First time buyers - Best options

[gsecoo]

Personal details
Age: 31
Spouse's age: 29
Number and age of children: N/A

Income and expenditure
Annual gross income from employment or profession: approximately €115k
Annual gross income of spouse/partner: €58k

Monthly take-home pay: approximately €5,200 (I am an hourly rate contractor so depending on the month this can change but average is around this depending on holidays etc) + €3500 = €8,700
Type of employment: Contractor in pharma industry (Director of umbrella company) + Teacher (Permanent)


In general are you:
(a) spending more than you earn, or
(b) saving?

Saving - Our rent was €1,500 per month and we were saving €1,500 per month on top of this into a joint savings account. Then investing about €1,500 per month into ETFs and zurich dynamic fund.

Rough estimate of value of home: €530,000
Amount outstanding on your mortgage: €477,000, we will be drawing down in the next month
What interest rate are you paying? 4.35%, we have fixed for one year with BOI to get the 2% cashback. Our monthly repayments will be €2,200.

Other borrowings – car loans/personal loans etc – No loans

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? N/A

Savings and investments:

Savings- We have just cleared €61,000 out of savings to pay deposit and legal fees etc. Below is our remaining savings/investments -

Cash - €39,000 (Recently sold a car worth €30,000 and replaced with a cheaper car and put remaining €23,000 into savings)
ETFs in Degiro - €11,000
Zurich dynamic fund - €13,000
Shares from approved share purchase scheme with previous employer - €14,000 (Waiting for final ones to reach 3 years this December and will sell)

Total savings/investments: €77,000

Do you have a pension scheme? - Yes, I have approximately €20k in a PRSA getting 52% tax relief as the umbrella company pays contributions. I am currently contributing €700 a month to this. I also have a retirement bond from a previous employment which has approximately €25,000

Do you own any investment or other property? No

Life insurance: No, we will obviously have mortgage protection as part of the mortgage. Is this something we should be looking at and any suggestions on this?



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

1.We are about to drawdown our mortgage on our new home in the next month or so. We ended up spending a bit more than we had planned on buying the house but hope it will be future proofed as it is a bit bigger than we currently need.

2. Once we have drawndown the mortgage I am unsure of where we should be focusing our money? Overpaying mortgage? Is it a waste to be investing in ETFs etc? I know the 41% exit tax is there on these investments. I think we have a healthy enough cash pot so not sure if we should be addding more to this. That is currently in a Bunq account getting approximately 3% interest.

3. I am hoping to get a slight increase in my hourly rate and was thinking to add some more of this to my pension to bring my contributions to €1,000 per month. While I am getting 52% tax relief on contributions I think this is worth taking advantage of? Tbh, neither of us are too sure how the public sector pension scheme works for my partner.

4. Children will hopefully be on the horizon in the next 3 years so want to be prepared for this also.



Thanks

 

[cremeegg]

Overpay your mortgage. You get a guaranteed 4.35% after tax return, you would need to get 9% elsewhere to match that which is not possible.

 

[ClubMan]

Overpay your mortgage. You get a guaranteed 4.35% after tax return, you would need to get 9% elsewhere to match that which is not possible.

9%? Surely it's 6.5%?
4.35% / 67 x 100 = 6.5% assuming 33% DIRT.

 

[Dr Strangelove]

You have a model set of finances for a couple your age.

Just overpay mortgage for now.

With kids the real squeeze is the few years from after maternity leave to before school when you have to pay for childcare. If you have two kids in this bracket you might want to dip into savings for a while.

 

[conor_mc]

Oh to have had your sense at that age!!

Seriously though, as Dr. Strangelove said, you are model students, well done.

Before focusing on paying down a mortgage which you are eminently capable of affording, I’d give a little thought to 10-15+ years down the line - like possible house extensions that you might like/need to do, will you aim for private schools for kids, would you at this stage even like to plan for early retirement and travel? If that road seems clear enough, then hammer away at the mortgage for sure, no doubt it’s the best zero-risk financial payback for you by a country mile. But I do wish that I had considered those things at your age when just paying for a wedding, getting into our first house and having a decent holiday every year was all we worried about.

Ps consider putting solar+battery into your new home. 6-7 year payback, followed by another 15+ years of free electricity. One of the best inflation hedges going.