Trading up - Use savings or keep mortgage low.

Product A: Cost €10k - Value €8k
Product B: Cost € 7k - Value €8k (But the tax is paid so no tax is due)

Option 1 - sell Product A.
Product B rises in value to €10k. Profit €2k - tax @31% = €620

Option 2 - Sell Product B
Product B rises in value to €10k. Profit: zero - no tax.

So you should not sell products which have losses in them which you cannot use against other products.

Note: This does not apply to equities or property as the losses can be carried forward and used against gains in later years.
 
Bronte I accept your comment about an established repayment track record. Perhaps I would re-phrase your comment in that way which I am sure you had in mind yourself!! Having no history of borrowings would not in my experience be a negative factor in a loan application. I also would not be a promoter of borrowing when cash resources are available.
 
Brendan Burgess said:
Product A: Cost €10k - Value €8k
Product B: Cost € 7k - Value €8k (But the tax is paid so no tax is due)

Option 1 - sell Product A.
Product B rises in value to €10k. Profit €2k - tax @31% = €620

Option 2 - Sell Product B
Product B rises in value to €10k. Profit: zero - no tax.

So you should not sell products which have losses in them which you cannot use against other products.

Note: This does not apply to equities or property as the losses can be carried forward and used against gains in later years.
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Totally confused now Brendan.

How is tax not due on 1k profit on Product B?

By the way, both my products have a loss
Product A: Cost 10k. Value 8k.
Product B: Cost 10k. Value 9k
 
Brendan Burgess said:
Hi Daniel

It makes no sense at all to borrow money to invest.

You can keep your €60k investments largely intact and use your cash to buy the house.

Borrowing money to invest is a terrible idea. Spreading it over a longer period makes a terrible idea worse,not better.

If you do decide to cash some of your investments you should not cash any which are currently worth less than you paid for them, as any gain from the current value up to the price you paid will be, effectively, exempt from tax.

Brendan
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This might be a naive question.
Totally get the point that one shouldn't get a mortgage of 20k if it can be avoided.
But how does spreading it over a longer period make it worse, if you intend paying it off reasonably quickly when things settle down after moving.
Is it that there is more 'front-loaded' interest over a longer term?
 
I'd be surprised if a bank would even issue a €20k mortgage. Same amount of paperwork and reporting, but for negligible return.

Borrowing over long periods of time means paying more interest, although not if you repay early admittedly.
 
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Daniel Kelly said:
Totally confused now Brendan.
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OK

As you can't grasp the point, then just take it from me, that you are better off selling products which have a profit in them and keeping products which have a loss in them.

Likewise, take it from me, that you should not take out a mortgage when you have €60k cash. Not even a €20k mortgage over a long period of time.

Brendan
 
Brendan Burgess said:
OK

As you can't grasp the point, then just take it from me, that you are better off selling products which have a profit in them and keeping products which have a loss in them.

Likewise, take it from me, that you should not take out a mortgage when you have €60k cash. Not even a €20k mortgage over a long period of time.

Brendan
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Thanks Brendan. Mistakingly thought example was saying opposite.
My products are both operating at a loss. One decreased from 10k to 9k. The other from 10k to 8k.
 
Brendan Burgess said:
It makes no sense with the amount of cash you have to buy a house which does not meet all your requirements and then trade up after a few years.
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A house that meets all our requirements is a question that we have to think about also.
Some houses we've seen, not necessarily this one, are beyond our requirements.
Moving house is stressful indeed.
Separating what you want from what you require can take some thinking.
 
Brendan Burgess said:
Am I right in saying that you are selling your existing house for €290k? If so...

View attachment 1195

While you haven't given us any details of your income, it seems as if you can comfortably afford the €425k house and for your wife to take time off work.

It makes no sense with the amount of cash you have to buy a house which does not meet all your requirements and then trade up after a few years.

Trading up is quite risky. Do you sell your own first or buy first? If you sell your own and prices rise before you buy another one, you can get caught. If you buy another one first and prices fall, you can lose out also.

It's also very stressful.

It's also very costly. Auctioneer's fees and two sets of solicitors' fees. Moving costs. Decoration costs.


So it's very clear that you should buy the house you want now as you can well afford it.
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With 425k house the sellers are in a chain and we need to be out by July.
Another house for 450k that we bid on a few weeks ago is now being accepted by vendors who are not in a chain.
In many it's better. It's detached. It has a converted attic and conservatory.
Certainly 440k would give us food for thought.

With the 425k house was going to pay cash and have no mortgage and still have 65k savings.
With 450k the decision between savings vs mortgage arises again.
The vendors I think see us as the last chance so don't know if we could reduce our offer at this stage. 440k would definitely seal the deal.
Wife thinks we need 65k for rainy day.
Also wife is taking a break from work in October.

Any ideas?
 
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