# How to free up more cash?



## ailbhe (17 Aug 2007)

Age: 24
Partner's age:24 

Annual gross income from employment or profession: 22000
Annual gross income spouse:35000

Type of employment: Employed

Expenditure pattern: No savings, struggle to pay the basics

Rough estimate of value of home  330000
Mortgage on home 254000
Mortgage provider: IIB
Type of mortgage: Interest Only


Other borrowings – car loans 300 per month
                           personal loans 400 per month

Do you pay off your full credit card balance each month? No
If not, what is the balance on your credit card? 1000 each (repay 100-200 each per month)

Savings and investments: None

Do you have a pension scheme? I don't, hubby does 125 per month

Do you own any investment or other property? No

Ages of children: 4

Life insurance: I don't, hubby does as mortgage is in his name 30 per month


Basically, between loans and mortgage and loans it costs us approx 2100 per month which wipes hubbies wages. My wages are 1700 p.m. - 790 (525 creche fees, 125 car loan, 40 phone bill, 100 credit card and 30 NTL) leaves us with 910 per month spending money. This then has to cover all other expenditure like petrol, groceries, car tax x2, car insurance x2 and all bills like ESB and eircom. This has become a big struggle as cost of living is rising all the time.

We are considering remortgaging (in both our names) as the current mortgage is over 19 years. We could clear the big loan (20k) and extend the mortgage over 30/35 years. This seems like the only option available as in the year since we bought the house the mortgage has gone from 650 per month to 1100+ per month and we still are paying Interest Only. I want to start my pension and would like to start saving. Hubby was out of work for 3 months which wiped our savings and we're just starting to get back on our feet.

Any advice?
BTW we need our cars as live in the sticks and work in separate towns. I work in a brokers so know I have the best deal on car, house and life insurances.


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## Kendr (17 Aug 2007)

*Re: How to free up more cash??*

Firstly, congratulations on being a young couple starting out and being able to provide a detailed list above of where your money is going.  By doing that you prove you're on top of the situation. Now you want to improve.  Because, financially you sound fairly wise and in reasonable shape.

Your mortgage sounds expensive to me, and I've never been a particular fan of the provider you are using.  Go and see a broker today, or do a search of the various providers/banks and look to switch. Especially one with a good switcher package - paying legal etc. 

You are young enough to look at a 30/35 year mortgage.  Some will groan at this, but at your age it's better than paying nothing off your home with an interest only loan.  I/o loans are fine for investments.  Your monthly payment may go up, but you will begin to saves thousands long term by reducing loan. 

What's wiping your money out is that 20k loan and the cars (€700pm!).  If they're both decent cars - downsize on one of them?

Consolidate 20k loan into new mortgage means whatever that money was for - you'll be paying back over 30/35 years.  But if it's the difference between being broke and not then it can be a good idea.  Once you decide not to take out a similar loan again!


Credit card must go - 100/200 per month - well that could be your new mortgage difference.  But if you're both putting that much into a 1k x 2 debt - you must be spending on it as well otherwise a balance that low would surely have cleared.

Leave the pension for another year or two.  Youth once again on your side.

All this could free up a couple of hundred a month.

Then both make a committment to live like hermits for 12 months.  Seriously.  Step back from any type of discretionary spending - magazines, DVDs you name it (easier said then done with young kids).  Put all the changes in place during this time and emerge in a years time in better shape.


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## michaelm (17 Aug 2007)

*Re: How to free up more cash??*

I don't see that it makes any sense for you to start a pension as you pay virtually no tax.  If it were me and I needed to free up cash to make ends meet I'd stop paying the husbands pension (if it's voluntary) as he only pays tax at the lower rate (anyway you are both very young).  Also I'd have thought that your husbands net wage would be closer to €2450 rather than €2100 but I may be working it out incorrectly; and there's also €150/month child benefit and €250/quarter early childcare supplement. 

I would be slow to remortgage to fix a short-term cash flow issue.  I'd be more inclined to squeeze my spending in every area - standard stuff like shopping in Aldi/Lidl, cheapest petrol, only buy clothes/footwear in 'Sales', try to reduce utility bill, there's no way I'd pay NTL €30 a month (I only have the 4 Irish channels but if I had to have more I'd get a free-to-air satellite system for a once of capital cost, maybe €200) - Pay off the credit cards first then loans in order of how high the rate is.  

A year from now your child should be starting school so the crèche fees should disappear and you may find yourselves in a much stronger position.

I expect the you will receive mush wiser advice than the above from other AAMers.


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## Kendr (17 Aug 2007)

*Re: How to free up more cash??*

Agree with above.

But I did point out remortgage may increase monthly payments, yet save thousands in long term.

Interest only never a good idea on family home, unless the wolves are at the door.

Good point on the kiddy, is the 4 year-old starting school in September?


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## my2leftfeet (17 Aug 2007)

*Re: How to free up more cash??*

"A year from now your child should be starting school so the crèche fees should disappear and you may find yourselves in a much stronger position."

Careful on that one ... our fees for school going child work out pro-rata more expensive than fees for baby in creche full time.


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## seriams (17 Aug 2007)

Try topping up your personal loan and paying off both your credit cards straight away. You'll pay a less interest rate if you do this


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## Firefly (17 Aug 2007)

Can you change jobs / move into something that pays more?


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## PGD1 (17 Aug 2007)

i would remortgage to a tracker rate for 30 years.... you will still be only 55 when it's paid off.... most likely much much younger if things go well.

I would also sell/run cheaper cars. No need to keep up with the Joneses.

In fact I would hazard a guess that the Joneses are probably in similar circumstances and would be jealous of anyone who can get out of the situation and still be happy.


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## Kendr (17 Aug 2007)

A kid going to national school works out the same as €525 pm creche fees? Jayz, where you sending them to school My2leftfeet? You talking about after school care?

I've two in national school, it saves a fortune?


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## nelly (17 Aug 2007)

Firefly said:


> Can you change jobs / move into something that pays more?


if it was that easy we would all be at it!!


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## ClubMan (17 Aug 2007)

How did you manage to get an interest only mortgage on a _PPR _at your age and in your financial circumstances?! Seems like far from prudent lending by the mortgage provider unless I'm missing something obvious here...


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## ailbhe (17 Aug 2007)

Hubbies dad is co mortgagee on the mortgage. 
We had almost cleared the credit cards this month but daughter is starting school so we had that expense plus a few bills we hadn't been expecting. We got the car loans a year ago and over 3 years. Both are old cars so no keeping up with the Jonses I'm afraid ;o)
Daughter is starting school as mentioned. Our after school costs are €350 per month from September but we have to take mid terms, teachers days off etc into consideration so I don't want to be factoring that into our income too much (if there is spare cash at the end of the month we usually put it off the credit cards - that is rare unfortunatly). I am loathe to put the car loans on the mortgage due to the fact that the cars are 7 years old and I don't want to be paying for them when they are long gone.
Hubbie is on the higher tax bracket. Pays approx €500+ in tax. I'm hoping for a pay rise soon which should help (I wish there were more 9-5 well paid jobs out there but alas, they're not to be found!).
When we got the mortgage we had savings of €30000 which paid the eposit and as I said the payments have doubled since last year so we thought we would be ok financially with this mortgage but we found ourselves in a similar boat to a lot of people. At least we have the option to lengthen the term of the mortgage. That's a saving grace many don't have.


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## michaelm (17 Aug 2007)

ailbhe said:


> Hubbie is on the higher tax bracket.


He shouldn't be.  A singe person can earn up to €34k at he lower rate but as you are a married couple you can transfer up to €9k lower rate cut-off to your husband (and vice versa) so he should be on the lower rate.  You should check to see that you are receiving all the tax credits that you are entitled to and that you are getting mortgage interest relief.


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## Kendr (17 Aug 2007)

I still think that generally speaking, for your ages, school going kid, mortgage etc your are both doing really well in this expensive ole country.

Bit of a nip and tuck here or there, take a look at the mortgage, see if even the smallest amount of spending can be cut, sort a few of the loans and you'll be healthier financially.

Your in reasonable shape.  Take some action now, and set a financial target for yourselves in 5 years time.  Hold or reduce current spending now and in 5 years you should be good shape with pay rises etc.


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## Marathon Man (17 Aug 2007)

Credit card: Get a credit union loan and pay off the credit card in full.  The interest rate from the cu is significantly lower than any of the card providers, so you will save money straight away. Alternatively, any of the alternative card providers may be offering cheap/interst free credit for, say, 6 months....then pay off the card in full every month.

Insurance: have the policy changed to joint names.  If either partner dies, the other is covered.  At the mo, if you were to die, hubby would be crucified with child care etc and still have the mortgage to pay.  With you covered on the policy, no mortgage, so difficulties less.  To my mind, worth the extra.


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## ailbhe (17 Aug 2007)

Ah, that'd explain it. I say "hubby" but we're not married! I just hate the word partner! Sorry, I should have realised it would have had an implication on tax. Hence why non hubby is in the higher tax bracket. Apologies again!
Another reason to get married.....


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## my2leftfeet (17 Aug 2007)

"A kid going to national school works out the same as €525 pm creche fees? Jayz, where you sending them to school My2leftfeet? You talking about after school care?"

Sorry yes talking after school care.  It's €200 per week ... 52 weeks per year.  Covers breakfast, school drop, school collection, after school care, in service days and summer months.


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## ClubMan (17 Aug 2007)

ailbhe said:


> Ah, that'd explain it. I say "hubby" but we're not married!


You also said "spouse" in your first post. Hardly conducive to obtaining useful advice if you don't post accurate info?


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## ailbhe (17 Aug 2007)

ClubMan said:


> You also said "spouse" in your first post. Hardly conducive to obtaining useful advice if you don't post accurate info?


 
Actually clubman I copied and posted that from the guidelines listed in "basic information required for this post" as I was trying to be as accurate as possible. I forgot that not being married may have tax implications for us as a couple. Not my fault if AAM assumes all couples are married. Put in "partner" and you may have a point.


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## Brendan Burgess (17 Aug 2007)

Hi Ailbhe

I have edited the basic information to reflect this. Thanks for using it and for providing so much useful information. This is an experimental forum and we will improve it as it goes along. 

If you have an interest only mortgage, it does not matter if it's 19 years, 25 years or 200 years. You are paying 5% interest or €13,200 a year and you will be paying that next year as well as you are not paying off any capital. 

And an interest only mortgage is fine for you. You have just bought a house. You are 24 years old. You have a 4 year old child about to start school.Your spouse, sorry partner, has had 3 months of unemployment. You are doing very well. It will get easier over time as your salaries rise. In 5 years time, you will have got over the really tough times. 

Don't worry about savings or pensions for the moment.  Pay off the most expensive debt first which is the credit card. Can the car loans be extended to free up extra cash to pay off the credit cards? Get your spouse to stop contributing to a pension unless it's required as a condition of his employment. 

You might consider a Registry Office marriage for the tax and general benefits.  He will pay less tax. You will be protected if anything happens to him - no CAT on the house for example. 

When you say you are considering remortgaging in both your names, that might be considered a disposal to you. In which case you might have a liability to stamp duty or CAT. There is no hurry to do this. If you are planning to get married, do it after marriage

Brendan


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## Brendan Burgess (17 Aug 2007)

> Then both make a committment to live like hermits for 12 months. Seriously. Step back from any type of discretionary spending - magazines, DVDs you name it (easier said then done with young kids). Put all the changes in place during this time and emerge in a years time in better shape.



There really is no need for this at all. You are both 24. You should be enjoying life with your young child. I am not suggesting reckless living, but don't become hermits. Oversaving is as bad as overspending.

Brendan


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## Kendr (17 Aug 2007)

Unless, of course, like the OP said, she's trying to find extra cash from somewhere?
If she's no longer trying to free up extra cash, then heck....as you were.


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## ailbhe (17 Aug 2007)

Thanks for all the worthwhile advice. I was just trying to reassure myself that our best option is remortgaging. We quite liked the idea of paying off the mortgage at 42 but that will have to wait! So first and foremost we lose the credit cards, then remortgage and put the large loan (which was for finishing the house) in with the mortgage. This will free up about 700p.m. plus a payrise for me(hopefully) and a reduction in childcare costs. This should enable us to build up a small nest egg for security.
Thanks again for all the advice. It's good to know we're not doing too badly because it doesn't always feel like that!

And Brendan thanks for the politically correct adjustment ;o)


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## ClubMan (17 Aug 2007)

Brendan said:


> You might consider a Registry Office marriage for the tax and general benefits.  He will pay less tax. You will be protected if anything happens to him - no CAT on the house for example.


Getting married solely or mainly for the tax benefits seems like a bit of a drastic step!


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## Brendan Burgess (18 Aug 2007)

I agree that you should not get married for these reasons. But if you are planning to get married anyway, it's worth bringing it forward to save so much money when financial things are tight.

brendan


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## irishlinks (18 Aug 2007)

You mention that you have an interest only mortgage - so how were you planning to pay it off "when you were 42" - you would still owe the original amount?
When you remortgage - will you be getting a repayment mortgage ?


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## ailbhe (18 Aug 2007)

irishlinks said:


> You mention that you have an interest only mortgage - so how were you planning to pay it off "when you were 42" - you would still owe the original amount?
> When you remortgage - will you be getting a repayment mortgage ?



The 19 years we would have been paying it off was factoring in the 3 years (maximum) we would be paying interest only. It is the maximum length of time you can pay interest only with IIB. When we remortgage we intend repaying interest and capital from the outset. We originally went with interest only as the house was a builders finish and we needed money to finish it. We had intended to be repaying the capital by now but the rising interest rates put paid to that.


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## SidTheDweeb (19 Aug 2007)

ailbhe said:


> The 19 years we would have been paying it off was factoring in the 3 years (maximum) we would be paying interest only. It is the maximum length of time you can pay interest only with IIB. When we remortgage we intend repaying interest and capital from the outset. We originally went with interest only as the house was a builders finish and we needed money to finish it. We had intended to be repaying the capital by now but the rising interest rates put paid to that.



At the end of the day you haven't touched the capital yet so there is no point even mentioning the mortgage term - you should factor in the large increase in payments when/if you do start paying back to capital. And I doubt very much it will be over 19 years 

Ultimately though you seem to be in pretty good shape. I would agree with the advice above to not live like hermits and just try to weather the tough times. Best of luck


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## ailbhe (21 Aug 2007)

Hi all.
Just a quick update. We're going for the remortgage over 30 years. This will reduce our loan and mortgage repayments from 2325 to approx 1645 thus freeing up approx 680 per month. Add to this the reduction in childcare costs (220) from September and I can safely say that we should be able to begin enjoying life again!
All work and no play etc.....


Thanks for all the advice


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## Quest (21 Aug 2007)

From previous personal your particular lender do personal loans at home loan rates, unsecured, over a term of 1-5 years, this may reduce you outgoings on short-term debt...


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## pc7 (21 Aug 2007)

glad things are looking up but clear your loans with your extra cash and throw a few bob in savings!! don't go blowing it


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