# Advice on Next Steps after Forever Home Purchase



## JuzAAM (19 Nov 2022)

*Personal details*

Age: *35*
Spouse’s/Partner's age: *36*

Number and age of children: *5, 4, and due in 2023

Income and expenditure *
Annual gross income from employment or profession: *150k + 20% bonus (private sector*)
Annual gross income of spouse: *60-70k depending on over time (public sector)*

Monthly take-home pay: *Between €8-€9k after deductions*

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


Summary of Assets and Liabilities 
Family home worth €950k with a €520k mortgage
Cash of €75k
Family home mortgage information *
Lender *BOI*
Interest rate *3%*
If fixed, what is the term remaining of the fixed rate? *3 years 1% cash back due in 3 years



Other borrowings – car loans/personal loans etc

9.5 years left on 70k credit union home improvement loan @4.75%*


Do you pay off your full credit card balance each month? *Yes*
If not, what is the balance on your credit card?
*Other savings and investments:*

Do you have a pension scheme? *Yes I pay 6% company 4% spouse civil service 


Other information which might be relevant *


Childcare fees: *currently €1500, likely close to €2000 after baby born*
Life insurance: *Yes, health, mortgage protection, death in service and critical illness*


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

*Focus of last few years has been buying and modernising forever family home which is now complete and just looking for advice on what to do next. 

We will need to upgrade family car (approx +€25k) and I am conscious of income drop while on maternity leave and childcare cost increase but my initial plan is:

-Keep some cash buffer to fund maternity leave and new car
- Pay off credit union with remaining cash
- increase pension contribution 

But would love some additional thoughts. *


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## NoRegretsCoyote (19 Nov 2022)

A general observation is whether you plan to sustain two full-time jobs with three kids under six.

At your pay level you no doubt work long hours, and your spouse does overtime.

Is this sustainable? Most people I know who've got to your stage have cut back on hours or changed career path at household level.


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## Brendan Burgess (19 Nov 2022)

JuzAAM said:


> 9.5 years left on 70k credit union home improvement loan @4.75%





JuzAAM said:


> Cash of €75k



You have a €70k credit union loan. Do you have shares in the Credit Union as well?  I assume not. 

When do you need to upgrade the car? 

Unless it's in the immediate future, you should repay the Credit Union loan in full.  
You will build up savings in the mean time, and if there is a shortfall to the cost of the new car, then take out a new Credit Union loan which you will clear quickly.

With such high borrowings, you should not be making any pension contributions other than those matched by your employer. You are young. You have plenty of time to contribute to a pension.  You should not be borrowing at 4.75% to contribute to a pension. 



Brendan


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## Mamamia22 (19 Nov 2022)

I would feel that your debt level is a bit too high. I know someone close in a similiar position 15 years ago. Except that their 600k mortgage was at 1%. I know if they had their time over again they would not borrow so much for bricks and mortar. They are now at 50 years of age burnt out by all the work done to try to overpay the mortgage to get it paid off a bit quicker. Still a couple of years to go. However the cost in terms of quality of life has not been worth it. A big mortgage with children in tow is not easy even for the well paid. Childcare is essential as staying at home is not an option with that level of debt. It’s hard to keep the plates in the air through your 40s and beyond without it taking its toll physically and mentally. A change of car should be far from your thoughts with those interest rates. Just my 5c.


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## Pinoy adventure (19 Nov 2022)

Clear the credit union loan from cash and build up cash reserves there after


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## Zion2022 (20 Nov 2022)

Step 1 seems to be obvious in that the home improvement loan should be cleared. You can always do something at a later stage for the car if you really need it.

Have you looked at your options with respect to mortgages? I know the increases have started but 3% for 3 years fixed looks high. Don’t get sucked in by waiting for 1% cashback in 3 years time, it might not be worth the wait if you can get a lower rate for a longer term now.


Mamamia22 said:


> I would feel that your debt level is a bit too high. I know someone close in a similiar position 15 years ago. Except that their 600k mortgage was at 1%. I know if they had their time over again they would not borrow so much for bricks and mortar. They are now at 50 years of age burnt out by all the work done to try to overpay the mortgage to get it paid off a bit quicker. Still a couple of years to go. However the cost in terms of quality of life has not been worth it. A big mortgage with children in tow is not easy even for the well paid. Childcare is essential as staying at home is not an option with that level of debt. It’s hard to keep the plates in the air through your 40s and beyond without it taking its toll physically and mentally. A change of car should be far from your thoughts with those interest rates. Just my 5c.


Their debt to income ratio is just over 2x. It looks an extremely manageable mortgage for them, even if the lower income spouse were to stop working to mind the kids.

I suspect they have borrowed relatively less than over 95% of first time buyers these days.


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## Gordon Gekko (20 Nov 2022)

Clear the Credit Union loan.

Increase your pension contributions.


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## JuzAAM (24 Nov 2022)

Thank you everyone for your advice. 

We are going to hold off on the car as long as we can and look into paying back credit union loan. 

While we know it is a work/life balance struggle we both generally enjoy our jobs and fear it would be difficult to get back to where we are if either of us stepped back. 

We currently use the overtime to fund luxuries to make our lives a bit easier, weekly cleaner, weekends away etc. but this could easily be reduced.


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## cremeegg (8 Dec 2022)

I would give some thought to using the cash to pay down the mortgage rather than the CU loan. The CU loan will be gone in 9.5 years, the mortgage will be with you I assume much longer. 

I know that the CU loan is at a 1.75% higher rate, but as the below poster says


Mamamia22 said:


> I would feel that your debt level is a bit too high. I know someone close in a similiar position 15 years ago. Except that their 600k mortgage was at 1%. I know if they had their time over again they would not borrow so much for bricks and mortar. They are now at 50 years of age burnt out by all the work done to try to overpay the mortgage to get it paid off a bit quicker. Still a couple of years to go. However the cost in terms of quality of life has not been worth it. A big mortgage with children in tow is not easy even for the well paid. Childcare is essential as staying at home is not an option with that level of debt. It’s hard to keep the plates in the air through your 40s and beyond without it taking its toll physically and mentally. A change of car should be far from your thoughts with those interest rates. Just my 5c.



You may not earn, or even want to earn, that big income in your 50s.


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## ClubMan (8 Dec 2022)

cremeegg said:


> I would give some thought to using the cash to pay down the mortgage rather than the CU loan. The CU loan will be gone in 9.5 years, the mortgage will be with you I assume much longer.
> 
> I know that the CU loan is at a 1.75% higher rate


That doesn't really make sense.
It makes more sense to pay down higher cost unsecured loans than the mortgage in this case.
As already suggested several times.
And the CU's nominal rate of 4.75% is quite likely higher in reality due to the way that they do things.


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## Brendan Burgess (8 Dec 2022)

cremeegg said:


> I would give some thought to using the cash to pay down the mortgage rather than the CU loan. The CU loan will be gone in 9.5 years, the mortgage will be with you I assume much longer.



Hi cremeegg 

Very unusual conclusion.

Could you set out your thinking a bit more on this. 

Brendan


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## Blackrock1 (8 Dec 2022)

Congratulations you are getting on well and if you are in your forever home then it makes things a lot easier in planning for the future.

Personally I’d clear the cu loan and build back up the savings , figure out what are doing with the car at that stage and then also see on the pension contributions once you have that sorted and a rainy day fund. Hopefully your earnings will continue to increase as you gain more experience and advance in your career.

Many people find that when the 3rd comes along that one parent taking some time out makes sense, pre school age is the easy period believe or or not once they start school it becomes harder to be both working full time, they miss activities and play dates etc and they tend to resent after school . Factor in that one of you may take a career break or some time out of the work force ( in reality looking at your earnings and the fact she is ps so has more scope to do it it would probably be your partner)


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## cremeegg (9 Dec 2022)

Brendan Burgess said:


> Hi cremeegg
> 
> Very unusual conclusion.
> 
> ...


It is all about cash flow.

The mortgage payments I expect are about €2,200 a month and the CU loan repayments about €720 (though we don't know the original amount).

Today, late 30s the couple both have high earnings and young kids. Today they can manage these repayments.

Roll on 15 years the couple will be older and the kids more expensive (believe me!)

A repayment of €2,200 requires earnings before tax of €52,800 just for the repayments. So they will have to continue with the high earnings.

If they reduce the mortgage now, it should be possible to possible to get a lower monthly repayment if not now at a later date.

I realise that clearing the CU loan now and upping the mortgage repayments by the amount of the CU repayments would save them more money, but in my experience life is not like that.


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## Blackrock1 (9 Dec 2022)

cremeegg said:


> It is all about cash flow.
> 
> The mortgage payments I expect are about €2,200 a month and the CU loan repayments about €720 (though we don't know the original amount).
> 
> ...


Often times on these threads the assumption is that high incomes are hard to maintain, my experience would be the opposite in that people with high earnings in their 30s tend to continue to progress and earn more as they get into their 40s + 50s.


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## cremeegg (9 Dec 2022)

Blackrock1 said:


> Often times on these threads the assumption is that high incomes are hard to maintain, my experience would be the opposite in that people with high earnings in their 30s tend to continue to progress and earn more as they get into their 40s + 50s.


I suppose it depends on the industry. Look around the office, its not how much do the 50 somethings earn, its how many 50 somethings are there. Many industries have a fairly narrow pyramid.  

Also would you want to work that hard that long. The satisfaction of achievement fades eventually, just in my opinion.


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## Brendan Burgess (9 Dec 2022)

cremeegg said:


> I realise that clearing the CU loan now and upping the mortgage repayments by the amount of the CU repayments would save them more money, but in my experience life is not like that.



That is the bit which I thought you did not get, which surprised me. 

It is always correct to clear the most expensive loan first.

I am struggling to see how some psychological or "life" factor changes that.

Rather than take this thread off-topic with a philosophical conversation, would you start a new thread setting out your ideas. 

Brendan


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## Ryan (27 Dec 2022)

I wonder though if the arrival of the third child necessitates a larger car meaning it can’t be put off for too long?


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## NoRegretsCoyote (27 Dec 2022)

cremeegg said:


> Look around the office, its not how much do the 50 somethings earn, its how many 50 somethings are there.


Earnings (on average) top out about 50, it's true.

There's a lot of variance though and it depends a lot on your own career trajectory and industry.


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## miser (28 Dec 2022)

Ryan said:


> I wonder though if the arrival of the third child necessitates a larger car meaning it can’t be put off for too long?


Thought exactly the same myself.  Realistically a 7 seater going to be required to fit everyone & their stuff. Doesn’t have to be new or overly expensive though, although cars both new & used have become really expensive in the last couple of years


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