30yr Old looking for guidance

Age:30
Marital status - single

Annual gross income from employment or profession: Investment management - 80k, 10k bonus. I working in a profession that's highly in demand ATM. Moving job in a year would see me in the 100/110k bracket. The salary ceiling is capped at 150k.

Monthly take-home pay - 3,926

Type of employment: e.g. Civil Servant, self-employed - Private sector

In general are you: Saving 1.5 - 2kish

Rough estimate of value of home - Purchased for 300K, 30k worth of renovation from 10k savings and 20k loan
Amount outstanding on your mortgage: 238,500 & 15k from loan @ 7.9%
What interest rate are you paying? 2.95%(3yr fixed - 1.5ys left) & 4.2% Fixed

Other borrowings – car loans/personal loans etc - 20k personal loan as above @ 7.9%
Do you pay off your full credit card balance each month? No
If not, what is the balance on your credit card? 300euro
I'm about to buy a car costing10k and would rather not use savings as I'd like to build cash savings up.

Savings and investments: 20k cash. No investments
22nd room in property - used as office

Do you have a pension scheme? 52k from previous employment. Current job, employer pays 10%, I contribute 8%

Do you own any investment or other property? None

Ages of children: None

Life insurance: Life assurance x 4 of salary, health insurance, income protection


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

My areas of concern are mortgage payments and pension.

1 - Would it be better switching mortgage from PTSB to KBC/BOI? Also taking into consideration 15k on personal loan?
2 - Pension - I have 52k from previous employer, approx 12k from current. All are invested in equities though diversified in terns of geography, sector - though all having equity as a risk factor. In todays climate, its unreasonable that job changes can occur every 3 years. What's the best way to handle pension switches? Are there any benefits in consolidating pension? If there are losses, I'd be locking them in.
3 -


Goals - My home will only meet the needs of 2 parents and a child, max 2 children. If I do meet someone, id like to purchase a a bigger house (550/650k). A deposit of 120/140 is probably needed. Should the house de disposed?
Retirement - I'd like to retire by 60ish with a healthy pension pool - 600k with 200k of cash. At 30yrs with 60kish pension isn't great. Apart from maximizing contributions what other ways can be done to achieve this?

At 30yrs, I'm aware that my human capital is still increasing but I'm fast approaching salary peak -(6yrs). I'm also cognizant that most of my cash savings went into house purchase. In the next few years I hope to see this built up.

Use the savings to pay off the loan at 7.9% !

Pay off the credit card.

Not will these things save you money, more importantly they will put you in the driving seat of your finances, then you can work on building up some savings.

Agree with cremeegg

Sort out your immediate problems first.

You have €15k of a personal loan costing you 7.9% or €1,200 a year!
You have €20k in cash earning you nothing.

You will be €1,200 richer this time next year if you clear that loan immediately.

Likewise, you should clear your credit card. If the balance is only €300 , I am not sure why you don't keep it clear so you pay not interest.

You say you are about to buy a car for €10k. Well buy the car for cash and pay the €10k off your personal loan. Then clear the personal loan as quickly as possible with your monthly cash savings.

Brendan

Financequery said:

1 - Would it be better switching mortgage from PTSB to KBC/BOI?

Click to expand...

Financequery said:

What interest rate are you paying? 2.95%(3yr fixed - 1.5ys left) & 4.2% Fixed

Click to expand...

Financequery said:

Amount outstanding on your mortgage: 238,500

Click to expand...

No, you should not switch to KBC as it will be taken over by Bank of Ireland and you will be stuck with a very expensive lender.

You don't tell us the value of your home, but let's say it's worth €400k.

60% of €400k is €240k.

So you would qualify for a rate of 1.95% with Avant. That is what you should do.

But check the breakage fees with ptsb. It probably will still be worth breaking the fixed rate and switching.

Brendan

Financequery said:

Goals - My home will only meet the needs of 2 parents and a child, max 2 children. If I do meet someone, id like to purchase a a bigger house (550/650k). A deposit of 120/140 is probably needed. Should the house de disposed?

Click to expand...

Meeting someone, having a child, and then having a second child is likely to take a few years.

You should stay as flexible as possible to account for the many ways your life could go. The person you have a child with may well have a fine house of their own or extensive assets.

The most flexible approach for you now is to clear your expensive borrowing and then start paying down your mortgage.

You only need a small cash reserve.

When you meet someone and start planning your life together you can adapt your plans at that stage. For example, it might make sense to build up a bigger deposit at that stage. But you should not be building up a deposit for a trade up which is far away.

Brendan

Brendan Burgess said:

.....
You have €15k of a personal loan costing you 7.9% or €1,200 a year!
You have €20k in cash earning you nothing.

You will be €1,200 richer this time next year if you clear that loan immediately.
.

Brendan

Click to expand...

If you do nothing else, clear that loan. It sticks out like a sore thumb.

Financequery said:

Life insurance:

Click to expand...

Is this linked to the mortgage?

If not I would get rid of it. Young people with no dependents don't need to insure their life.

NoRegretsCoyote said:

Is this linked to the mortgage?

If not I would get rid of it. Young people with no dependents don't need to insure their life.

Click to expand...

It sounds like a salary-based company plan. But even if there is life cover for the mortgage, which there probably is, I’d be wary of cancelling it.
a) The bank may not allow it
b) It’ll be a lot more expensive to reinstate
I still have mortgage-related life cover I got when I was 24 and it’s incredibly cheap relative to what I can get now.

Other than that, I’d echo what other posters have said, with a couple of additions:

1) Use your savings to clear your credit card (-€300)
2) Use your savings to buy the car
(-€10,000)
3) Use your savings to pay €9,700 off the loan
4) With effect from January, start making pension AVCs through payroll of 12% of your €90,000 earnings; that will see your take home pay go down by €540, leaving you with a surplus of €1,460 per month
5) Direct the €1,460 towards to loan and it’ll be cleared by the end of April
6) Thereafter, save the €1,460 monthly surplus plus the loan repayments you’re now not making until you have €12,000 in cash; on the basis that you seem to be able to live on €2,000 a month, that would represent a ‘buffer’ of 6 months.
7) Switching mortgage provider should also be on your agenda; you should see what the break-fee would be and compare it to the potential savings with another provider; but at a minimum, you should probably switch at the end of the term

When is your bonus paid? It would make sense to at least think about an AVC for 2021 if the cashflow can be made to work.

You’re in decent nick financially, well done.

Thanks for the suggestions.

I'll look into clearing off the loan and credit card in the next coming days.

Car purchase. - This will be bought using cash

Brendan Burgess said:

No, you should not switch to KBC as it will be taken over by Bank of Ireland and you will be stuck with a very expensive lender.

You don't tell us the value of your home, but let's say it's worth €400k.

60% of €400k is €240k.

So you would qualify for a rate of 1.95% with Avant. That is what you should do.

But check the breakage fees with ptsb. It probably will still be worth breaking the fixed rate and switching.

Brendan

Click to expand...

Value of the house is around 350k on a conservative side. I have looked into the breakage fee cost and it could be low. I fixed around Sep 30/2020. Staying with PTSB, at the 3nd of the fixed term, I'll be paying at a minimum 1072euro which is high. Is there a reason why Avant is your preferred choice rather than BOI/AIB?

Gordon Gekko said:

It sounds like a salary-based company plan. But even if there is life cover for the mortgage, which there probably is, I’d be wary of cancelling it.
a) The bank may not allow it
b) It’ll be a lot more expensive to reinstate
I still have mortgage-related life cover I got when I was 24 and it’s incredibly cheap relative to what I can get now.

Other than that, I’d echo what other posters have said, with a couple of additions:

1) Use your savings to clear your credit card (-€300)
2) Use your savings to buy the car
(-€10,000)
3) Use your savings to pay €9,700 off the loan
4) With effect from January, start making pension AVCs through payroll of 12% of your €90,000 earnings; that will see your take home pay go down by €540, leaving you with a surplus of €1,460 per month
5) Direct the €1,460 towards to loan and it’ll be cleared by the end of April
6) Thereafter, save the €1,460 monthly surplus plus the loan repayments you’re now not making until you have €12,000 in cash; on the basis that you seem to be able to live on €2,000 a month, that would represent a ‘buffer’ of 6 months.
7) Switching mortgage provider should also be on your agenda; you should see what the break-fee would be and compare it to the potential savings with another provider; but at a minimum, you should probably switch at the end of the term

When is your bonus paid? It would make sense to at least think about an AVC for 2021 if the cashflow can be made to work.

You’re in decent nick financially, well done.

Click to expand...

I'll take the pension increase into consideration. As of now I pay 6% through AVC and 2% through EE. I'm weary that further increasing would decrease by savings.

Bonus is paid March of every year.

Bank of Ireland has very high rates for existing customers. They can only get new customers by tricking them with cash back.

AIB is ok.

But Avant is way cheaper.

Brendan

60% of €350k is €210k

Your mortgage is €238k.

So you need to get €28k off your mortgage before you switch as 60% LTV loans are the cheapest.

1) Apply to Avant for a mortgage based on 60% LTV
2) Get a valuer to value your loan
3) Get your mortgage down to 60% of that amount.

So don't pay off your expensive personal loan or your credit card and don't make AVCs until you have switched to a 60% loan with Avant.

Then pay off your personal loan.
Then consider making AVCs.

Brendan

Brendan Burgess said:

60% of €350k is €210k

Your mortgage is €238k.

So you need to get €28k off your mortgage before you switch as 60% LTV loans are the cheapest.

1) Apply to Avant for a mortgage based on 60% LTV
2) Get a valuer to value your loan
3) Get your mortgage down to 60% of that amount.

So don't pay off your expensive personal loan or your credit card and don't make AVCs until you have switched to a 60% loan with Avant.

Then pay off your personal loan.
Then consider making AVCs.

Brendan

Click to expand...

Hi Brendan,

Unfortunately I went ahead and cleared all the loans. From looking at other posts the difference between 1.95% and 2.05% fixing for 7/10yrs is miniscule.

Assuming I fixed for 2.05 for 7 yrs, could I move to 1.95 or less assuming the rates reduce without incurring breakage fees with Avant?

Financequery said:

Assuming I fixed for 2.05 for 7 yrs, could I move to 1.95 or less assuming the rates reduce without incurring breakage fees with Avant?

Click to expand...

If you fix with any lender, and you break early, you may be charged an early break fee.

There is a technical oddity at the moment, which means that if you fix now and break early, the break fee is liable to be very low.

So, fix for the appropriate period e.g. 7 years. And then if house values or repayments bring your LTV below 60% or if Avant reduces their fixed rates generally, then break out and fix again.

Brendan

Current UB mortgage: 6yrs
Date you fixed: Nov 2019 - Start of mortgage
Period for which you fixed: 4 years
Fixed rate: 2.6%
Fixed until Sept 2023
Mortgage remaining: 66K
Current LTV: 28%
Mortgage: 1002e pm
Currently paying: 1002e pm but have made yearly 10% overpayment and a lump overpayment of 30k in Aug 2021.

Hi Brendan/ Everyone!


I'm wondering should we opt to break out of our UB fixed rate. I haven't received a quote yet on how much this would cost but I'm thinking of jumping to a lower rate so that when PTSB take over we wont be faced with high rates in August 2023. UB are offering a 4 or 5 yr fixed rate of 2.35% taking us to march 2026/27. Or a 2 yr fixed rate of 2.2% (would take us to march 24). Not sure if would be worth the hassle for what some would call a small mortgage.

Also have option to pay this mortgage off earlier than the 6yrs as we have company shares we could sell. Not sure if it's best to hold onto these though.

We want to upgrade to a better ppr in the next few yrs too.