Mid-40s trading up. How much mortgage?

[Green in Wien]

Personal details

Age: 43
Spouse’s/Partner's age: 42

Number and age of children: two primary, one secondary


Income and expenditure
Annual gross income from employment or profession: €106k
Annual gross income of spouse: €45k (half-time)

Monthly take-home pay: €8k

Type of employment: e.g. Civil Servant, self-employed: Both public service

In general are you:
saving approx €1.5k per month


Summary of Assets and Liabilities
Family home worth €700k-€750k with €210k mortgage
Cash of €225k on deposit at 2.25% abroad

Pensions
Me:

1. DC fund of €300k all equities. It has an unusual condition where I have to use it all to purchase a lifetime annuity between 60 and 65
2. Preserved pre-2013 public service pension which should pay €500 per month from 65
3. Current (post-2013 public service scheme) which should see me with 24 years career average at 66 - should be about €1.7k per month
4. On track for full UK state pension via paying voluntary NICs - approx €1000 a month at 67
5. Full Irish contributory state pension

Spouse:

1. DC fund of €60k from prior employment
2. Pre-2013 PS pension scheme which should get her about 30/80s of final salary at 65
3. Full Irish contributory state pension

Family home mortgage information
Lender: BoI
Interest rate: Fixed 3.0% for five years until late 2027

Remaining term: 20 years
Monthly repayment: €1350 (overpaying)

Other borrowings – car loans/personal loans etc
No personal loans
Do you pay off your full credit card balance each month? Yes


Buy to let properties
None

Other savings and investments:
None. Never bought ETFs, shares, crypto, etc, and have no plans to do so.

Other information which might be relevant

Life insurance: Joint cover €250k until end of mortgage term (2043). Sole cover on me for €300k until 2033 as the higher earner.


What specific question do you have or what issues are of concern to you?
We lived abroad for almost a decade and have moved back to our tight three-bed semi in Dublin. We're kind of a in a "worst house on the best street" situation at the moment. We like the location but outgrew the house when away and want to trade up in 2024. Kids need more space and most likely some or all will go to college in Dublin so we'll be housing them for some time to come!

We sold a house abroad very recently and funds are sitting on deposit earning 2.25%. This is basically equal to our mortgage balance. I know we could save money immediately by paying off our 3.0% fixed-rate mortgage but don't want to push the button right away. When we trade up we may need cash for renovation and my feeling is (correct me if I'm wrong) it'll be simpler if that cash is to hand. This is under review however and I don't rule out paying off some of the mortgage immediately. But to simplify we basically own our PPR without mortgage.

Anyway to get to the point an ambitious purchase would look like the following:
1) Current house worth €700k with no mortgage
2) Dream house four-bed in a good Dublin location (€1.2k)
3) Mortgage €500k- 23 years @4.5% is €2.9k a month

Is this too much mortgage?

I don't even know if a lender would stretch to €500k but if they did I'd be worried that €2.9k a month would be a lot of mortgage to shoulder as we approach middle age and have to put three kids through college on the horizon.

In terms of employment we are very lucky to be relatively senior in public service bodies. I will likely get one promotion in the next decade that would take me to €125k. My wife is currently on half-time hours by choice and we have no childcare costs. Medium-term she will go back full time on €90k and the increment scale will take her to €105k or so. Neither of us has big career aspirations at this point but there's a chance one or other of us could end up in a role with a salary of €150k-ish or so by career end.

In terms of risk I don't think we are low on pension assets for our age and am not worried about house prices falling even a bit as we plan to buy once more and then not for a long time.

We don't have explicit early retirement goals and we'll work as long as we are able to and need to educate the kids which could take us to 60. That's our priority. At the same time it would be nice if at least one of us was able to dial back a bit around 60 and do something at a slower pace.

Finally I know a big house in a prestige area in Dublin is not everyone's dream but it really is for us. We both grew up in the city, all our friends and family are nearby, and this is where the amenities we like are. My question is really whether the level of borrowing would be too much short-term: out of a net income of €8k a full €3k on a mortgage would be quite a lot, but at the same time we wouldn't struggle to live on the remaining €5k either. I think long-term our incomes should increase but I'm wary of banking on this - I've seen ill health hit people our own age and we would be struggling if ever knocked back to one income even temporarily.

TIA

 

[arbitron]

You have many things in your favour:

• Public services jobs - really the safest type of employment
• High earners
• 1.5 income household with the possibility to increase by another €45k if needed
• Solid pensions
• No childcare costs
• You may be able to avoid the need for expensive student accommodation in college

A €500k mortgage on your earnings is not high and monthly outlay of €3k on an €8k net income is reasonable. It's effectively your current monthly mortgage + your current monthly savings.

The only thing I wonder about is the €5k monthly spending. If it's holidays, hobbies, and other truly discretionary purchases then you have more wiggle room if the situation changes. If you are spending it on private school fees, nursing home fees, etc. then you could struggle if you needed to cut costs.

 

[DublinHead54]

It looks like you could afford it mathematically but it may put you under pressure, but thats no different to a lot of families in Ireland currently.

I would say that you probably have less than 5k monthly spending as you'll need to save for one of expenses, holidays, christmas, replacement cars etc.

One additionally point to note is that bigger houses usually have biggest costs when it comes to heating, maintenance etc. Many of the houses in that 1.2m price range in Dublin are actually pretty old.

If you are on the worst house on the best street have you considered just renovating if you are already in the area you want to live in? With your savings and borrowing capacity you would have a substantial renovation pot.

 

[misemoi]

Are you sure that you want your kids still living at home during their student days and beyond? If you are talking about trading up to have enough space for that purpose, would you consider housing them outside your PPR? You certainly have the resources and time to plan for this. That way you might not necessarily need to 1.2m home, you might be able to extend your current one or find one that will cover 2a and 3 teenagers but would not need to house 5 adults so would be less expensive. Just another angle.

 

[Green in Wien]

The only thing I wonder about is the €5k monthly spending. If it's holidays, hobbies, and other truly discretionary purchases then you have more wiggle room if the situation changes.

To be honest we are adjusting a bit after returning to Ireland from abroad where we had a higher income, higher cost of living, but also more of a lifestyle. So far €5k a month seems ample to live on but haven’t had any recent big expenses. Neither of us has expensive habits but we don’t have a frugal mindset either.

Are you sure that you want your kids still living at home during their student days and beyond?

No! At the same time UCD, TCD and TUD are within a five km radius so I’d imagine at least two kids will hang around for college. We don’t rule out some kind of property with a granny flat but these can be hard to find.

have you considered just renovating if you are already in the area you want to live in?

We have thought long and hard but there are limitations with the site that can’t be overcome.

Many of the houses in that 1.2m price range in Dublin are actually pretty old.

Very good point. Our mental threshold is no lower than a C3. In our area there are some builds from the last 20 years in our price range that we would have a preference for.

 

[OEP1990]

No! At the same time UCD, TCD and TUD are within a five km radius so I’d imagine at least two kids will hang around for college. We don’t rule out some kind of property with a granny flat but these can be hard to find.

They could live outside the home for college, like those not from Dublin do. Better college experience too. However, the current Dublin renting experience would make that undesirable - hopefully things will have changed by the time yours are that age!

 

[DublinHead54]

Very good point. Our mental threshold is no lower than a C3. In our area there are some builds from the last 20 years in our price range that we would have a preference for.

I'm assuming on your current income and previous incomes, you've not had to really worry about the monthly budget or when one off costs arise?

At this point in your life do you want to go pay check to pay check just to have a house that friends and family will be impressed with? Not meaning to sound hard, but there will be more costs with a bigger house, more costs as the kids get older etc.

You are in a great financial position as it stands, so you probably need to spend a year trying to be strict on 4/5k a month to make sure you can live off it.

I live in the area you are talking about, and unfortunately there isn't a lot of value and prices have gone up significantly in the last 3 years. Having said that, you should be able to get a great house for 900k that has ample space for a family of 5, maybe look at ones that you can add an attic conversion to etc.

Or maybe just hold put for a few years.

 

[Green in Wien]

At this point in your life do you want to go pay check to pay check just to have a house that friends and family will be impressed with? Not meaning to sound hard, but there will be more costs with a bigger house, more costs as the kids get older etc.

Many thanks for this.

I just like the area a lot for its amenity value. Both of us will always work in the city centre without parking and the need for on-site presence 3 to 4 days a week so a short commute is a priority. I’m not looking for a prestige address per se. I appreciate that the two objectives overlap of course

But as a general point I’m happy to be spending more on housing than the average person.