Single parent looking to secure future

I

Isabel S

Registered User
Messages
23
Age:
42
Spouse’s/Partner's age:
N/A

Annual gross income from employment or profession:
E60,000 (based on 30 hour week)
Annual gross income spouse:
n/a

Type of employment:
PAYE, public sector

Expenditure pattern:
Ensure essentials are paid off :mortgage, bills, mgt fees for apt, groceries. No concrete savings target-I invest in shares but no concrete investing plan in place.

Rough estimate of value of home
E350,000
Mortgage on home
E112,000
Mortgage provider: KBC

Type of mortgage: Tracker, interest only, fixed rate
Fixed
Interest rate
2.25%

Other borrowings – car loans/personal loans etc
None

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

Savings and investments:
E5,000 savings in cash. Circa E70K shares in one MNC from previous employment. E10K cryptocurrency, E10K in various US shares.

Do you have a pension scheme?
I have a pension fund of 80K E from previous employment. Currently contributing minimum to public sector pension


Do you own any investment or other property?
No

Ages of children:
One child-3 years old

Life insurance:
Mortgage Protection? Yes.

What specific question do you have or what issues are of concern to you?
As mentioned, I am a single parent and very conscious I am the main carer of my daughter. I want to plan for the future as best as I can with the resources I have. Concerns include:
-Should I be contributing to AVCs to my pension or buy notional service instead? I only started in the public sector recently
-Should I get income protection-my job provides 3 months full pay and 3 months half pay; I have been mostly healthy in my lifetime (thank goodness). I have been carefully watching my outgoings so this would be another 'fixed' cost if I avail of it.
-No private health insurance-I cut that about 2 years ago when I was unemployed; should I avail of it again?
-I would like to move to a house in the next few years as my child gets bigger and more active-we are in an apt currently, which is fine but would prefer own garden, driveway etc. How realistic are my chances of getting one? I am on a 4 day week currently but possibly move to more hours when my child starts primary school. Top of the grade salary scale for my role is 85k.
-Don't have alot in cash, I prefer to invest in shares as a long term investing vehicle.

I would appreciate any comments you have; I realise there is alot of information provided. Thanks.
 
If you want to move to a house you should do so in the next 3 years so you can get a 20 year or 25 year mortgage. In the meantime save all your spare cash for the move. €5K will hardly pay all the fees needed to move, but overall you have €95K to make the move.

After you move try to build up your pension while paying off the mortgage. If you sell you shares you may have a very small mortgage, so pay off mortgage relatively quickly and then maximise pension.

Moving back to full time work will increase your earning potential. How secure is your employment? You were unemployed 2 years ago which must have been hard with a 1 year old. So maximise your earning potential while you can. You don’t mention childcare costs? Do you expect that to change significantly once the child goes to school?

While you have insurance to pay off mortgage if you die what is the plan for your child. Does your current pension pay out to children, if you die before your child finishes college. So definitely some life assurance, a will and a plan to cover what would happen if you die in next 20 years. I would prefer you fund this rather than private health insurance.
 
I'd recommend speaking with a broker now to understand your current borrowing capacity, so that you can plan in advance and make appropriate changes to position yourself well for mortgage approval.
Different lenders will have varying criteria particularly in relation to dependents so going thru a broker will give you full picture. Make sure broker is listed to deal with Avant.


Lenders will want to see ability to repay and regular amount (mortgage / loan/ savings) and one thing that stands out is that you are paying interest only on your mortgage.

You dont mention childcare costs - are you availing of the National Childcare Scheme?

Depending on when you are considering selling, it may be worth switching current mortgage provider to get a better rate.

Obviously moving to full time hours will better position you. Ask you broker about the timing of this eg six months before applying.. what will lenders want to see here?
 
Isabel S said:
Mortgage on home
E112,000
Click to expand...
Isabel S said:
Savings and investments:
E5,000 savings in cash. Circa E70K shares in one MNC from previous employment. E10K cryptocurrency, E10K in various US shares.
Click to expand...

We are in a very unprecedented position with a Q.E. and war in Europe. The right strategy is to reduce risk as much as possible.

So irrespective of what else you do, you must sell your €70k of shares in one company. That is way too risky. It might be a great company. But the share price of great companies often fall when they are re-rated.

You are effectively borrowing money at 2.25% to invest in one company. This is madness. Crypto likewise - whatever you think of crypto a single parent should not be borrowing money to gamble.

You do not need to wait until the fixed rate ends to clear your mortgage. Check the break fee and it will be well worth your while selling your €90k and paying the proceeds net of CGT off your mortgage.

Brendan
 
Isabel S said:
-Should I be contributing to AVCs to my pension or buy notional service instead? I only started in the public sector recently
Click to expand...

No. Not while you have not yet sorted out your housing requirements. Cash is king. Clear your mortgage first. Or trade up if that is what you want to do. An AVC will be no use to you while trading up.

Brendan
 
Isabel S said:
-I would like to move to a house in the next few years as my child gets bigger and more active-we are in an apt currently, which is fine but would prefer own garden, driveway etc. How realistic are my chances of getting one? I am on a 4 day week currently but possibly move to more hours when my child starts primary school. Top of the grade salary scale for my role is 85k.
Click to expand...

So you have an apartment worth €350k with a net mortgage of €22k.

How much would a house cost?

Have you a two bed apartment? If so, there is no hurry.

A lot of families in Europe live in apartments.

While it would be nice to have a garden and a driveway, it's also very nice to live in a mortgage-free apartment.

Given your circumstances, being mortgage-free or having a very low mortgage should be your absolute priority unless you are in a one bed in which case you need to upgrade.

If you do trade up, you should be conservative and not borrow more than twice your salary. So maybe clear the mortgage. Build up some savings and review the decision to trade up in a few years.

I can't underestimate the psychological security you will experience when you are mortgage-free in a few years. So you can get sick or lose your job but you won't be worrying about your mortgage payments. Social Welfare with no housing costs is a relatively comfortable place to be.

Brendan
 
Thanks for the replies.

To be clear, I am currently paying off the principle and interest off my mortgage ; my job is permanent with the public sector. I don't have any childcare costs currently as I rely on family to help out. My child is starting pre-school (ECCE) in Sep and I plan to do 2 half days and the other 3 days a family member can look after him for the afternoon till I finish work for the day. Property is a 2 bed apartment.

I think the suggestions are very sensible; I am too overweighed in one MNC for sure. In terms of trading up, this is definitely something I want to pursue; I'd be looking for a property in the 500k price.

My question is if I am better off:
1. Selling off my shares and net of CGT, use that as a basis to build up a deposit. So 20 percent deposit would be 100k.
2. Use proceeds of share sales to instead pay off as much as possible on existing mortgage. I enquired with KBC and my breakage fee would be zero currently for the next 10 working days.

My next bit of research is to get life assurance, will and a plan for my child should I pass away in the next 20 years or so.
 
Isabel S said:
My question is if I am better off:
1. Selling off my shares and net of CGT, use that as a basis to build up a deposit. So 20 percent deposit would be 100k.
2. Use proceeds of share sales to instead pay off as much as possible on existing mortgage. I enquired with KBC and my breakage fee would be zero currently for the next 10 working days.
Click to expand...
I don't think you will have a choice, it will be option 2.

In option 1, you would still have an outstanding mortgage of ~€100k and you are looking to borrow the remaining €400k. Even if you went back full time and reached the top of the pay scale, you are way outside the 3.5 LTI limits so unfortunately you are not in a position to own both properties at once.

Your options are to sell first (and maybe move in with family temporarily) or buy/sell as part of a chain.

If you sell first, you have lots of cash on hand and with a mortgage AIP , you are an ideal buyer from an EA's or sellers point of view. But it comes with the risk of an indefinite stay with family or renting while you are bidding.

If you don't sell first and try to sell as part of a chain, it can also be complicated and you might not even be considered for bidding as a lot of sellers don't want the hassle of dealing with a chain. The upside to this is if it works out, you move straight from one property to the other.

If you decide to go to chain route, you should probably keep a bigger cash reserve on hand and use the excess to pay down the mortgage. You don't need the 20% deposit but there will be costs associated with buying/selling such as EA and solicitors fees, holding deposits etc
 
_OkGo_ said:
I don't think you will have a choice, it will be option 2.

In option 1, you would still have an outstanding mortgage of ~€100k and you are looking to borrow the remaining €400k. Even if you went back full time and reached the top of the pay scale, you are way outside the 3.5 LTI limits so unfortunately you are not in a position to own both properties at once.

Your options are to sell first (and maybe move in with family temporarily) or buy/sell as part of a chain.

If you sell first, you have lots of cash on hand and with a mortgage AIP , you are an ideal buyer from an EA's or sellers point of view. But it comes with the risk of an indefinite stay with family or renting while you are bidding.

If you don't sell first and try to sell as part of a chain, it can also be complicated and you might not even be considered for bidding as a lot of sellers don't want the hassle of dealing with a chain. The upside to this is if it works out, you move straight from one property to the other.

If you decide to go to chain route, you should probably keep a bigger cash reserve on hand and use the excess to pay down the mortgage. You don't need the 20% deposit but there will be costs associated with buying/selling such as EA and solicitors fees, holding deposits etc
Click to expand...
Hi OkGo,

To clarify, I would have circa 100k in cash in 2/3 years when I trade up-this will consist of proceeds from sales of shares plus further consistent monthly savings. So I will have 100k in cash but at the same time circa 100k in mortgage outstanding. When applying for a mortgage what would be the better option:

1-Pay off mortgage completely & have little cash reserve; apply for a mortgage of circa 160k-try and sell apartment as part of a chain. I would have circa 350k in cash post selling the apartment and look to trade up to 500k property.
2-Don't pay off existing mortgage & keep the cash in hand as a deposit for new property (20% deposit) and borrow 160k.

I am abit confused tbh. Thanks.
 
This is very confusing. Here is your current position

Home: €350k

Mortgage: €112k
Less
Cash: €5k
MNC: €70k
Crypto: €10k
Various shares: €10k
Net mortgage: €17K

Cash after selling home and cashing all investments: €330k ( less CGT on shares)

Target property: €500k

Mortgage required: €170k

Just about doable on a salary of €60k.

I have no idea what other option you see?
You must sell your apartment before you buy a house.
If you keep your present apartment and house, your situation will be:

Apartment €350k Mortgage €112k

Investments €95k
To buy a house for €500k, you would need a mortgage of €400k.

You will not get a mortgage of €400k , which would be a total mortgage of €512k.
 
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