75k into pension if borrow at 1.5%

N

nbc

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Hi
I'm a uk resident for 7 years. I have several investment properties in Ireland - Total value E1.5 million. Outstanding mortgages- 500k( 400 k at tracker 1%). This produces a net profit of E30k per annum
I own a property in London - Value £650,000. Mortgage £375k
My income apart from property is £100,000 pa
I dont have a pension. I'm late 40's.
I applied for a top up on my uk home for 75K which has been apporved for whatever purpose I wish( I had been intending on an Irish and then UK investment property but Brexit and recent tax changes are raising doubts)
I have been told I could put all 75K into a pension and get a 40% bonus. The mortgage rate is 1.5%. Is this a prudent wise choice?
Cheers
NBC
 
Hi nbc

Looks like you need UK advice rather than Irish advice.

The rate looks very low. Are you sure that it's not just an introductory rate? If it's a fixed rate, how long is it fixed for?

You are in the fortunate position, that you have plenty of money. €1.5m in net assets and an income of €100k a year.

While you can afford to take additional risk, what is the benefit in doing so? If everything was in Ireland, I would be suggesting maxing out your pension contributions and selling properties if necessary to do this. But I don't know if that is the right strategy for a UK resident.

Brendan
 
Thanks Brendan. I think in terms of tax relief etc things are similar in the UK.
I suppose the basic question was does it make sense to borrow at 1.5 % in order to gain a 40% tax advantage. The answer appears obvious but I was wondering if I was missing anything. Could I perhaps use this 75K top up to greater advantage than putting into a pension...
 
As it stands right now your position may look good, but if property ever goes belly up you might need all of your salary + to pay off the €900,000.00 plus of borrowings you've got.
 
noproblem said:
As it stands right now your position may look good, but if property ever goes belly up you might need all of your salary + to pay off the €900,000.00 plus of borrowings you've got.
Click to expand...

Classic Askaboutmoney doom and gloom.

The OP’s LTV is 33%, and the vast bulk of the debt is at 1%.

He/she is well covered regardless of what happens.
 
Gordon Gekko said:
Classic Askaboutmoney doom and gloom.

The OP’s LTV is 33%, and the vast bulk of the debt is at 1%.

He/she is well covered regardless of what happens.
Click to expand...

Hope so with all investments in the one asset class. As for your take on my opinion being, "classic doom and gloom"? I would call it an observation and i've seen people losing heavily in situations like the OP. But there you go, what would I know compared to yourself?
 
I’m all for advising people to be prudent.

However, someone who has an LTV of 33% and a 1% borrowing cost is insulated against property going “belly up”.

It’s a classic case of the imprudence of “one size fits all” advice.

In my view, the OP should borrow the money.
 
Hi Brendan and others,
Appreciate the replies- to answer Brendan's question- the risk is to make my life more secure in retirement. So I can put into a pension or make an investment in property which is the only think I know well.
nbc
 
Brendan Burgess said:
You are in the fortunate position, that you have plenty of money. €1.5m in net assets and an income of €100k a year.
Click to expand...

How much more secure do you want to be?

We are in turbulent times and you should not be taking on any more risk. The most likely outcome of such a risk is that your wealth will increase,but there is a significant risk that your wealth will suffer a long term reduction as a result of borrowing to invest.

Brendan
 
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