33 male New Mortgage Planning for Future

[Master_stamp]

Money Makeover
Details: Mortgage is a year old so I used most of my savings I had built as deposit for that and furnishing it after moving in. My situation now is:

Age: 33 this month
Annual gross income from employment or profession: €60,000
Monthly take-home pay: €2,800
Monthly expenses:
- General Monthly Expenses (i.e. Grocery Shopping, petrol, pints, eating out, cinema) 900
- Mortgage 814
- Life Insurance 25
- Car PCP 250
- House Insurance 20
- Deduction to Goal Saver Savings account 250
- Internet 55
- Electricity & Gas 50
- Mobile Credit 20
- Annual costs planned for monthly 219

Annual Expenses:
Tennis Club membership 300
TV License 180
Bins 300
Car Insurance 1000
Car Motor Tax & Service 600
LPT 240
= approx 219 a month

Type of employment: private sector

In general are you:

• (a) spending more than you earn, or BREAKING EVEN. saving
  (b) saving? small savings – see below
  
  Rough estimate of value of home: €220k
  Amount outstanding on your mortgage: €175,000
  
  Other borrowings – car loans/personal loans etc.: Car PCP €250 a month until Feb 2020 when 8k ballon Payment due to own outright.
  
  Do you pay off your full credit card balance each month? Yes, always.
  
  Savings and investments:
  - goal saver saving 250 monthly towards the car balloon payment due for Feb 2020. Currently value of that goal saver savings account: 3,250.
• - current account 800
• - savings account 1,000
• - Investments 500 in bitcoin. current value 720
• Do you have a pension scheme? Yes, DC scheme. 3% employer and 20% personal contribution each month. Current fund value is €61,000.

Do you own any investment or other property? no

Ages of children: none

Life insurance: Policy that pays 4 x Salary on death. Also have serious illness cover in place and VHI medical insurance - both of these are through work. Life cover for mortgage also in place.

Questions
1. I'm considering reducing my pension contribution back to focus more on building up my cash savings to get to six months cash savings as a safety net as while right now I'm doing ok month to month I feel I'd be in serious trouble if I lost my job so building up that six month saving would be a buffer if I ever find myself in that situation.

2. Any other feedback welcome.

 

[Brendan Burgess]

The area of biggest saving for most people is their mortgage. You have an 80% LTV mortgage. Who is your lender and what rate are you paying? You should shop around to see if there is a better rate.

A mortgage of €175k represents three times your income and 80% of the value of the property. That is way too high to be comfortable. So your priority should be to reduce this mortgage. You are contributing €12k a year to your pension, which is €6k net. I think you would be better off paying this off your pension.

• Firstly, it will reduce your Loan to Value and may well qualify you for a lower rate on your entire mortgage
  
• Secondly, you will be less impacted by mortgage interest rate rises when they come, as they undoubtedly will.
  
• Thirdly, if you lose your job, the lower LTV will give you and your lender a lot of comfort
  
• Finally, if you decide at some stage to trade up, you will have much more equity. You can't access the money in your pension scheme to trade up.

I might be very old fashioned, but I reckon a comfortable mortgage is around 50% LTV and one time's income. This might be a bit low at age 33, but aim to achieve that within a few years. When you achieve that, start maxing out your pension.
You have €5,000 in savings. That is probably enough given that the return on your savings is so low. At your age and in this employment market, you will probably get a job again very quickly. If you lose your job, you will probably get notice and a redundancy payment. Maybe build up to the €8,000 needed to buy out the car and then use any surplus to reduce your mortgage.

After you pay off the car, start building up your savings again to €5,000.Don't forget you will have the €250 per month PCP payment available to save at that stage.

Brendan

 

[abc_xyz]

I've got my mortgage a bit over a year and I've found it well worth looking at the smaller monthly bills after the initial one year contracts are up. The ones that jump out at me on your list are mortgage protection insurance (€25), bins (€300/year) and internet (€55/month). Looking at those and electricity/gas might save €400/500 a year.

A quick quote on bonkers.ie for mortgage protection insurance for €200k for 25 years gives quotes of €12-€20/month. The bins looks very high to me (I pay about half that) but maybe you have limited (or no) options. For internet and electricity/gas look at the offers for switching. I've switched and save about €25/month on internet and about €150-200/year on electricity (I don't have gas). For electricity/gas you probably use less than the average (I'm assuming low usage as you don't mention family) so look for offers with a high cashback rather than a high percentage of the standard unit rate.