lessons are in there from other people's experience. There's a pretty wide range of people in different circumstances. Some will be more useful than others. Maybe start with this one https://www.rte.ie/player/series/how-to-be-good-with-money/SI0000004732?epguid=IP000064800


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## Bobalin (8 Jun 2022)

Personally I would prefer to have more "wiggle room".  As someone said above, what if either of you want to take a career break or reduce hours.  I don't think it's a great idea to max out the finances on a bigger house unless absolutely necessary.  But if you do - take schools into account.  For that kind of money I hope you're going to be near a good primary school, maybe even within walking distance.  And if you are staying there long term, walking/cycling distance to secondary school.  Quality of life is surely a factor in buying a house for a million plus  - skip sitting in traffic for the school run for the next 11 years.


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