# Mortgage Only but still struggling - Advice



## susan12 (1 Jan 2008)

Age: 33
Spouse’s/Partner's age: 35

Annual gross income from employment or profession: 68k
Annual gross income spouse: 63k

Type of employment: e.g. permanent full time both salaried PAYE 

Expenditure pattern: Finding it hard to make ends meet despite having a low frills life style.  Old car/ no carpet on the stairs/ very little furniture/ hate clothes shopping etc

Rough estimate of value of home 1.9million
Mortgage on home 700k
Mortgage provider: First Active
Type of mortgage: Tracker
Interest rate .75 above ECB (know there's better out there but we needed to draw it down in installments and NIB won't let us do that - did some building work)

Other borrowings – 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: Joint account with €250 a month going in/ Child allowance into An Post account, couple of grand (less than 5k at any time in current account)

Do you have a pension scheme? Yes DB for spouse, had to wait qualifying period to join mine which I will do this year - DC

Do you own any investment or other property?  No

Ages of children: 2.5 years and 7 months

Life insurance: Yes

Creche fees - €2000 a month full time for two

*Problem*

Despite earning good wages between us and having a low mortgage compared to the value of the property and having no car loans etc we are still struggling.  Wonder if we are missing something but between the mortgage and creche we seem to have little if nothing left and I'd really like to get a saving scheme going for my own children to help them later in life.  Any advice???


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## Calico (1 Jan 2008)

Its your creche fees that are killing you it seems & you probably don't want to move them anywhere. You have over a 1m equity in your home. I think I would release some of that to see the kids (or just the eldest) to schoolgoing age.


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## sam h (1 Jan 2008)

What is your monthly take home pay & how much are your mortgage payments each month?


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## PM1234 (1 Jan 2008)

Can you advise your monthly income v monthly outgoings inclusive of mortgage repayment and creche fees?  

_post crossed with sam h._


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## CCOVICH (1 Jan 2008)

Despite the fact that you (appear to) have a favourable loan-to-value ratio, your mortgage is still very high compared to your earnings.  

Unless you can address this situation, there appears to be little room to manoeuvre.

Can you post a detailed list of expenditure each month so that we can see if there are an areas where cutbacks/sacrifices can be made?


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## Importer (1 Jan 2008)

I think your main problems here are two fold :

You're up to your neck in debt. You owe 700,000. Step back and look at that figure, Its a lot of money. Just the interest on that alone must be close to 3K per month. Can you really afford that house ?

The second issue is the creche fees of 2000.
Both of you have good salaries indeed but this means that one of the salaries is almost entirely at the top rate of tax. The second salary take home pay is likely to be only 35K and out of that you have to pay creche fees of 24K. So the difference to your family finances of you working or not working is very very small, maybe as little as 11K. 

The real issue here however is that your incomes are not big enough to service that level of mortgage. Every increase in the interest rate is going to sting you hard. I disagree with the other poster who advises you to release more equity in your home. You are already finding it difficult to service your existing debt, the last thing you should do is try to borrow more.

On top of all that, what are you going to do when you sooner or later need to replace your old car or cars, or take a holiday or as you say yourself put a carpet on the stairs, you are completely over stretched already.

In the cold light of day I think you will have to consider downsizing your home and mortgage to more manageable levels.


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## GeneralZod (1 Jan 2008)

Wow, impressive. €1.2 million in home equity (assuming your valuation is realistic) while still only in your early to mid thirties on salaries that while comparatively good aren't massive relative to the value of your home. 

700k mortgage and double creche fees is a scary commitment but if you can avoid downsizing to something more realistic for a couple of years you might get a better price.


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## markowitzman (1 Jan 2008)

would you consider an au pairs or live in nanny?


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## SidTheDweeb (1 Jan 2008)

Would you consider selling the home and buying another home of approximate value €1m and living rent and mortgage free for the next few years?


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## ClubMan (1 Jan 2008)

sam h said:


> What is your monthly take home pay & how much are your mortgage payments each month?


Going by www.taxcalc.eu take home should be around €7,800 for 2008 depending on the couple's specific credits etc. This excludes monthly _Child Benefit _and quarterly _Early Childcare Supplement _payments. The repayments on a €700K loan over 35 years should be about €3,500 excluding mortgage interest relief and insurances. Sounds like there should be c. €2,300 p.m. spare for living and other expenses. Would be worth posting a more detailed monthly/annual household budget/expenditure details.


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## RainyDay (2 Jan 2008)

SidTheDweeb said:


> Would you consider selling the home and buying another home of approximate value €1m and living rent and mortgage free for the next few years?



This idea makes sense to me.


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## Raskolnikov (2 Jan 2008)

Would it be possible to rope in one of your parents/aunts to take care of your children while you're working? 


Flax said:


> I think the simpliest solution is to get an au pair. A friend of mine did this for about two years - they normally get a salary of about €90 per week, but get full boarding in your home.
> 
> I would imagine on such an expensive house you have a spare room
> 
> Au pairs also do the cleaning and stuff like that, so it's unbelievable value.


God forbid the poor soul who would have to do similar work for you.


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## susan12 (2 Jan 2008)

Thanks for the replies but not exactly what I want to hear!!

We aren't long enough in the house to make sense to sell it on - market at the moment let alone the stamp duty paid etc.  I think we're committed for the time being staying put - I accept we may have to move but that really will have to be last resort stuff.
As for the valuation I've been conservative - its less than we paid a few years ago and we've done a serious amount of work so I think this is a fair price in the current market. 

As for fixed expenditure a month - there isnt much slack here but here goes;

Health insurance - €117 a month
Life insurance - €135 a month
Critical illness (husband) - €44 a month (illness in his family hence the need and possibly high level)
Broadband and phone - €56
Standard Life policy - €13 (existing long standing policy)
Mobiles - average €40 - €60 a month (I'm moving to pay as you go)

food, gas and electric on top of this.  Few bottles of wine but talking two a week and I ain't talking high brow stuff around the tenner mark.  Neither of us big shoppers or fashion addicts so very little on clothes or personal looks.

Considering going interest only until eldest gets to school going age - is this madness??


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## ClubMan (2 Jan 2008)

susan12 said:


> As for fixed expenditure a month - there isnt much slack here but here goes;
> 
> Health insurance - €117 a month
> Life insurance - €135 a month
> ...


That's about €425. If my calculations above are roughly accurate that still leaves about €1,800 p.m. (excluding _CB _and _Early Childcare Supplement payments_) for other stuff such as...


> food, gas and electric on top of this.  Few bottles of wine but talking two a week and I ain't talking high brow stuff around the tenner mark.  Neither of us big shoppers or fashion addicts so very little on clothes or personal looks.


You need to clarify your incomings/outgoings and budget in even more detail. While you have a a big mortgage at the moment I cannot see why you should be struggling in terms of cashflow.


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## susan12 (2 Jan 2008)

Does the poster on salary scarifice have any further links or info - been on to revenue website but can't see anything?

Also in terms of affordability - there is a possibility that I could increase my earnings by doing some consultancy.  How much additional revenue roughly would I need to bring in do you think to get me into a better position?


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## ClubMan (2 Jan 2008)

susan12 said:


> How much additional revenue roughly would I need to bring in do you think to get me into a better position?


I think this is premature since as I said above I can't see from the details posted so far how you can be hard pressed on the cashflow front. Can you explain in more detail why this seems to be the case - i.e. clarify precisely your net income, other income (e.g. _Child Benefit _and _Early Childcare Supplement _payments) and outgoings? A simple but detailed list of monthly or annual incomings and outgoings is all that's needed.


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## deedee80 (2 Jan 2008)

Hi Susan,

like others have pointed out, the first thing I would look into is alternative childcare.  I have 2 friends who are child minders.  They both look after 3 children of varying ages in the childrens family home and take them to school, make their dinner etc.  From what I understand they are paid in the region of 1600 a month.  I know its not a huge drop from 2000 but 400 a month extra would make a difference to you and there is also the bonus of not rushing to the creche before work in the morning and then again to pick up the kids after work.  I think it would make sense in your situation.

Did you buy the house recently?  I only ask because it seems a very hefty mortgage at 700k with 2 children, not taking into account what you might have originally paid for it.  I can understand why you might find it a struggle.


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## maison (3 Jan 2008)

How do you need a house worth 1m+ for 4 people?


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## ClubMan (3 Jan 2008)

The original poster still hasn't clarified all incomings and outgoings in detail so that people can pinpoint where the alleged cashflow problems lie. To date I can't see why there should be any such problems in the first place.


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## Vanilla (3 Jan 2008)

Well the food, gas and electric will easily come to 1000 a month, add on car tax and insurance possilby for two cars, house insurance, VHI, household repairs and maintenance, car servicing, petrol, car repairs, clothes and shoes and possibly an annual holiday and I can see how easily it all adds up. 

The OP mentions doing some consultancy work on top of a full time job and having two young children. Personally I think they should think very carefully about embarking on this kind of venture- not only will you be taxed on the top bracket but you will also have to either deal with a self employed return or employ an accountant and add more stress and work to what must already be a busy schedule. Your children are very young and the childcare costs wont last forever. You are also already saving and have substantial equity in your home. My advice would be to hang on in there, it will get better. Personally if I were in your situation I would be inclined to go in the opposite direction to you- downsize the house, either get rid of a mortgage entirely or have a much smaller one and think about working parttime rather than full time while your children are young- when you consider the childcare costs and the fact that you are on the top tax bracket, even going to a four day week might not reduce your overall income much if at all. Of course what works for one person wouldnt work for another so at the end of the day you must decide what works for you and your family.


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## ClubMan (3 Jan 2008)

Vanilla said:


> Well the food, gas and electric will easily come to 1000 a month, add on car tax and insurance possilby for two cars, house insurance, VHI, household repairs and maintenance, car servicing, petrol, car repairs, clothes and shoes and possibly an annual holiday and I can see how easily it all adds up.


It doesn't add up based on the figures posted so far as far as I can see. The more detail the better in this case. Saves people guessing and making suggestions that may be irrelevant.


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## xman (4 Jan 2008)

susan12 said:


> As for the valuation I've been conservative - its less than we paid a few years ago and we've done a serious amount of work so I think this is a fair price in the current market.


 
So 1.9 million is less than you paid a few years ago. But your mortgage is only 700k.

So you have managed to accumulate 1.2 million in your mid thirties even though your asset has gone backwards in price, despite further investment. An admirable achievement, you must have both invested your communion money wisely.

Sell it, clear your debts, buy something for a million and then live mortgage free on 130k plus a year. That would be heaven on earth for most people.


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## RainyDay (4 Jan 2008)

susan12 said:


> We aren't long enough in the house to make sense to sell it on - market at the moment let alone the stamp duty paid etc.  I think we're committed for the time being staying put - I accept we may have to move but that really will have to be last resort stuff.



In accounting/decision-making terms, the stamp-duty is a sunk cost. Nothing that you do now can change this cost, so it should have no impact on your decision making. If you letting this sway your decision, you are making an emotional decision based on a financial issue - not a great idea.

Can I ask what kind of financial planning you did before the house purchase? How did you expect to be able to manage a €700k mortgage along with your childcare costs?


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## SidTheDweeb (4 Jan 2008)

This is ridiculous - they OP has 1.2m in equity. 

What's the point in 'hanging in there' when you can live a full and fun life - it just involves making a rational decision and down sizing.


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## Brendan Burgess (4 Jan 2008)

> Considering going interest only until eldest gets to school going age - is this madness??



This is not madness at all. It is something you should be doing. Your mortgage is too high for your current level of income and expenditure. You can't afford to make capital repayments and interest payments. You are at a particularly expensive time with young creche going children. 

You should only downsize as a very last resort. You are keeping your head above water and paying off some of the capital. No need to take emergency measures. You presumably are getting good value from the home at the moment. The worst thing you could do would be to trade down and then trade up again after a few years when your finances improve. You would be paying two lots of stamp duty to be in the same position that you are in now. 

You have done well to have accumulated such equity at a young age. Don't throw it away now because of some temporary financial indigestion.

Brendan


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## Brendan Burgess (4 Jan 2008)

I have moved the creche discussion to here:

http://www.askaboutmoney.com/showthread.php?t=71461


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## terrysgirl33 (4 Jan 2008)

My kids aren't in school yet, but while you will save on creche fees, you will be dealing with childcare, children who are too old for a creche but much too young to be left on their own, and covering holidays/sick children/in service days.  From all that I've heard childcare gets cheaper but more problematical as they get older.  There is also the issue that a toddler is easier to keep tabs on than a teenager.  Is there some particular reason you don't want to move from this house?  It seems to be crippling you.


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## theboys (7 Jan 2008)

Going back to your original problem.  I think you need to look long term.  I am in the same situation as you with two children in creche.  Together with a large mortgage i am not at all suprised you are finding it difficult.  It really won't be like this for ever.  Before you know it your oldest will start school (yes, really) and you will have 1000 free a month for day to day expenses or savings for the children.  You are in the fortunate position to have to equity in your house but I would say, hang in there if you can, cut back as much as possible, and long term it will all pay off.


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## susan12 (7 Jan 2008)

Thanks to all posters - guess it is a question of priorities.  We could downsize and live a good life with the equity from the house however we have worked very hard to get to where we are, taking some big risks (along with a tremendous amount of luck!) so I think we'll hang in there for now.

To answer the questions - we both were fortunate before we met to have invested in property and so when we got together we used both holdings to buy more which paid off for us in a real way.  We sold all to buy where we are so we've no investment properties etc left but think we timed it pretty well considering the market at the moment.  Might go back to property but need a break as despite doing very well out of it, it took a lot of work and stress and I couldn't do it with two small children at the moment.


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## colin79ie (20 Jan 2008)

Fur coat....no underwear!!


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