Best way to use Lump Sum Payment

R

rustie

New Member
Messages
4
Age:
46
Spouse’s/Partner's age:
45

Annual gross income from employment or profession:
E0 as on long term sick leave, but E50,000 otherwise
Annual gross income spouse:
E15,000

Type of employment:
Full-Time, but currently on invalidity pension
Part-time

Expenditure pattern:
Just buy essentials

Rough estimate of value of home
E290,000
Mortgage on home - E195,000 - includes arrears of E28,000
Mortgage provider: Pepper
Type of mortgage: Variable rate
Interest rate: 3.25%


Other borrowings – car loans/personal loans etc
Family - E20,000

Do you pay off your full credit card balance each month?
No Credit Card

Savings and investments:
None

Do you have a pension scheme?
Me: Defined Benefit based on final salary
Partner: No

Do you own any investment or other property?
Buy to let property - 1 bed apartment
Value: E190,000
Rental income per year: E9,000
Rough annual expenses other than mortgage interest : E1,600
Lender: Pepper
Interest rate: 3.25%, Interest Only - E537 /month. Interest only mortgage finished in 9 years when the total of the mortgage will have to be paid
Rent: E750/month which is far below similar properties in the area, but tenants have been there for a long time.


Ages of children:
16
14
11.

Other
I recently received a lump sum payment of E750,000

What specific question do you have or what issues are of concern to you?
I received a monthly income continuation payment from my employer up until now. That has stopped so we don’t have enough monthly income to cover bills and expenses, and I can't return to work for at least 2 years.

My question is, what is the best way to utilise the E750,000 payment? I imagine paying the loan back to family and paying off the mortgage on our home are the first things we should do.
What to do about the buy-to-let?
How can I invest the money that will generate some sort of income while I am on invalidity, which will be another 2 years at least.
 
Is the rental property in negative equity?
Am I right to understand that your rental income before tax is about €1000?
 
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As you have high capital and low income, you would need to provide information on your living expenses now and expected living expenses in two years time, when the oldest finishes education.
 
azerty said:
Is the rental property in negative equity?
Am I right to understand that your rental income before tax is about €1000?
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Similar property sold last September for €196,000
We get €750/month before tax. For last number of years mortgage was only €150/month so had to pay a good bit of tax on income. In last few months the mortgage has jumped to 537/month so we don't have to pay as much tax on that, but I'm sure its going to keep rising.

Itchy said:
As you have high capital and low income, you would need to provide information on your living expenses now and expected living expenses in two years time, when the oldest finishes education.
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Up until now income continuance of €1700/month and Invalidity Benefit of approx €1780/month, combined with childrens allowance of €420 was just enough to cover expenses. But, it didn't cover the mortgage as well. I was able to negotiate with the bank and basically stopped paying the mortgage except for a nominal amount, although the arrears kept increasing.

I don't see much difference in living expenses between now and when our first child finishes education, although I'm sure I haven't thought of everything. I would hope to be back working at least part-time in two years, so that will be income of about €25K a year
 
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Based on the interest only payment, I presume your mortgage balance is ~€198k, is this correct?

You have very low income and high debt even when you had full income. The first and most obvious step is to clear all of your debt: PPR, BTL and family loan. This totals just under €410k leaving you with €340k cash.

If you don't clear this debt now, you run a very serious risk of spending that money elsewhere and getting in serious financial difficulty when the BTL is due.

rustie said:
Annual gross income spouse:
E15,000
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Why is your spouses income so low? With you out of work, your spouse needs to be working full time

rustie said:
In last few months the mortgage has jumped to 537/month so we don't have to pay as much tax on that, but I'm sure its going to keep rising.
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The rental is barely profitable since the recent hikes in interest rates. Clearing the mortgage means you will have €7.4k profit on the rental. While not great in terms of overall yield, because you are low income, it is basically tax free so that helps a lot

rustie said:
I don't see much difference in living expenses between now and when our first child finishes education,
Click to expand...
If you want your children to go to third level then you really need to plan this out and be very blunt with them about the financial reality of your situation (treat them as adults). Your eldest needs to find some part time work and your spouse really needs to be working full time

rustie said:
How can I invest the money that will generate some sort of income while I am on invalidity, which will be another 2 years at least.
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I don't think you can afford to invest the remainder (€340k) in anything with risk. Under no circumstances should you buy another property, you can't afford to deal with unpaid rent.

A lot of the €340k will get used in general living expenses and education so you will need easy access. The best place for it is probably spread over a few fixed term deposit accounts, 3-5years.

You can then reassess your situation in 4/5 years if/when you have returned to full time employment and the end is in sight on the education costs.
 
I think options are somewhat limited unfortunately. Taking into account childrens ages etc. Pay off the house loan and get rid of the BTL.
Sit down with spouse and try to work out a plan on how to increase income. Really if one or both of you do not get back to work you will blaze through this money very quickly. Pension provision is of the utmost importance.
Your 750k is a large sum of money but only provides medium term breathing space. It is most probably 20yrs until retirement and kids will be moving into an expensive stage in a short few years. Should you both be able to increase your income/get back to work you could create a very good situation for yourselves on the back ot this sum. Good luck.
 
Get rid of all debt, immediately.

Then look at what's left and ask yourself how long it can realistically last, if you've to pay living expenses out if it. If the answer is 6 years, for example, then divide the figure in six, and put one sixth of it in a fixed term deposit account, maturing every year.

Then look at what you can do, to increase the household income. Can your partner work more than one day per week? Can any of the children get a part time, or perhaps a summer job? Are you getting all the benefits that you are entitled to?

You should also give serious consideration to selling the investment property. The sale proceeds might guarantee your living expenses for another 3 years, or thereabouts. To have that locked away, as a safety net, we'll give notable additional comfort.

Your family circumstances should improve over the coming years, with the kids getting older, so able to earn a few bob part time etc., and you will hopefully able to return to work etc.

Now isn't the time for taking investment risks etc., it's the the time for sleeping without worry about household bills, mortgage arrears, and getting well.
 
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Clear down your debt. Your home will then be secured and you will never have the threat of the bank going after the family home.

The investment property isn't doing much either. You are going to have to come up with €190,000 at some stage. Where is that going to come from? Interest only investments are a bet on the capital value going up and you making a profit on the sale price. You aren't in a position to be making those bets.

With no debt, you will have breathing room financially and can look at providing education for your kids and on you getting better and back to work. Be prudent with the money, it can disappear very quickly!

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
If you clear all loans and keep the rental property.
350k in cash
Rental property
No Mortgage
Monthly income of 4k including children allowance, should be adequate with no major bills to survive without touching cash in bank.
 
Yes, clear all of the debt for starters.

Then your position is good.

Arguably you could set aside a certain number of years’ expenditure in cash and then invest some of the surplus.
 
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