Property & Pension advice, please

L

laundry24

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Hi there, hoping for some sound advice from fresh eyes!

I am currently in the fortunate position that I can sell my home and "trade out" (working from home primarily etc), The aim is to be mortgage free, but am open to a small mortgage ie paid off in 3-5 years - for the right place. I currently have 20 years left on current mortgage and it seems to make sense to cash in the equity on my home now and buy a little (or a lot!) financial freedom/choice.
If I can pay off current mortgage with sale proceeds, it would leave 230K approx to fund a new house outright - which appears to be doable in the areas I'm looking at.

My pension (PRSA) contribution has been minimal to date, as a result of large mortgage repayments so I could, in theory, start taking those contributions up several notches if I was mortgage free.

What would you do in my position?

Single female 50 years old, no dependents
Annual Gross income 42500
Employed - Private sector

Home current value 400K
Mortgage remaining 170K
Lender PTSB
Fixed rate 3.9% years (4 years from June 2023 - 3 years approx remaining)
Monthly repayment 1090

Savings - 16K Cash
PRSA - current value 72K - 250/monthly contributions

No other loans, credit card cleared monthly.
 
Yes, I would consider maximising your pension contributions, you are just scraping into the 40% tax band so you will get marginal relief of 40% on any AVC’s you make. Is your employer matching your pension contributions?

Don’t forget that moving house has fees involved in both selling and buying so you need to factor that into your budget.

If you are buying a house for €230K it is not a new build so you will probably have more maintenance that currently so perhaps start a saving fund for house repairs when you move and if you are moving out to the country then a reliable car, maintenance and financing of that would be very important.
 
Hi, thanks for your response.
No, employer not currently making any pension contributions - but that will change to the minimum requirement, at least, later this year/start 2025.
Yes, the agent, solicitor fees etc - I'm currently trying to put a price on all that selling & buying entails - apart from the psychological price :)
Good advice for the saving fund too - hopefully will have a little left over to seed that.
 
I can't understand this
You have a home 400k with a mortgage 170k

That's not unusual.

Surely the next step is to pay off the mortgage?

Do you not like your home?
Why are you thinking of selling?
 
Hi, not unusual - but paying off the mortgage at current rate will mean 19-20 more years of (crippling) repayments (all things being equal ie salary, role etc).
I love my home but would love not to shoulder such a financial burden even more. I need a home - it doesn't have to be this home for the rest of my working life. I'm lucky to have flexibility in the area in which I live.
20 years of high repayments (relative to my income - and I'm happy in my job so that doesn't need to change) v no mortgage - seems to make sense to me - but that's why I posted - curious to hear other perspectives.
 
1090 monthly of mortgage payments on a gross income sounds of €42.5k sounds like a struggle and your plan sounds right.

It makes sense to prioritise pension at your age and pension level.
 
I'm not sure I would downsize now.

Assuming property prices continue to rise at a moderate pace you might end up better off waiting until you retire and downsizing then....but obviously there are no guarantees.

Also, if you are mortgage-free you may be tempted to spend your extra cash on lifestyle costs - which is fine of course, if that's what you want.

Lastly, don't forget, over time the burden of your current mortgage should decrease assuming you get a pay rise from time to time.

Edit: I think you should also consider that you may end up slipping out of the 40% tax bracket in the coming years.
 
I don't understand
"trade out" (working from home primarily etc)

What that means?

How did it happen that you owned a house worth 400k and a mortgage payment of 1090
On a salary of 42k?

Is 230k enough to buy a house?
Probably not enough in Dublin I would say.
 
I would definitely downsize now if you have the opportunity to do so. Then you can put €1090 a month into pension/savings/invest instead of giving it to the bank.
 
Gorbashow said:
I would definitely downsize now if you have the opportunity to do so. Then you can put €1090 a month into pension/savings/invest instead of giving it to the bank.
Click to expand...
As MM has stated where are you planning on finding a home for 230k - the costs of selling/buying?
 
Bluefin said:
As MM has stated where are you planning on finding a home for 230k - the costs of selling/buying?
Click to expand...
There are over 1000 properties (2 bed + but with OP being a single maybe even 1 bed would do just fine) for sale with the price of up to 200k in Ireland on daft.
OP stated: " it would leave 230K approx to fund a new house outright - which appears to be doable in the areas I'm looking at."

Based on that I would not think twice and downsize, cutting all this interest otherwise paid over the next 20 years to the bank.
 
Gorbashow said:
There are over 1000 properties (2 bed + but with OP being a single maybe even 1 bed would do just fine) for sale with the price of up to 200k in Ireland on daft.
OP stated: " it would leave 230K approx to fund a new house outright - which appears to be doable in the areas I'm looking at."

Based on that I would not think twice and downsize, cutting all this interest otherwise paid over the next 20 years to the bank.
Click to expand...
OP is paying 3.9% on €170k mortgage.

Her house is worth €400k.

I haven't crunched the numbers, but if there is a small annual increase in property prices I suspect OP will be better off staying where she is until retirement.

A lot depends on whether OP commits to maxing out her pension contributions while continuing to qualify for full tax relief.
 
I know youve said you like your job but personally i would (and have) prioritized a job move to support long term financial goals.
There are a lot of costs associated with selling and buying a home eg stamp duty, surveys, solicitor fees, conveyancing, moving costs, storage costs and then costs for fixing up the property, changing furniure etc.
Ate your considering moving to a more rural area? Would this lrad to increased costs for transport, limited job opportunities?

Would you be in a position to rent out a room even for a while to overpay mortgage or increase avcs?



To me the numbers feel a little tight right now but you could move but spunds like you would have very limited options.

And even if you got a small mortgage you could emding up psying higher interest rate on what you borrow.
 
I think you also need to ask yourself also how much of a pension fund do I need when I retire
Will you be entitled to the state pension and if so how much do you need fund the difference between the OAP and what you'll need in retirement
and can this be funded out of current earnings or are there other ways you could fund this like through rent a room??
 
Taking aside the financial aspect of it, are you 100% sure this move is what you want? Have you already got connections to your target new community, or are you the sort of person who can find ways to integrate in a new community ie though sports, volunteering other interests etc? If you don't settle well in your new place the financial impact of moving back would be onerous.
 
Thanks for all your advice and thought-provoking questions.
I'm heartened that at least a few of you think it's a good financial idea, thank you Dr Strangelove Gorbashow!
Thanks for your concern, misemoi, but the non-financial reasons for a move are sound in my mind.
By "trading out", I wasn't clear - trading out of the city - not sure if it's trade up or trade down yet! And I think my budget will be OK for the area I'm considering (not in Dublin, no)
I do agree that I need to concentrate on my pension, I can't put that off any longer - and I can't do that and service this mortgage. If it wasn't clear, it is, and has been, a "struggle" and "a bit tight" - so something has to give.

Thanks again for your time.
 
Can I suggest you vist the area/estate you are thinking of before committing fully to downsizing option. If you're viewing them on Daft/MyHome then you may not be seeing the full picture.
A few years ago I was looking at a rental in Longford for very cheap money (I know lol) looked great on Daft until I visited to find 2 burned out homes, horses on the Green and an air of utter neglect and evidence of industrial strength vandalism, the house I had been looking at was curiously very well maintained by a very depressed owner occupier looking to flee.
 
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