self build mortgage novice

Age: 33
Spouse’s/Partner's age: 30

Annual gross income from employment or profession: 47,000 before tax
Annual gross income of spouse: 35000 before tax

Monthly take-home pay 2, 800 (plus at least 400 per month overtime) equals 3200

spouce 2100 take home

combined 5300 take home pay

currently saving combined 3000 per month for the last couple of years (not renting staying with family while building) also paying 600 per month for the self build mortgage as it is.

Type of employment: e.g. Civil Servants

In general are you:

(b) saving?

we saved 140 k in total.......see below for question

Rough estimate of value of home 400,000
Amount outstanding on your mortgage: 147,000



What interest rate are you paying? 2.6 per cent ulsterbank fixed for four years

Other borrowings –

car loans :

spouces is paid (but he wants another new car soon)

mine has about 7 k left over three years ie 196 per month (its 161 very low loan on it)
I could have fully paid out for it at the time but i wanted to keep some cash for the house.

Do you pay off your full credit card balance each month? n/a

Savings and investments:

saved 140 k but majority gone into new build house ( see below) which is what we were savinf FOR.

Do you have a pension scheme? state civil service for both of us for last ten years

Do you own any investment or other property? no

Ages of children: none

Life insurance: yes 80 per month including illness benefit







So at the moment we are building a house it will be ready to move in the next couple of weeks
, we had saved 140 k for the house, the build cost including money to amke it livable was about 310 k in total (including floors bathrooms etc) we have the outside landscaping done bar gates and patios which we will do over time. we have funded alot of the build so far using this money, and now we have drawn down 147 k and we will be moving in in a few weeks.

there is still about 32 k left to pay on the self build mortgage which we can cover out of out 140 savings if we wish leaving us with a final mortgage of 147 k so i am writing on here to see what people advise.

1)
if we pay out the 32 k this means we will only have 15 k left in savings ,(we have a budget for inside of the house which is all worked out and will have the house 70 percent finished livable wise)this option facilitates us having a mortgage of 147 k for a brand new house which has all bathrooms tiled and furnished,stairs finished living room utility kitchen furnished floors down walls painted all landscaping done. all we will need is to finish the carpets upstairs our bedroom and get gates and patios approx ish 20 -25 k of work that we can do over the next couple of years as we earn


2)
the alternative is keep the 32 k in savings which means a mortgage of 179 k and 47 k in savings.

I suppose we are just stuck as to which decision to make, thankfully we have saved alot and have managed money well so far for a young couple with no kids,

but its hard to build it all up again and one of us will have to work part time if we have kids in the near future ( probably the larger earner will have to reduce hours-which will reduce house hold income down to 4 k and means that if the mortgage is 1000 per month and childcare is 1000 per month there is only 1000 ish to live on after bills and our ability to save will be diminished greatly.



if we do pay out the 32 k and have a lower mortgage the plan is one of us saves 1000 and the other pays the mortgage for a year so that we will have 27 k savings in a year for security.after this we will finish rest of the house and save less aggressively.



if we keep it at 147k or raise it to 179k we will aim to repay the mortgage over 17 years and over pay it at fixed rate to reduce term to 15 years.


179 k over 17 years is 1086 per month but have 47 k in savings
147 over 17 years is 892.30 per month but have 15 k in savings

in both options we can repay up to 10percent


we will have the mortgage paid by 50 and we will have our state pensions, we would be obviously looking in to other investments like in zurich once we build up more money in time.
also I know that the intrest rates will inevitably rise but we really want to have the mortgage paid back with in 15- 17 years for a lower intrest overall to be paid and so we can work less when we are older if we want to.

would love the advice as to how we are getting on and what we should do

thanks from the novices : )

I would rarely think that having a larger mortgage would make sense but in this instance you can well afford to do the necessary works to complete the house and garden now.

You both have secure jobs with relatively small outgoings. Use the 32k to do the works now and overpay your mortgage as much as you can. I think UB allow up to 10% of total borrowings when you are fixed?

Do not take expensive car loans out when you have a cash surplus and access to borrowings at 2.6%. Also there is no need to be buying brand new cars. You will get far better value buying something that is 3-4 years old with low mileage.