Remortgage or??

T

trickytrixter

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2
Personal details

Your age:49
Your spouse's age: 47
Partner's age if not married:

Number and age of children: 3 - 15, 14 and 8


Income and expenditure
Annual gross income from employment or profession: 88000
Annual gross income of spouse/partner: 60000

Monthly take-home pay:

Type of employment - e.g. Employee or self-employed. Employee
Employer type: e.g. public servant, private company. Public servant

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


Summary of Assets and Liabilities
Family home value: 500000
Mortgage on family home: 122000
Net equity: 388000

Cash: 50000
Defined Contribution pension fund: 120000 tex free lump sum in 8 years time and 22000 pension. Wife - not sure tbh! Private pension - value 70
Avc - 40000
Company shares : 0
Buy to Let Property value: 0
Buy to let Mortgage: 0

Total net assets:


Family home mortgage information
Lender BOI
Interest rate 3
Type of interest rate: tracker, variable, fixed.
If fixed, what is the term remaining of the fixed rate? Fixed 8 years
If tracker, what is the margin e.g. ECB + 1%

Remaining term: (Original term is not relevant) 14.5 years
Monthly repayment: 877

Other borrowings – car loans/personal loans etc
Personal - 120000
Car - 10000

Do you pay off your full credit card balance each month? No
If not, what is the balance on your credit card? 2500

Pension information

Value of pension fund: see above - public sector pension so lump sum/pension as above

Buy to let properties
Value: 0
Rental income per year:0
Rough annual expenses other than mortgage interest :
Lender
Interest rate
If fixed, what is the term remaining of the fixed rate?

Other savings and investments:
N/a


Hi all. Looking for some advice on what to do. So currently I am -

Job is with the public sector and I am lucky that my take home is about 950 per week - 28 years served and can retire in 5 years but that's not going to happen! So will probably work until early 60s. Will have a lump sum and pension then. But living now is the problem! So we have a mortgage of 120k left on the house/15 years to go (valued at 500k) and loans of 120k - business investment that went belly up and house renovations/9 years on these. We have about 50k in savings. But anxious not to touch them given college coming etc and no plan for that. Strange as it sounds but it seems we never have money. Currently I pay for the mortgage and all these loans myself - about 2200 per month. With other bills that I pay, it's closer to 3200 a month. It's my name only on the mortgage and I d prefer to keep it that way - wife has a clean slate so just incase anything happened! While the 2 personal loans are relatively new, I m wondering should I just resign myself to remortgage and put them into it and live now and worry about it at the end? I can't see currently how we can afford college without more borrowing as saving currently is not an option with my wife looking after childcare and groceries etc. I would have capacity to pay but just seem to be swallowed in debt at the minute. Any advice welcome!
 
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Have you run the numbers on remortgaging? How likely is it that you would get additional credit based on your current outgoings?

Have you done a deep dive into your spending patterns if you are feeling like you never have enough money? Maybe there are some things that need to be deprioritised until you get back on track, whatever that looks like for your family (eg for me holiday would be the last to go, I would sacrifice socialising and other material things for that if we needed).

How likely is it that your wife could take up work once your eldest is ready for college? Childcare for a 12 yo is v different for an 8yo. This additional income could cover the extra education costs and you could use your current savings to reduce the personal loans? Even if she has been out of the workforce for some time there are a couple of years she could use to retrain/upskill/prepare? Also in terms of her own state pension, the disregard for Home Caring periods will stop once your youngest is 12.

Will your kids need to move out for college, have you quantified the expected expense? Are the two oldest both certainly headed that way, would either of them be planning to work after school?
 
Just my unlearned opinion ( and I am not a financial advisor) and your tone suggests the last thing you need is remortgaging. You’re 49 with your current mortgage to be paid off when you reach 64. You have good earnings and guaranteed employment and plenty of time to mull over your financial future. Your savings are healthy too and appear not to be doing much other than lounging in a bank account. My gut feeling is that you should pay off some of your mortgage now and use the money “saved” towards college expenses later.
 
Remortgaging to pay off debts is an awful, stupid, terrible idea. More water doesn't help you if you're drowning, and while consolidating loans over a longer period will reduce the monthly outgoings I'd lay heavy bets you'll use up all the surplus cash and then some, and likely end up borrowing again in the near future; indeed you're already planning to borrow more because you think €50k isn't enough for your two kids to go to college when (together with your income and their earning capacity as young adults) it really should be.
  • Back in the Celtic tiger era about 50% of the people I did mortgages for were consolidating loans not buying property. Most of those were on their second or third rounds of remortgaging to consolidate debt: credit cards, credit unions, car loans. People were basically getting 20 and 30 year mortgages to pay for their Saturday nights out. Any debt you take out should be dead long before whatever you're buying it for loses its value— your night out repaid within a month or two, your holiday within a year, your car within 5 years etc.

At the risk of stating the obvious, look at your outgoings and shop around. There's a decent chance you're overpaying for your broadband, phone bills, electricity, health insurance, other insurances, and other monthly outgoings. A 20% saving on each of these (easily achievable Vs inertia) probably finds you €100 per month. If the two adults & two teenagers replace their phones every 2 years with a €300 model Vs every year that's another €50 per month. Etc etc etc.

Take the €50k savings and apply it towards the most expensive loan which is almost certainly far higher than the interest (if any) you're getting on the savings right now. If the interest in the business loan is 5% that's equivalent to 7.5% gross on the savings or an annual pay raise of €5k. Don't reduce the loan repayments but continue to reduce your overall debt.
  • Assuming you qualify for PSCU membership, an education loan with them is 5% which is probably lower than the business (and maybe also the personal) loan. (There's probably similarly priced offerings from whatever credit unions you can qualify for). If you have to borrow for the kids college, you're still going to be better off doing this incrementally when the bills actually come due as opposed to having €50k sitting there doing nothing while you're paying punitive interest rates on the outstanding loans.

You'd probably save at least €10k over the next four years just with the savings/loan strategy, and another €10k by having a hard look at your monthly outgoings. That's €100 extra a week becoming available to you which (ideally) would be dumped into the most expensive loan.

It's generally easier in my opinion to reduce outgoings than increase income. That €100 per week is worth a €10k annual pay raise before tax.

In terms of funding college, your kids can at least get jobs during the college holidays. Keep an eye on the annual Civil Service TCO competitions; even 10 weeks would provide an extra few grand during the academic year. Also, unless you're truly in the back end of nowhere (and the €500k value on your home suggests otherwise) they'll probably be able to live at home and commute to college if necessary.
  • They may also be interested in studying outside Ireland— many universities throughout Europe provide courses through English with minimal tuition fees and low accommodation costs. It can be cheaper and more convenient to move to Berlin to study than stay in Ireland if commuting really isn't an option.
 
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Totally agree with remortgaging comments in above post, unfortunately I don't think that is going to be your answer. Is the personal/car debt that you want to remortgage with the same lender as the mortgage? It's likely to be very difficult to add that sort of debt to your mortgage unless they are unsecured loans with same lender who might see the benefit in securing the lot on your house! Not a great plan but if it reduced the interest rate you are paying there might be some merit in the idea.

Remortgaging is like a diet, no point doing it if you go back again to the unhealthy eating, it very seldom fixes a problem without extreme discipline to ensure all other areas are looked at and sticking to basics rather than just allowing debt mount up again. For example if you include that car debt in a remortgage then you will still be paying for that car long after it's gone and you will probably have another car loan taken out. Start with a look at every expense you have and see if it can be improved on. If you could consolidate the bigger loan with the mortgage assuming that debt is at a much higher rate then there is some saving to be made but not if you just spend the difference again. Mind you though I think it's unlikely to be possible to remortgage in this sort of scenario.
 
misemoi said:
Have you run the numbers on remortgaging? How likely is it that you would get additional credit based on your current outgoings?

Have you done a deep dive into your spending patterns if you are feeling like you never have enough money? Maybe there are some things that need to be deprioritised until you get back on track, whatever that looks like for your family (eg for me holiday would be the last to go, I would sacrifice socialising and other material things for that if we needed).

How likely is it that your wife could take up work once your eldest is ready for college? Childcare for a 12 yo is v different for an 8yo. This additional income could cover the extra education costs and you could use your current savings to reduce the personal loans? Even if she has been out of the workforce for some time there are a couple of years she could use to retrain/upskill/prepare? Also in terms of her own state pension, the disregard for Home Caring periods will stop once your youngest is 12.

Will your kids need to move out for college, have you quantified the expected expense? Are the two oldest both certainly headed that way, would either of them be planning to work after school?
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Sorry I read from your OP that your wife was not working but see that she is. How will this look when your eldest is ready for college, will your youngest be in secondary school and require less childcare? Will this bridge the gap for college funding? Is your wife taking a reduced working week or year right now and can she halt this in a couple of years?
 
You might consider following Dave Ramsey on Instagram. It's repetitive but the repetition helps internalise the message of budgeting & giving every euro a job before it reaches your account. It's also maybe a bit extreme (I see no reason to effectively live in poverty until my mortgage is paid off for example!).

You're a public servant which means you can probably use salary deduction for a few things. It's worth talking to your credit union about a debt consolidation loan if they offer better rates BUT DON'T EXTEND THE TERM(S) OF THE LOAN(S)! If you max out the repayment directly from your paycheck this will help reduce the long term costs.

Have the loan repayments go out the day your salary goes in. If you can't schedule the direct debits, then set them up from a separate account and schedule a standing order to cover them.

Have a budget spreadsheet setting out all the income & expenditure- you can't manage what you can't (or aren't) measuring. I'm attaching the basic outline of mine. Update it with your own details. Look at every single item in the expenditure columns and see if you can reduce it and if so, by how much.
  • I would recommend clearing the debts as soon as you can by overpaying. Right now you don't earn yourself a salary, you earn your creditors a salary. Change this.
  • Have a separate account just for groceries. It puts a limit on your spending which makes it easier to control.
  • You shouldn't have anything left the night before you get paid. It should be going to your credit card at least.

Also worth pointing out the obvious:
  • Smoking is extremely bad for your health and wallet.
  • Alcohol isn't great for your health either, but the off-license is a lot cheaper than the pub
  • Home cooked food is cheaper and tastier than takeaway
  • if you're shopping in Marks & Spencers STOP and move to Lidl/Aldi instead. Buy your underwear at the very least in Penneys. Teach your kids that anyone who judges them by whether they're wearing branded clothing or have the most expensive clothes is an idiot who isn't worth their attention.
  • Your kids don't have any entitlement to get the newest/most expensive clothes/phone/games console/games/headphones every fortnight. They will get much more in the long run by learning to delay gratification.
  • Fly Ryanair & off-season. You're not going to ruin your kids' education by bringing them away for 1 week a year during term time. You WILL save probably at least a thousand euro.

One thing I WOULD recommend is worth the money is health club membership if it's actually being used. There's one near me (gym, pool, and fitness classes) which costs about €1,500 a year for a family of 4 which is definitely not cheap, but if everyone goes once a week it's €7.50 a visit. That's cheaper than a weekly cinema ticket as well as being good for your mental & physical health.
 

Attachments

  • Direct Debits- SAMPLE.xlsx
    10.7 KB · Views: 3
Steven Barrett said:
You need more income. 78% of your income is going in bills. With 2 teenagers, life isn't cheap.

Can your wife work?
Is there an opportunity to get a promotion in work?
Can you get a second job?
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My wife works - updated there now
Protocol said:
148k gross income

122k mortgage at 3%

130k personal loans - this is the issue - what are the interest rates here?
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7%
 
With an income of 148k, you should not really have an issue servicing your debt (2200k a month) as well as all your other expenses as your net income is probably income is around 7k a month. However, you don't seem to really know where your money is going. You spoke about your 3.2k spending on your wage, where is the remaining going? Your wife has a decent wage that you didn't mention in your first post (some posters didn't even realised she was working). What does this cover? I would suggest you have a proper look at your household income and expenditures so that you can actually have a proper understanding on where your money goes and how to budget better. I would suggest a money diary.
 
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Premos said:
However, you don't seem to really know where your money is going.
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As ever in these sorts of cases, this is key in my opinion, and others have also touched on it earlier. Before you can make any plans/changes you need to do an honest analysis/audit/assessment of your expenditure in order to know where the money is going. This includes all expenditure - e.g. loan repayments, annual household expenses such as insurance policies, monthly/bi-monthly expenses such a utility bills, weekly expenditure such as groceries, and any/all other regular or sporadic expenditure. If most or all of these are done by credit/debit card then it should be possible to do most of this analysis by downloading a year's worth of statement data from online banking and analysing them using Excel. E.g. group things into logical categories and then calculate the pro-rata monthly amounts.
 
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trickytrixter said:
7%
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There's a big part of your problem right there. 7% interest on a loan is the same as 10.5% return on investment. Unless your €50k is earning you over 10.5% guaranteed return (hah! if only!) you need to immediately dump it into your credit card and 7% loan. If you do nothing else this will save you at least €3,500 a year in interest, and probably more like €4k because the APR is probably even higher.
  • it MAY be worth spending some of the money getting solar panels instead of repaying debt- the return on my solar panels is working out at about 17%, but obviously that depends on your roof size & orientation and how much the panels actually cost you.

As a public servant you should have easy access to it cheaper education loan via your work credit union when the time comes if you actually need it.

Holding a large amount of cash when you've a lot of high interest debt is crazy. Holding that cash for 5 years probably cost you €20k, and it's costing you money every single day you wait to dump it into your credit card & 7% loans.
 
Start with the basics, full tax review to see you are paying tax in the most optimal fashion and do a tax return and ensure you are claiming for everything as far back as you can possible go.

In terms of the business loans, was it to yourself, are you a personal guarantor or was it to a limited company. ? How have you personally ended up with this debt.

you biggest issue here is not the loans, you have sufficient income to cover those, the issue is that you seem to have no idea where the rest of your money is going, Get to grips with that and you'll be on a good road forward
 
Peanuts20 said:
you biggest issue here is not the loans, you have sufficient income to cover those, the issue is that you seem to have no idea where the rest of your money is going, Get to grips with that and you'll be on a good road forward
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I strongly disagree. Just because someone can make repayments on their debts doesn't mean their debts aren't a big issue. The OP's debts are swallowing a large proportion of his income right now.

The OP is dropping around €4k annually or €10k gross inc- around 8% of their net income- on interest because they're holding cash instead of repaying a high interest loan. At 7% their €130k of high interest debt is eating up €9,100 cash a year which at the higher rate of everything is around €20k gross.

Using the CCPC's mortgage repayment calculator, a loan of €130k over 9 years at 7% has a monthly repayment of €1,610. Reducing the principal (which the OP could do tomorrow with their savings) reduces the monthly payments to €990, saving €620 a month. Alternatively, the OP could keep the repayments the same for 3 years until the first kid goes to college by which time the outstanding balance would be maybe €35k and the repayments would be around €600. That frees up €1k a month for the OP to support their child financially during college without going near any lender.

No matter what way you look at it, reducing that debt pile as fast as they can will dramatically improve their financial situation on a monthly basis. It's the easiest win possible.

Sure the OP needs to be aware of and control their expenditure. But there's a big chunk of expenditure can be made to instantly disappear. The faster the debt pile is reduced the faster the options grow for the entire family.
 
SquirrelChaser said:
it MAY be worth spending some of the money getting solar panels instead of repaying debt- the return on my solar panels is working out at about 17%, but obviously that depends on your roof size & orientation and how much the panels actually cost you.
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That 17% return probably assumes zero depreciation which isn’t strictly correct on an RoI calculation. That said, payback of 6-7 years should be expected which equates to 17% or so annually. In reality, a €10k investment in a decent array with small 5kWh battery should save €100 a month on electricity bills at the very least, probably €130 or so depending on orientation and usage profile.

Depending on driving patterns, a second-hand EV is also another potential money-saver. We replaced our two cars with decently depreciated EV’s last year and cut our approximately €200 petrol bill to €50-70 a month in electricity. Depreciation rates since probably make this an even more attractive option now.

Both changes definitely eased the pressure on our monthly finances.
 
While the aforementioned suggestions for cost savings are valid I think it's premature to suggest specifics until the original poster audits/analyses their expenditure in order to understand where every penny is going right now. Once that has been done it should clarify where improvements can be made and what changes are likely to give the biggest bang for the buck.
 
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