Big savings and investments, worried

S

Seccie

New Member
Messages
5
Age: 37
Spouse’s/Partner's age: N/A

Annual gross income from employment or profession: 76k
Annual gross income of spouse:

Monthly take-home pay: 4100

Type of employment: Private company employee

In general are you:
Saving

Rough estimate of value of home
N/A

Amount outstanding on your mortgage:
N/A

Other borrowings – None

Do you pay off your full credit card balance each month? I don't use credit
If not, what is the balance on your credit card? N/A

Savings and investments:
190,000 cash savings in bank. ( Very little interest ).
200,000 in stocks and crypto.

Do you have a pension scheme?
Yes, only contribute small amount though

Do you own any investment or other property?
No

Ages of children: None

Life insurance: None

What specific question do you have or what issues are of concern to you?
I have been looking at buying a property for the last 2 years. But when covid hit I panicked and let things run away from me.
I am still looking but finding the market very poor, not only overpriced but also with the quality of whats going up for sale. I could have pulled the trigger a few times in the last year and am now very angry with myself.
I am now also concerned about the safety of my cash deposit, all this inflation talk scaring me.
I am also concerned about the overextended stock and crypto markets.
So I guess the question is what should I do. Should I buy a property now?, how big a mortgage should I get and how much of my savings\investments should I put towards property?.
Or should I wait and put money somewhere more sensible, if that exists?
 
You have roughly €400K disposable income. Buy the best house you can for that money. You can get a mortgage of €273K so you have enormous buying power.

So what do you want
Town, city, country, costal
Short commute, or don’t mind
A particular neighbourhood near family, friends, community
Apartment or house
No of bedrooms
Do you need another bedroom because of your large model railway collection, or a dining room for your dinner parties?
Garden or patio, or shed? Parking or storage for a pony or a jet ski or a fishing rod or golf clubs.

I suppose what I am saying is you cannot change current market pricing so just make your house buying decision on what suits you best now and don’t stress about future value. Do you plan to live in the house you buy long term? If you live there 30 years it is probably going to inflate in value. So what you pay now only impacts your monthly payment, not the value of the house.

What will you get, somewhere you can call your own, decorate and use as you please and at the end of the mortgage you will have an asset that will give you a roof over your head or pay for your nursing home.
 
You have the resources to buy a house that suits your needs anywhere in Ireland tomorrow with a modest mortgage.

Seccie said:
I have been looking at buying a property for the last 2 years. But when covid hit I panicked and let things run away from me.
Click to expand...

I am not sure you really need financial advice here.
 

Hi Seccie

This is the dilemma facing lots of people in a volatile and uncertain market.

I know people who sold their house with a view to trading up who could barely afford to buy back their original home now.

You have about €650k of buying power.

The best investment a person can make in Ireland is buying their own home. The "return" is tax-free. Any increase in value is exempt from CGT. It is not taken into account for means-testing.

So turn your investments into cash and buy a house. You don't need to spend the entire €650k. If you do find the house you need for €450k, then use your savings and borrow what you need and no more.

You would be mortgage-free in a few short years which is a very comfortable place to be.

Brendan
 
Thanks,

I was thinking about buying a house in around 450k, using some savings but taking out a mortgage of 260k.
People are telling me to max out my mortgage regardless of how much I actually need, as rates are so cheap.

Is this the case?. I can see an argument for it. If inflation is 5 percent you in a way getting free money. The higher inflation goes, the cheaper your debt becomes.
I can always pay off some of mortgage. Real issue is where do you put money right now, everything is risky as hell.

Regards,
 
The best way to think about this is as follows:

You own a house worth €450k and you have a mortgage of €50k. You have no savings.

Do you borrow €150k to invest when "everything is risky as hell"?

You may find yourself with a loan of €150k and investments worth €50k.
 
But if you think that with mortgage rates at 2%, borrowing is cheap, then the best investment you can make is to buy a €650k house instead of a €450k house.

1) You will get a better house and this extra "return" on your investment is not subject to tax.
2) You can rent a room for up to €14k a year tax-free.
3) It may not be your final house, and any increase in value will not be subject to Capital Gains Tax when you sell.

Against that, you will probably have higher maintenance costs and you will pay about €185 a year more in Local Property Tax.

Brendan
 
I hear you, my thought process is trying to balance risk around.
I could end up with investments worth 150k, but could also end up with investments worth 300k.

I dont like the idea of putting everything into property as who knows whats coming there.

But I think it seems wise to max out my mortgage regardless?
 
Seccie said:
I dont like the idea of putting everything into property as who knows whats coming there.
Click to expand...

If you were looking purely at investments after you own your own home, you would be correct.

However, if you buy a home to live in, you continue to get the return. Any fall in value won't matter until you go to sell it (although you will feel poorer if you are in negative equity.)

Generally, you should not borrow to invest. And taking out a mortgage while you have investments is borrowing to invest. And you should not do this when "everything is risky as hell".
 
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