# Is €400k of debt too much at age 45?



## stovesoot (25 Jan 2021)

Age: 44
Spouse’s/Partner's age: 45

Annual gross income from employment or profession: 110 + 10k car allowance + ~40k bonus/RSU for the last few years
Annual gross income of spouse: 60k

Monthly take-home pay: Private 5200 -> 5800pm depending on month, Public 2800pm

Type of employment: Private multi national, public sector

In general are you:
(a) spending more than you earn, or
(b) saving?
saving ~20k per annum for about the last 8 years since we exhausted 50k of savings on extension

Rough estimate of value of home: Sold 18 months ago to trade up, currently renting @ 1500pm

Other borrowings: None, run one car paid for with 22k out of savings 2 years ago.

Do you pay off your full credit card balance each month? Y

Savings and investments: Total of 270 - made up of 110k equity from house sale, remainder savings/company share sales

Do you have a pension scheme? Private value 220k (me 3%, company 7%), partner public sector but with career breaks etc so not sure what the entitlements will be

Do you own any investment or other property? N

Ages of children: 13 and 16

Life insurance: Policy from house still in force ~ 250k, death in service from private sector


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

As above we are planning to buy a slightly bigger, better located home for anywhere between 500 and 700k.
We're mortgage approved for 425k (split offer based on tracker retention and STV). If we draw down the max it would give a monthly repayment of 2k per month.
I'm comfortable with that on the basis I've never had a break in income in a good industry, and I've min 20k after tax in shares due for each of the next 3 years, combined with bonus we could use to pay down that mortgage by ~100k.
We passively manage our income/savings, and just in the last few years I've reaped the rewards of a few hard years workwise. We've a lifestyle where we spend less than we earn, but don't work hard to maximize that benefit e.g. still go on decent holidays, lots of nights out pre covid, and have helped out siblings with deposits. I just put away what's left, try not to touch any additional income (bonus, shares). Probably my own failure compared to those who share here and have more actively managed their income.

My issues of concern/questions:
- Is 400k+ of debt too much to take on at our age. I run the numbers and it seems okay, and we haven't take the approach of asking the bank for the max they'd allow us to borrow - we don't want to move after this one.
- Would we benefit from talking to a financial planner in terms of more active management in the future. Or is the strategy post purchase in terms of aggressively paying down the mortgage best?


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## Brendan Burgess (25 Jan 2021)

House : €700k
Less saving €270k
=mortgage: €430k - 61%

Interest rate - say 3%
Monthly interest: €1,000

Your combined salary is just over €200k, so the loan is twice your income. 

This is very comfortable.

You should buy the house you want especially if it makes sure that you don't move again.

Brendan


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## Brendan Burgess (25 Jan 2021)

stovesoot said:


> Do you have a pension scheme? Private value 220k (me 3%, company 7%)



As your mortgage is comfortable and as interest rates are low, after you have bought your home, you should increase your contributions to your pension fund ahead of paying down your mortgage.

Given the age of the children, you need to budget for their education.  But it seems likely that you will be able pay for it out of your income.  So when you face these bills, stop overcontributing to your pension or your mortgage. 

Brendan


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## NoRegretsCoyote (25 Jan 2021)

I wouldn't have a chunk of my wealth _and _my income dependent on the fortunes of one company.

It's an extreme example but a lot of Enron staff had retirement savings in Enron stocks. That didn't end well.




stovesoot said:


> - Would we benefit from talking to a financial planner in terms of more active management in the future. Or is the strategy post purchase in terms of aggressively paying down the mortgage best?



I doubt it. In your shoes you should be paying down mortgage and maximizing tax-relieved pension contributions.

Maybe AVCs for your wife, but I don't think any kind of investment outside pension makes any sense.


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## Brendan Burgess (25 Jan 2021)

NoRegretsCoyote said:


> I wouldn't have a chunk of my wealth _and _my income dependent on the fortunes of one company.



Fully agree. If you have shares in your employer which you are free to sell,  you should sell them immediately.

It's not just Enron - The Irish banks provide a much more identifiable example of why people should not have their income and wealth dependent on one company.

Brendan


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## stovesoot (25 Jan 2021)

NoRegretsCoyote said:


> I wouldn't have a chunk of my wealth _and _my income dependent on the fortunes of one company.
> 
> It's an extreme example but a lot of Enron staff had retirement savings in Enron stocks. That didn't end well.



Just sold out most of the stock this morning after reading yet another "stock bubble" article, while assessing things and posting this - only 23k remaining. The stock was coming off a low over the last 2 years so I've gained most of the upside.

Thanks for the advice and inputs.


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## Brendan Burgess (25 Jan 2021)

stovesoot said:


> after reading yet another "stock bubble" article,



Hi Stovey

Just to be clear, that is not the reason Coyote gave for selling them. It's not that he thinks that they will fall in value. It's just that a person should diversify their income and investments. 

Brendan


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## stovesoot (25 Jan 2021)

Brendan Burgess said:


> Hi Stovey
> 
> Just to be clear, that is not the reason Coyote gave for selling them. It's not that he thinks that they will fall in value. It's just that a person should diversify their income and investments.
> 
> Brendan



Understood Brendan - I'm just putting it into cash to lock in the value since it's part of our home budget, I don't need the money now but crystallizing it's value is sensible given there are many opinions that the US tech stocks are in a bubble.
In my circumstances there's been a 25% upswing in the last 6 months, which obviously helps.

Maybe I should put it in crypto until Covid goes away, I hear that's the place all the cool kids are


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## PebbleBeach2020 (25 Jan 2021)

NoRegretsCoyote said:


> ......but I don't think any kind of investment outside pension makes any sense.



Is this applicable to the poster or all people?


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## NoRegretsCoyote (25 Jan 2021)

PebbleBeach2020 said:


> Is this applicable to the poster or all people?


The OP. I think it's quite clear from the context


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## stovesoot (7 Apr 2022)

Update just over a year on, quick lookback
Income: 

bump in salary to €150k due to promo
some more shares/bonus
Savings/House:

Bought house ~700k, put in 250, left with 80k savings after furnishing etc. Mortgage approx 2500pm. 
Split mortgage with tracker retention: Green mortgage rate only .05 more than tracker.
Continue simple plan to pay down mortgage until we're at 1750pm and then look to see what else to do
No point in regrets but:

we sold prev house mid 2019, so missed out on market gains inbetween (maybe 50k) but equally it's hard to get into bidding and taken seriously unless you are ready to go in our area
we went for max 3.5 salary on mortgage - with that large commitment monthly, in retrospect I'm glad we didn't go that high. It would have limited our options for one/both to reduce/change careers


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## noproblem (7 Apr 2022)

stovesoot said:


> Update just over a year on, quick lookback
> Income:
> 
> bump in salary to €150k due to promo
> ...


A lot of things have gone your way, but you're one of those people who has a lot of common sense and who actually listens to advice you've been given. You're in a very good place given the world we're all living in right now. Only wish I had my head screwed on like you when I was your age. Well done.


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## Brendan Burgess (8 Apr 2022)

stovesoot said:


> 700k, put in 250, left with 80k savings



Hi Stove 

I am confused.  Are you saying that you have a mortgage of €450k and cash of €80k? 

You can afford the kids' educational costs from your annual earnings I assume.

If so, pay the €80k off your mortgage. 

If you can't afford the kids' educational costs, then keep the cash. 

Do you still have shares which will be sellable in future years? If so, use them to fund the education.

Brendan


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## stovesoot (8 Apr 2022)

Brendan:

We didn't change mortgage drawdown amount during the 6 months it took to close as were advised it'd create more work (bank looking for tax clearance re: capital gains paid, proof of funds change etc). So it was easier to stick with the original mortgage amount requested.

If things remain as they are additional income from shares will continue to come through for mortgage/edu


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## Brendan Burgess (8 Apr 2022)

Hi Stove

Good advice not to change the amount.  But that does not mean that you shouldn't pay it down now.

Brendan


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