Late 20s, high income, planning for PPR extension

I

interested21

Registered User
Messages
85
Personal details

Age: 29
Spouse’s/Partner's age: 29

Number and age of children: 0 (will hopefully be starting a family in the next 2-3 years)


Income and expenditure
Annual gross income from employment or profession: ~140k (112k base ~28k bonus)
Annual gross income of spouse: ~150k (120k base ~30k bonus)

Take home varies month by month depending on bonuses

Type of employment: Private sector

In general are you:
(a) spending more than you earn, or
(b) saving?
Saving by a long shot. We don’t track our savings month to month, but we have a good lifestyle that still leaves us living well within our means and our savings growing very healthily each month

Summary of Assets and Liabilities
50k pension pots each (maximizing our contributions | 100% Global Equities)
PPR ~375k w/ 180k mortgage fixed @ 2.8% for the next 2 years
15k shares in 2 previous employers
10k shares in Investment Trusts (40% JAM, 30% FCIT, 15% MNKS, 15% SMT)
80k cash

Other borrowings – car loans/personal loans etc
None

Other information which might be relevant
Life insurance: 4 x salary death in service benefit through work for both of us
No other big planned expenditures coming up

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

Our PPR suits us great now, but it will not work for a growing family. We want to future-proof ourselves a bit while we have the cash and while it’s just the 2 of us. We looked into moving, but we like our area and so we’re thinking now of getting an extension built next year to add a bedroom and bathroom, and expand the living space a bit.

We’re struggling a bit with the next step of figuring out how much money to put aside for this work, especially as I’m finding it hard to get up-to-date information on the price per square meter of building work. Should we engage with a professional (Builder? Architect?) at this stage to get an idea of what we’re looking at, or is it too early seeing as we’re probably 12 months out from being ready? Given the relatively low value of the house, should we set a ceiling on how much we spend - if we spend 200k extending it won’t make it a 600k house, but spending 100k might add 100k of value (I can't rule out that we won't move again in another few years, depending on circumstances).

I’d like to avoid a scenario where this time next year let’s say we have 200k saved and only need 100k for the extension - that extra 100k could have gone into paying down the mortgage and/or investments. Or maybe the price of building is going up so much that this is all irrelevant and we’ll need access to every cent we can get?

Would also be interested in any other ideas about our general situation!
 
First off well done, you are both doing well and in a good financial position.

If you think you may move in the future, and you plan to have kids, make that your next move. The reality is once you start a family your earnings will take a hit and the amount you can mortgage will decrease also as childcare costs are taken into consideration.

My wife and i would have been in a similar position at your age and you assume that you will both continue in your careers but for a lot of dual income families the reality is that you cant, or at least not to the same extent that you did before.

So best advice i can give you is max out your pension if the cash is available (if in a co scheme you can both make EE contribtions up to 17,250 along with what your employer is putting in, rising to 23k in the year you turn 30) and save to move and try and buy your family home next. The cost of renovations are such that doing that work and putting up with the hassle, in a location where you see values as capped, it may not make sense if you need to move again.
 
interested21 said:
Our PPR suits us great now, but it will not work for a growing family.
Click to expand...

Then don't touch it.
Wait until you have a family. It will presumably still suit you both for a couple of years after a child is born.

Given your level of incomes at your age, you will inevitably want to move to a bigger and better area. So when you need a bigger house trade up.

In the meantime, after maxing your pensions, just clear your mortgage. With your level of savings, you will be living in a mortgage-free house in a couple of years.

Then when you want to trade up, sell the house and buy what you want.

Brendan
 
Ballpark budget of 3k per square meter for your extension.

You will likely have to vacate your home for the project.

I'd suggest trading up to lifetime home now.
 
I think it would be worthwhile engaging an Architect to scope out what you want with your current home. Even if you do decide to move in a few years it may be a good idea to invest in your home now to make it suit your current needs. Maybe a small extension and a reconfiguration of the current house will make it more pleasant to live in than it currently is.

Some building woks, & interior design may give you a very pleasant home. I know I spent 5 years in a house with a very depressing kitchen because we had no cash at a similar age to you. I would have enjoyed it a lot more if I could have afforded to invest in it.
 
Thanks all for the replies.

Blackrock1 said:
My wife and i would have been in a similar position at your age and you assume that you will both continue in your careers but for a lot of dual income families the reality is that you cant, or at least not to the same extent that you did before.
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Yeah we're definitely pretty conscious of this, both in terms of starting a family but also that the premium that's paid for our skills at the moment may not last forever as well. As a result we don't want to get too comfortable with our current earnings.

Brendan Burgess said:
Wait until you have a family. It will presumably still suit you both for a couple of years after a child is born.
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You're totally right that our current house in its current state could suit us another 5 years, however we're also conscious that it will be a lot easier to move or get work done while there is just the two of us. It would all be a lot more stressful with a family. It's a bit of chicken and egg - we want to sort ourselves before we have a family, but we probably don't fully understand everything we need until we have a family as @NoRegretsCoyote says.

Brendan Burgess said:
You will have no problem raising a new mortgage to pay for the extension.
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For some reason I hadn't even looked in to financing the extension through a loan as I assumed it would be a separate (expensive) loan rather than a mortgage top-up. That definitely makes it a lot easier. Thanks Brendan.

Brendan Burgess said:
Given your level of incomes at your age, you will inevitably want to move to a bigger and better area. So when you need a bigger house trade up.
Click to expand...
Moving was our initial preference, but we found that any house we would like to move to also would require work to be done, so not sure if there's any avoiding rennovations.

Brendan Burgess said:
If you do decide to extend your house, this is not a good time to do it. Labour and materials are in short supply and expensive. We may well have a recession in a few years and builders will actually want your business.
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Yeah this is something we're quite aware of. It'll be 12 months before we're ready to do anything anyway so I'd imagine costs will have settled down a bit by then.
 
It is an expensive time to get work done but don't bank on a recession to make it cheaper. I doubt you can spend a 100k and add a 100k value as generally labour is a bit of a sunk cost in terms of value but I get what you mean. You need

You like the area you are in now as a couple but you've probably never thought of it from perspective of parents. I'm a few years ahead of you with a toddler and another on the way. We moved last year and the area suits us as parents but wouldn't as a childless couples. Things to consider are location of childcare, schools, general neighbourhood for kids (parks, clubs etc). These inevitably become more important especially if both parents work.
 
interested21 said:
Yeah this is something we're quite aware of. It'll be 12 months before we're ready to do anything anyway so I'd imagine costs will have settled down a bit by then.
Click to expand...

Speaking to a QS the expectation is the pace of increases in materials will slowdown but it won't necessarily mean price reductions. In this environment you just need your money to work harder for you when getting the work down, for example shopping around for clearance tiles, or putting down a laminate vs real wood. In terms of the construction get a good engineer to help minimise expensive unnecessary work e.g. maybe leaving a window in place gives the same effect as knocking out a new window.

We are planning renovations and I found it incredibly difficult to get an accurate view of how much works will cost. You will likely need to pay an architect / QS / Engineer to get that view. However, from what I have found you are unlikely to get a rear 2 storey extension for less than 100k
 
Dublinbay12 said:
Speaking to a QS the expectation is the pace of increases in materials will slowdown but it won't necessarily mean price reductions. In this environment you just need your money to work harder for you when getting the work down, for example shopping around for clearance tiles, or putting down a laminate vs real wood. In terms of the construction get a good engineer to help minimise expensive unnecessary work e.g. maybe leaving a window in place gives the same effect as knocking out a new window.

We are planning renovations and I found it incredibly difficult to get an accurate view of how much works will cost. You will likely need to pay an architect / QS / Engineer to get that view. However, from what I have found you are unlikely to get a rear 2 storey extension for less than 100k
Click to expand...
Can I ask how you're managing your finances and budget around the uncertainty of the costs ahead?
 
The worst outcome for you would be as follows:

1) Get an extension in the near future and have a lot of hassle.
2) Spend €200k on it and it makes your home worth €100k extra. Don't forget that whoever buys your home will want to change it to their way of thinking.
3) Trade up anyway in a few years and have all that hassle.

The best outcome would be
1) After a few years buy a new house. Given your level of income and low mortgage, it's quite possible that you will be able to afford to buy the new home that you would like without selling your existing home beforehand.
2) Refurbish it.
3) Move into it from your existing house.
4) Put your current home on the market and pay the proceeds off your big mortgage.

If you get nearer to this position, then start saving for the deposit on the new house.

Brendan
 
interested21 said:
Can I ask how you're managing your finances and budget around the uncertainty of the costs ahead?
Click to expand...

There should be little change to how I manage my finances. I've set a budget for the works, I've worked out how I am going to fund (savings and mortgage top up), whilst keeping a 10% contingency of budget. I've taken my currently monthly budget and factored in the extra childcare and mortgage payments and confirmed that I can afford it. If my budget is 150k, I plan to borrow 100k and self fund 50k.

I'm only at the drawings stage, the works will go out for tender and a builder will come back with a cost and we will agree and sign the contract. After that there should hopefully not be that much uncertainty in costs that can't be covered by the contingency.

Of course it probably won't be as smooth as the above and I do have some concerns about inflation and rising mortgage rates.

You certainly need to consider the economics of what your house will be worth after and certainly in todays market the added value will be a smaller percentage of the cost. However, the economics shouldn't be the sole driver in my opinion. Personally we are doing it because we have young kids and want our house to function better i.e. it is solving a problem we have. In your situation I would tend to agree with @Brendan and @NoRegretsCoyote that you should wait.
 
a builder will come back with a cost and we will agree and sign the contract
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Dublinbay12, that was the way it worked a year or two ago, but at the moment most (possibly) all builders will not agree to a fixed price contract due to material price escalations. It may be worth looking at a cost plus type of contract with fixed prelims - but just bear in mind you will still be carrying the material price escalation risk.

Best of luck with the project.
 
aiddan said:
Dublinbay12, that was the way it worked a year or two ago, but at the moment most (possibly) all builders will not agree to a fixed price contract due to material price escalations. It may be worth looking at a cost plus type of contract with fixed prelims - but just bear in mind you will still be carrying the material price escalation risk.

Best of luck with the project.
Click to expand...

Thanks Aiddan, yes I am aware of this. I should have been clearer in the post that the builder will come back with a fixed price that is subject to change due to material price differences. Traditionally this clause in the contracts were struck out but not at the minute.
 
Have to say I agree with all the advice here. Dont sink 150k into a house you dont plan on staying in. Clear as much of your mortgage as you can, then upgrade. Buy new and for your family when you have them.

As BB said, if you cleared your current mortgage, you could probably get a new one comfortably on a second house. You could rent out the place you are now, have it as a second income/insurance policy.
 
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