# Self Employed - Buy Property or Pay Off Current or Both?



## SelfEmpl (30 Jul 2012)

Age: 42
Spouse’s/Partner's age: 45

Annual gross income from employment or profession: 90k
Annual gross income of spouse:40k

Monthly take-home pay 

Type of employment: e.g. Civil Servant, self-employed  Self Employed

In general are you:
(a) spending more than you earn, or
(b) saving? Yes thank god

Rough estimate of value of home: Probably about 280k
Amount outstanding on your mortgage: Probably about 330k
What interest rate are you paying? Tracker mortgage 1.85%

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? 

Savings and investments: 30 k personal savings

Do you have a pension scheme?  No

Do you own any investment or other property? No

Ages of children: None

Life insurance: Yes


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

I am self employed and thankfully have been doing very well over the past few years. I'm a self employed business consultant and have about 150k in the company bank account.

I have been toying with the idea of buying a house with partner (currently living in a large apartment which is in my name alone). Would likely move there and rent out apartment. Not entirely sure what kind of mortgage we would get though. Any ideas?

Also as someone self employed I have considered pensions over the past few years but to be honest would be concerned about starting a pension now, have been thinking that buying property in order to have ongoing rental income in the future might be more sensible.

The other option I have been considering is upping my salary this year and paying some off the current mortgage. Is that a mad idea considering the tracker I'm on?

Interested in the learned views of those on this forum as to what I could/should do.


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## Dermot (30 Jul 2012)

I will try to give an opinion on part of your question. I would consider it to be foolish to increase your salary and paying tax at the higher rate to reduce a very good tracker rate that you will never get again. In relation to your Apartment does it suit your medium term needs or have you and your partner other plans that would necessitate a move.  If you rent out your apartment and buy a house to live in you have to examine a good few things. If you are buying a house the bank will look at the negative equity in your Apartment, what would the Apt rent for taking account of 10% for vacant periods, management co fees, letting fees,repairs and renewals, the two property taxes which will increase, Insurance charges, Prtb fees, 75% of your interest will be allowed against income, tax advisor's fees. Have you a budget for a house in mind. It would appear to me that given that you have negative equity of €50,000.00 in your Apt the bank would probably need this covered in your new mortgage plus 20% of the value of the house. You have 30k in personal savings and if you take out the 150k out of the company on top of your salary you would end up with something around 72k after taxes and levies giving personal savings of 102k. If the bank want the 50k negative equity in the Apt covered this would reduce your potential deposit to around 50k. Remember you will have about 2k legal fees and costs. Take into account furnishing and decorating the new house. You will be paying a SVR mortgage of a least 3.5% plus water charges and household charges on the house. Food for thought? Unless you really need it I would stay where I am. Someone else may have an alternative view. I do not know enough about pensions but you have very knowledgeable people on that subject who contribute to the forum.


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## SelfEmpl (31 Jul 2012)

Hi Dermot
Yes thank you very useful food for thought, will have a chat with the other half about it...the apartment is fine in the medium term to be honest and we have no urgent need to move. I guess my thinking relates to funding for retirement. I am nervous about not having a private pension and therefore potentially having very little future alternative income, so saw having a second property as a way of having future retirement income. 
I also wonder what others do in my situation? Is there something I could be doing with the company 150k (if I'm not planning to up my salary amount. ) Should it be in some type of savings account? At the moment is is only in a current account. 
Thank you for taking the time to reply, most useful.


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