Money makeover - best home for cash

F

Firsttimeuser

Registered User
Messages
6
Hi, first time user here :) I've been a frequent visitor to the site and find it very informative. I have finally gotten around to preparing my Money Makeover post.

Age : 40, Partners Age: 38 One child < 5
Annual gross income from employment or profession: E70K + bonus
Annual gross income of spouse: E75K + bonus
Monthly take-home pay : Gross 5600, 2800 net (includes 1200 contribution to AVC) Spouse: Gross 6250, net ~3k (also maximizing AVC)
Type of employment: Both Private Sector, financial services.

In general are you (a) spending more than you earn, or (b) saving?
Sitting on relatively high cash balance, not actively saving, but not big spenders. Big outgoings are mortgage & creche fees
Rough estimate of value of home 285,000
Amount outstanding on your mortgage: 270,000, from a heavily negative equity position 5~10 years ago (~425k)
What interest rate are you paying? Tracker ECB +1.35% (complicated history but this is new rate)
Mortgage Expiry: 2041 (20 years)
Mortgage Repayments: 1300 + 500 (max) overpayment = 1800 p/m. So total annual repayments = 21600. Mortgage in my name only.
Other outgoings : Creche fees ~1200pm
Other borrowings – car loans/personal loans etc. none
Do you pay off your full credit card balance each month? Yes
Savings and investments: 250,000 cash savings in various zero-interest accounts.
Do you have a pension scheme? Yes. Same with partner. Company contributing 7%, me 3.5%. Both (recently) maxing AVC within age bands (so 25% and 20% respectively). No idea if pension fund balances are healthy for our age (~100K each @ present).
Mortgage protection : covered for death. Life insurance: None, but company has 4 X salary @ death "benefit"
No other income protection

What specific question do you have or what issues are of concern to you?
I think we're doing ok, but we're at a kind of a cross roads. I'm keen to get a plan in place for the next few years.
Relatively high cash balance from savings. Question on what do with it in short term
I have focused on overpaying mortgage & recently now maxing out AVC pension contributions. Looking to move house soon to larger property, likely ~800k all in.
Major outgoings are mortgage and creche for next 2~3 years.
I would like for my partner to be able to cut back or maybe even give up work in 5 years, for even a few years.
I've read quite a lot on this about retaining the current PPR for future rental, but annual tax returns and upkeep of near 20y/o house not that appealing. Like the idea of it as a future "pension fund" but not clear if this is feasible given desire for new PPR and extra debt taken on from that

All and any comments appreciated
thanks
Firsttimeuser
 
You are paying about 275 euro a month to keep money in a current savings account instead if paying off yr mortgage.
 
You should probably leave your cash on deposit to maximise flexibility in terms of the future house move.
Firsttimeuser said:
Looking to move house soon to larger property, likely ~800k all in.
Click to expand...
That's going to be a bit of a stretch, particularly if your partner takes a career break or early retirement.

I don't think retaining the current house as a rental will be a runner - your combined mortgage debt would be too high.
 
You were doing well until you mentioned the 800k property and the career break. Even with 2 incomes, you are still maxing the limits of lending so servicing a >500k mortgage on a single income of 75k is not a good idea. It would put a lot of financial strain on you even if only for a few years. I'm a little surprised that you would want to take on that level of mortgage debt having just come out of negative equity

Your current PPR is effectively worthless to you right now. If you sell, you clear the mortgage and have enough to pay for the cost of sale. Trying to keep it for rental also does not sound likely as pointed out already. You would a very high total debt with both properties despite its potential to turn a good profit.

Maybe you need to re-evaluate your 2 goals of an 800k PPR or a career break for your partner. I don't think you can do both or at least it is very risky to do both.
 
Thanks for the replies

Regarding the losing 275 a month on keeping in current account v paying more on mortgage, I guess the idea had been to keep a potential cash deposit for a new PPR and if making a lump sum payment off mortgage, how much to a)make a difference and b) not eat into said deposit.
Apologies, I should have made it clearer that any proposed career break (or reduced days) would not likely happen for at least 5 years.
Slightly frustrating having paid down a lot off the existing mortgage to have so little to show for it (if sold), hence the idea to hang on to it as a rental.
Don't even like the sound of taking on a new mortgage but we would need to for space, especially if blessed with more children.
Happy enough to keep eating into existing mortgage as much as possible now, but question still lingers then of what best to do with the cash on deposit

Thanks all
 
Would reducing down the AVC contributions and mortgage overpayments make any sense to build a bigger pool of cash for future PPR purchase, for example?
 
Yes it would.
Maybe just a thought - would there be a bigger home in suitable area that's not €800k? To go from €285k to €800k seems too big a stretch!
 
I’ll rethink the 800k house search. 800 was my absolute limit for buying a house of 700k + renovation+ kitting out + small contingency, and even at, that knowing we’d be broke (from a now reasonably comfortable position)

so short term my options are leave cash on deposit at best available rate(s), cut back on voluntary overpays & build savings up further

the post was self-hijacked by the mention of the new PPR. The post was originally intended to provoke thought on best short term (<18 mth) home for cash & a critique of other finances
 
You must log in or register to reply here.
Back
Top