40 year old with savings needing to upsize or move house

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Scouser

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Age: 40
Spouse’s/Partner's age: 39

Annual gross income from employment or profession: 130K
Annual gross income of spouse: 30K


Type of employment: Self Employed

In general are you. b) saving

Rough estimate of value of home: 250K
Amount outstanding on your mortgage: 95K
What interest rate are you paying 0.75%

Other borrowings – car loans/personal loans etc: Company Car being paid for by my company 500/Month

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?

Savings and investments: 300K

Do you have a pension scheme? No

Do you own any investment or other property? No

Ages of children: 8, 6

Life insurance: Yes


What specific question do you have or what issues are of concern to you?

We need to up-size our current home and have a quote for 130K to do so and planning has been approved etc. Just waiting to pull the trigger for a start next month.

We plan on using our savings to do this which will leave in savings approx. 150K - 160K. Im also tempted to pay off the mortgage in part or full. On the face of it, what we plan on doing is the obvious choice, wondering if there might be a better way of funding everything.
 
At 40 you would need to be looking at pension and some good tax planning, If I was in your position I would try and keep the 300K saved after very high taxes/usc/prsi ,I would not pay off the 95K on 0.75% intrest I would look at building up a pension and tax free lump sum , To get the max free lump sum you need to be paying into a pension for 20 years so you need to start straight away and get yourself a good tax planner,



What intrest rate are you paying 0.75 % Is it a tracker
 
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I have a meeting regarding pensions next week, lets see what comes out of that. Its a tracker that I took with NIB originally at .25% above ECB, so it might actually be .5% im paying. I understand keeping the 300K, but we do need to up-size. Would adjusting the mortgage by 130K be an option?
 
Scouser said:
I have a meeting regarding pensions next week, lets see what comes out of that. Its a tracker that I took with NIB originally at .25% above ECB, so it might actually be .5% im paying. I understand keeping the 300K, but we do need to up-size. Would adjusting the mortgage by 130K be an option?
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Sorry I should have said keeping the 150K to 160K savings ,The fact you are self employed and taking 130K out of the company a good tax planner is very inportant before you take anymore pay rises instead of paying into pension,

Make sure you check/understand how inportant it is to be paying into a pension for 20 years so you get max tax free for both of you,
 
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@Scouser
I guess there is a few questions here:
I assume you own the company and are the sole shareholder in it? Is the 130k the company revenue after costs or is it what you take out in salary, with more funds left in the company ?

If you have a salary of 130k, with such a low mortgage and I assume reduced childcare costs at the age of your kids, I suspect you may wish to review your spending patterns. I would agree with others re some good tax planning.

Personally, I would review your salary and potentially reduce it (your marginal tax rate is very high), and consider diverting a reasonable amount of it into a pension fund. Assuming you have a 20-25 year working life left, you need to consider how you plan to fund your retirement. Add in any desire to retire early (for lifestyle, health or other reasons), this will be key. An Executive Pension plan definitely needs to be considered

I would also agree that you should fund the upgrade of the house from savings, but I would not really pay off the mortgage at 0.75% rate. I would just continue to pay it on a monthly basis, and imagine it is a very small drain given a combined income of 160k

Other things to consider are the usual death in service, income protection, life assurance etc.

Finally, how robust is the company/industry ? Are you an independent consultant in IT for example (or similar personal service type company), or is there an underlying asset other than the goodwill/service of yourself? If you got sick tomorrow morning, could the company survive in your absence? Are there other employees in the company etc
 
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