# 27 in negative equity - what should I focus on?



## Goggles (10 Sep 2009)

Age: 27
Spouse’s/Partner's age: N/A

Annual gross income from employment or profession: E43,000 + E3,600 rent a room scheme 
Annual gross income of spouse:

Type of employment: Private sector

In general are you:
(b) saving - minimum E600 per month

Rough estimate of value of home E200,000 - E220,000
Amount outstanding on your mortgage: E240,000
*What interest rate are you paying? 2.1% AIB tracker*

Other borrowings – no other borrowings

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

Savings and investments: 
6,000 Anglo Irish regular saver
1,000 credit union
2,000 First Active e-savings


Do you have a pension scheme? No

Do you own any investment or other property? No

Ages of children: N/A

Life insurance: With mortgage


*What specific question do you have or what issues are of concern to you? *
I bought my house 16 months ago (92% mortgage) when prices were beginning to come down and remain happy with my decision despite negative equity and I have spent the last 16 months re-building my savings.
I now don't know what financial goals to have in place - should I overpay my mortgage or begin my pension or look to investments?
How much money should I keep on deposit as a safety fund?
My car may need changing in the next 1-2 years which is why I have E1,000 in the credit union as I doubt a bank would lend to me due to my negative equity.
I am also studying a different career area at the moment (all fees paid) and may change career and take a salary cut of approx €15,000 initially (salary gradually increasing to current amount over 3-4 year period and hopefully continuing to increase).
What goal would you work towards in my position?
Thanks in advance for your words of wisdom!


----------



## HaloSun (11 Sep 2009)

Hi.. just a quick line to say wow !  I think you've achieved a lot for a 27 yr old and are doing fantastic - way above average...

I'm not a finance professional but a few comments:

Dave Ramsey in America recommends an Emergency Fund of 6 months expenses.  I would build this up first of all....

As to whether overpaying the mortgage or starting a penion is best, I don't really know.  Both have big attractions.  Maybe do both ?  Half and half with your spare income ?

Good Luck  !


----------



## Goggles (11 Sep 2009)

Thank you HaloSun! 
An Emergency Fund of 6 months sounds like a good idea - I will do my calculations and see how much I need.
The reason I am thinking about my pension is as I am in the higher tax bracket at the moment I can get maximum tax relief, where as in 1-2 years if I change career area and take a salary cut I will not be able to avail to the same extent...
Thanks again!


----------



## Bronte (11 Sep 2009)

I think 3 months as savings is enough and I'd be putting nearly all the savings you currently have monthly into overpaying the mortgage (600 X 12 = 7K annually off your mortgage.  I wouldn't worry about a pension until you have a lot more equity in your home and you are still young.  When you have the equity to value more manageable I'd then concentrate on savings and a pension.


----------



## Goggles (11 Sep 2009)

Thanks for your reply Bronte, I think you are right and I should overpay the mortgage by some amount at least. Although I like my house at present I would aim to be in a position to move in the next 5-10 years and my negative equity would make that impossable. I appreciate your help!


----------



## Bronte (11 Sep 2009)

Just curious googles why did you buy in the last 16 months if you plan to move in 5 to 10 years?

In any case if you want to move then your ONLY option is to get down the negative equity.  You will also need a deposit for the next property of 10%.


----------



## Goggles (11 Sep 2009)

I don't plan to move in 5 to 10 years as such Bronte but I would aim to be able to do so if my position required it (family, career, job location etc.) 
I bought my house in a location and size that will make it possible to stay in long term should I need to do so (house prices still dropping who knows where they will end up) but I would like to work hard now to have as many options open to me as possible in 5-10 years. Who knows where the future may lead!


----------



## cancan (11 Sep 2009)

In 5-10 years you should have a good chunk of what you owe paid off, regardless of what house prices do, so you should be well out of NE by then.


----------

