# Investment property / Pension / Paying off the mortgage /



## bbari1 (1 Jan 2020)

Age: *43*
Spouse’s/Partner's age: *36*

Annual gross income from employment or profession: *€100K*
Annual gross income of spouse: *0*

Monthly take-home pay: *€5,500*

Type of employment: *Private health sector, secure job, 10 years in the same company*

In general are you:
(a) spending more than you earn, or *No*
(b) saving? *€2K per month*

Rough estimate of value of home: *€430K*
Amount outstanding on your mortgage: *€210K*
What interest rate are you paying?: *2.75% - AIB*

Other borrowings – car loans/personal loans etc: *0*

Do you pay off your full credit card balance each month?: *Yes*
If not, what is the balance on your credit card?: *0*

Savings and investments: *€100K*

Do you have a pension scheme? *No*

Do you own any investment or other property? *Yes (Tracker of 0.75%, remaining term 20 yrs. pre tax profit of €12K p/a.)*

Ages of children: *3, 10 and 12*

Life insurance: *to pay the loans only*


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

*1 - *_*re investment property:*_  I had a question about if I should sell the investment property. I didn't realise that I could ask all of my stupid question in this section and posted this question in another section yesterday. I got the answer that I should hang onto this property for now as it generates gross profit of €12K p.a. and all of the net proceeds are being used in full to pay off the capital.

*2 - re pension: *I never joined pension. Being a single earner, i always wanted to have max take home money (perhaps being stupid). Employer can match up to 5% of the contribution. Should I must join the pension now? is it too late or better late than never?

*3 - re mortgage of PPR:*  Should I pay lump off the mortgage? and how much should I pay off? Should I increase the monthly repayment amount or just pay the lump sum once a year?


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## HollowKnight (1 Jan 2020)

Where are your savings of 100k? Earning what interest?
I think I would pay a lump sum against mortgage and max out pension contributions. Make sure to avail of the employer contribution.


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## bbari1 (1 Jan 2020)

HollowKnight said:


> Where are your savings of 100k? Earning what interest?



In my current account earning no interest.


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## RedOnion (1 Jan 2020)

bbari1 said:


> Employer can match up to 5% of the contribution. Should I must join the pension now? is it too lat


Better now than never.
At a very minimum contribute 5% and get employer matching. It's free money.
But I'd be contributing more. You don't have to put in extra every month, but do it backdated each year if you're worried about commuting more than you can afford.

I'd be paying at least 50k off the PPR. It's the same as getting 5.5% taxable interest.
50k cash is more than enough to be comfortable as a rainy day fund.


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## bbari1 (1 Jan 2020)

RedOnion said:


> but do it backdated each year



Can you please explain how will that work? e.g. if I contribute 5% of my annual salary in 2020, there will be ER contribution of 5%. Anything additional (which you call backdated?) won't be matched by the employer - am i right in saying that ?


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## RedOnion (1 Jan 2020)

bbari1 said:


> Can you please explain how will that work? e.g. if I contribute 5% of my annual salary in 2020, there will be ER contribution of 5%. Anything additional (which you call backdated?) won't be matched by the employer - am i right in saying that ?


Sorry, I didn't explain it.
You have to put in 5% each month for employer matching.
At you age you can put in up to 25%. So, the extra 20% you can put in each month, or at anytime prior to October the following year and claim tax relief on it. So if you're a bit worried about budgeting you don't need to put it in each month.
If you start a pension now, you can put in a lump sum of 25% of last year's salary and claim tax relief on it. So a 25k kick start will only cost you 15k net.


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## goingforgold (1 Jan 2020)

You're in a good position financially, 220k equity in home, 70k equity in investment property and 100k savings. All you need to address is pension so start putting at a very minimum 1k per month into pension and avail of employer contribution also. You'll still be saving 1.4k per month as the 1k pension contribution will only cost ~600 euro after tax. Also you don't need to be saving huge amounts of cash as you already have more than enough in the bank.

You are exposed enough to property so invest in pension which is the most efficient way of saving for retirement and also gives you exposure to stock market, which you should have at your age...definitely not too late to start a pension...If you were to max out contributions between now and retirement you could build up an extremely sizeable fund based on your current salary.


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## bbari1 (1 Jan 2020)

Thank you for your suggestions.
in summary, I should...
1 - Keep the second property
2 - Join the pension with max contributions (perhaps 10% contribution by me plus 5% of ER contribution)
3 - Pay off at least €50K of the PPR mortgage.


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## bbari1 (3 Jan 2020)

Another question.....

The rental property isn't on the joint name as I purchased that before we got married. is it possible to have co-ownership of it? if yes, what is involved?
Why? I was thinking if its on the joint name, then half of the income can be transferred to wife (house wife) and it will reduce my tax bill?


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## bbari1 (3 Jan 2020)

Thanks. 
Perhaps good to have on the joint name anyway incase of my death?


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## bbari1 (3 Jan 2020)

Why can't i allocate 50% of the income to wife (as a self employee) after she's a joint owner?


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## RedOnion (3 Jan 2020)

bbari1 said:


> Why can't i allocate 50% of the income to wife (as a self employee) after she's a joint owner?


Hi, technically you need to transfer the house into joint names, and then the income can be split for tax purposes.

There is no stamp duty or capital gains tax on transfer between spouses.

However, you've a pickle. Because there's a mortgage, you would need banks permission to transfer. Then it'd come to light that it's no longer your PPR, and you'd potentially put your teacher rate at risk.

It might be possible instead to put a partnership agreement in place, or transfer the beneficial ownership 50% to your spouse. They're more open to questions from Revenue than a legal transfer.


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## Andrew365 (3 Jan 2020)

What is your secret to a family of 5 living off ~2,500 a month? This seems pretty tight over a year?


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## bbari1 (3 Jan 2020)

Andrew365 said:


> What is your secret to a family of 5 living off ~2,500 a month? This seems pretty tight over a year?



You meant 3,500?
No secret, we don't smoke, don't drink, don't eat out, we prefer to spend €50 on buying food and enjoying bbq at home over eating out. Yes, very boring and you may think that we aren't enjoying our life


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## RedOnion (3 Jan 2020)

The use of AVC to receive tax relief on rental income is fully discussed in the following thread. I would advise to read it through fully where it is all clearly explained.






						Using AVC to reduce Rental Tax Liability - Is it Possible?
					

Hi All,  Looking for some advice. My wife and I have a rental property which we started to rent out last year for 2 months. We hired a book keeper to file our tax return this Oct which was a liability of approx a couple of hundred euro and we paid the same in preliminary tax for 2017 liability...



					www.askaboutmoney.com
				




The OP has already been advised to contribute to pension using PAYE income. The maximum tax relieved pension contribution he can make is based on his earned income.

While well meaning, your advice might be misunderstood by people who don't have the in depth knowledge of tax legislation that you possess, so it's important that you explain it fully.


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## Brendan Burgess (4 Jan 2020)

I have moved the discussion about setting pension contributions against rental income to this thread, so it can all be kept in one place. 






						Using AVC to reduce Rental Tax Liability - Is it Possible?
					

Hi All,  Looking for some advice. My wife and I have a rental property which we started to rent out last year for 2 months. We hired a book keeper to file our tax return this Oct which was a liability of approx a couple of hundred euro and we paid the same in preliminary tax for 2017 liability...



					www.askaboutmoney.com
				






Brendan


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## bbari1 (30 Mar 2020)

Hi,

Just a question about the interest charged on the mortgage account....

in Dec, my outstanding balance was €208K and the quarterly interest charged in Dec was €1,442.

in Feb, along with couple of monthly repayments, i paid lump sum and brought the o/s balance down to €103K. Quarterly Interest charged in March was €1,242.

I'd hoped that the interest charged would be a lot less than the previous quarter as the o/s amount was reduced by 50% in Feb (in the middle of the quarter). or this is now how it works ? 

interest rate is 2.75%.


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## moneymakeover (30 Mar 2020)

next quarter
Your interest should be €704
If not then ring the bank for an explanation


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## cloughy (30 Mar 2020)

It depends what was the dates for the interest period, as whilst it was applied end of December it could have been for mid month periods.

Should be easy to calculate if you know the dates of the interest periods, and repayments,


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## bbari1 (17 Jun 2020)

moneymakeover said:


> next quarter
> Your interest should be €704
> If not then ring the bank for an explanation



I used Karl's calculator, i put loan fig as €104,028, int rate 2.75% and term as 10 yrs as this is when payment is close to what I'm paying and it returns the interest charged for the quarter close to what you said but I'm charged €726.74.

My statment looks as below,


 Balance 16/03/2020​Interest- 1,242.60- 104,028.8001/04/2020​Payment   998.78- 103,030.0201/05/2020​Payment   998.78- 102,031.2401/06/2020​Payment   998.78- 101,032.4616/06/2020​Interest-     726.74- 101,759.20

Should I enquire or I'm miscalculating the figures?


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## moneymakeover (17 Jun 2020)

The interest €726.74 suggests a capital amount
€105,707.63

However perhaps if they calculate the interest daily they could arrive at this slightly higher figure?


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## abc_xyz (18 Jun 2020)

bbari1 said:


> *1 - *_*re investment property:*_  ... generates gross profit of €12K p.a. and all of the net proceeds are being used in full to pay off the capital.



Any reason bbari1 shouldn't pay the net proceeds off the PPR mortgage instead of the investment mortgage considering the difference in rates?


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## bbari1 (18 Jun 2020)

Perhaps you misread... profit from the rental income is used to pay mortgage on that property. Sure i can't not pay the mortgage?


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## abc_xyz (18 Jun 2020)

bbari1 said:


> Perhaps you misread... profit from the rental income is used to pay mortgage on that property. Sure i can't not pay the mortgage?


I read net proceeds/profit as the amount after the mortgage and tax. And that this was used to make extra payments off the capital. Yea, you do have to pay the mortgage


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## bbari1 (18 Oct 2020)

The OP here for an update and mostly importantly a quick note of appreciation for all who pointed me in the right direction to achieve this milestone.

I confess that I acted against the advise that I should hold onto the investment property. The reason it was advised to rent the investment property because i was €2K p/a better off if I'd rented it. However, I put it up for sale to test the water and got €35K/€40K more than what I'd hoped. I put the property for sale 3 months ago, got sale agreed 3 weeks later and sale closed last week. After paying the mortgage of the investment property, the surplus/equity amount will be used to clear the PPR mortgage in full. Hopefully by the end of this/next week I'll be completely debt free!

I am very thankful to all of you and can't appreciate enough for the guidance received.

Please see the updated op below,


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## bbari1 (18 Oct 2020)

Age: 43
Spouse’s/Partner's age: 36

Annual gross income from employment or profession: €100K
Annual gross income of spouse: 0

Monthly take-home pay: €5,000

Type of employment: Private health sector, secure job, 10 years in the same company

In general are you:
(a) spending more than you earn, or No
(b) saving? €2,700 to €3,000 per month

Rough estimate of value of home: €450K - €470K
Amount outstanding on your mortgage: €0

Other borrowings – car loans/personal loans etc: 0

Do you pay off your full credit card balance each month?: Yes
If not, what is the balance on your credit card?: 0

Savings and investments: €60K in current a/c

Do you have a pension scheme? Yes - started in Jan.2020

Do you own any investment or other property? No

Ages of children: 4, 10 and 12

Life insurance: Yes

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

1 - re pension: I joined pension in Jan (thank you @RedOnion and others). I contribute 10% and take max benefit of the Employer contribution. I got statement from Zurich a few weeks ago. 100%of the funds are invested in Plasma Max. Should i keep it there or move the scheme to a different fund? The fee is 1.50%.

2 - I am hoping to cancel both mortgage protection insurances as the mortgages are now paid and planning on getting Term Assurance. is that the right thing to do? There is DIS in place in work.

3 - I've a question re what to expect or do after paying off the PPR mortgage. Perhaps I'll ask in a separate post in Banking/Mortgage forum

TIA - bbari1


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## 50andOut (19 Oct 2020)

I think you made a good choice. You have low expenses, are on a good income and are now debt free without the hassle of a rental.

1. You should maximise your AVC to make the most of the tax breaks - which for your age bracket is 25%. The 1.5% fee seems high for a company scheme
2. Yes no need for these, your death in service covers you, maybe you could add a personal family policy
3. you have excess after tax cash now - see point 1 first step, build back up an emergency fund (3 months salary) then spent a little.
4. do you have income protection insurance? as the sole earner, you should look at this

50+o


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## bbari1 (11 Jan 2021)

information in my post on the 18th Oct still applies.

in Jan 20, I started contributing 10% into the pension with a max of ER contribution. 

As I don't have mortgage anymore, should I increase my contribution to 20%? It will decrease my net by €500pm and I'll still manage to save €2,200 to 2,500 per month. 

Will the reduction in my net salary have an impact on my ability to borrow (€100K-€200K) if I want to upgrade my house at some stage? Will the banks consider the gross salary or taxable salary (after pension) for the 3.5 multiple? of course I can stop the contribution at anytime I need to.


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## Alkers86 (11 Jan 2021)

Gross salary is what bank look at for lending multiples but they also look at your ability to repay but IMO you'll be fine at that level.

If I was you, I would up your contribution to the 20%, unless your plan to borrow to upgrade the house is a more-definite plan than just a possibility.


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## bbari1 (11 Jan 2021)

Alkers86 said:


> Gross salary is what bank look at for lending multiples but they also look at your ability to repay but IMO you'll be fine at that level.
> 
> If I was you, I would up your contribution to the 20%, unless your plan to borrow to upgrade the house is a more-definite plan than just a possibility.


Why wouldn't you if the plan was definite?


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## _OkGo_ (11 Jan 2021)

If your plan to move is imminent, i.e. in 2021, then you should maintain the minimum matching employer contribution while moving house. It gives you more cash in hand short term and when the dust settles, you can retrospectively use up your 2021 tax relief in 2022 by backdating a lump sum payment to your pension. 

You end up in the same place but it can just help cash flow a bit this year


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## bbari1 (11 Jan 2021)

Thanks for that. 

If cashflow isn't an issue then I can up the % now and reduction in the net salary will not be a disadvantage from the borrowing point of view?


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## _OkGo_ (11 Jan 2021)

It all very much depends on your plans for managing the move. 

As an example, if €650k is your ideal house then you need a 20% deposit of €130k. Your 2 options are to:

Sell current PPR and buy new PPR (part of a chain)
buy new PPR and then sell current PPR
Option 1 would probably work best for you, you would be comfortably within lending limits and your €60k cash can be used for any ad hoc expense during the move. The downside is trying to time and align everything when trying to close and sign contracts. Or even selling, renting and then buying so that you are not in a chain but the renting part could be difficult with a family of 5

Option 2 is more convenient from a family perspective but a lot harder to manage financially. You would need to add more than €70k to your existing savings just to reach the 20% deposit (why you might limit pension contributions this year). And then you would need to borrow well in excess of lending limits to purchase the new PPR and you would need an exception to the LTI from your lender. If it all went smoothly, proceeds from selling your current PPR would then go straight against the mortgage and you are back to a comfortable level but it is possibly a bit of a headache and I would imagine that it could be difficult for you to get an exception to borrow 5.2 LTI.

If option 1 is your preferred route, then paying the max to your pension now sounds reasonable because you have a cash buffer. If you think you can manage option 2, then you need as much cash on hand as possible so it would be better to delay contributions



bbari1 said:


> 2 - I am hoping to cancel both mortgage protection insurances as the mortgages are now paid and planning on getting Term Assurance. is that the right thing to do? There is DIS in place in work



Another point, if you have not already done so, you should really have Life insurance and Income protection in place in addition to your DIS. As the sole earner with a young family, your DIS may not go very far if your spouse does not have any income. Similarly if anything was to happen to you preventing you from working, your household income needs to be protected


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## bbari1 (11 Jan 2021)

_OkGo_ said:


> It all very much depends on your plans for managing the move.



Thanks a lot for taking your time in responding. 

it will be Option-1 if i make any move.

I have life insurance in place as i didn't cancel one of the two policies. DIS is also in place. I don't have Income Protection though but I'll certainly look into that.

Thank you again, sincerely appreciated.


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## Alkers86 (12 Jan 2021)

bbari1 said:


> Why wouldn't you if the plan was definite?


Because I'd save the money towards the move / extension / renovations and then once that's done,  I'd increase my contributions.


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