33yr Old New Homeowner looking to optimise income use

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Consult101

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Age: 33
Spouse’s/Partner's age: 33

Annual gross income from employment or profession: 65,000 Salary (+25,000ish Director Income)
Annual gross income of spouse: 52,000

Monthly take-home pay: 6,700 (Excluding director income)

Type of employment: e.g. Civil Servant, self-employed : Private Sector (+ Company Director), Wife: Civil Servant

In general are you:
(a) spending more than you earn, or
(b) saving? Saving

Rough estimate of value of home: €380,000
Amount outstanding on your mortgage: €305,000 (35 years left)
What interest rate are you paying? 2.9% Fixed for 5 Years (Ends 2026) (€1,157 a month) (Cannot overpay during the fixed term, but pan to knock a chunk off after it ends)

Other borrowings – car loans/personal loans etc: None

Do you pay off your full credit card balance each month? No CC
If not, what is the balance on your credit card? 0

Savings and investments: about €50,000 savings (was double but house purchase ate half)

Do you have a pension scheme? No (job doesn't have one), Wife Single Pension Scheme (5k ish)

Do you own any investment or other property? No

Ages of children: None (Sometime in the next few years though)

Life insurance: Tied to mortgage 2x Mortgage Value


What specific question do you have or what issues are of concern to you?
So after a few years of education both myself and my wife are in well paying jobs, and have just bought our first house last month. After dedicating years to education (Up to Phd for myself, Masters for her) its nice to be earning good money for a change. We got very lucky and bought a nice house in the current chaotic housing market. We love it there, and have no real plans to move in the next 10 years+.

After years of short term contracts etc, We now are earning more than ever before and tbh don't know what to do with it. As im a consultant, I do lots of additional side work via the company I Direct. This company is only myself (after another founder had to leave due to other commitments). This consultancy work make my yearly income very hard to predict, but for the year ahead it should round out to about €125,000 (65k salary, 38k additional paye role (starting soon) and about 20k consultancy). Wife's civil service on her 3rd contract (5 years for this one) with it highly likely shell be put on indefinite duration next.

I'm wondering what are the next best steps for use to follow. Our mortgage is very manageable, we don't drink or smoke, we drive a single 1k car with most of our income going into savings.

Do I put the director salary into a pension fund for me? Set up a AVC pension? Take it out as salary? Invest in stocks? I'm not sure, it new territory for me having been so unsecure the last few years while studying.
We are both on upwards salary paths, with a number of options to change if we desire, so if anything that will on compound the need to get financially planned.
Any advice? Where should i start?
 
Consult101 said:
Rough estimate of value of home: €380,000
Amount outstanding on your mortgage: €305,000
What interest rate are you paying? 2.9% Fixed for 5 Years (Ends 2026) (€1,157 a month) (Cannot overpay during the fixed term)
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Start by paying the €50k savings off your mortgage. I don't know why you say you cannot overpay it? You can, but there might be a small break fee.

You will save €50k @ 2.9% or €1,450 interest a year or €7,250 over 5 years.

It is unlikely that the break fee for paying off €50k will be anything like that. If you only fixed last month, the break fee should be very small.

That will leave you with a 66% LTV mortgage.

Get that down to 60% and then shop around for a much lower rate.

You have plenty of time to stuff your pension.

Brendan
 
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Brendan Burgess said:
Start by paying the €50k savings off your mortgage. I don't know why you say you cannot overpay it? You can, but there might be a small break fee.

You will save €50k @ 2.9% or €1,450 interest a year or €7,250 over 5 years.

It is unlikely that the break fee for paying off €50k will be anything like that. If you only fixed last month, the break fee should be very small.

That will leave you with a 66% LTV mortgage.

Get that down to 60% and then shop around for a much lower rate.

You have plenty of time to stuff your pension.

Brendan
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Thanks Brendan. I like to have a bit of a buffer finance wise, so may built up to knocking 50k off with a break fee
 
NoRegretsCoyote said:
Out of curiosity, why did you fix? Mortgage payments are only 17% of your regular income.
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I had expected a drop in income due to taking up a new opportunity, but that never arose (I was able to do both). Fixed for a while due it being the first mortgage and wanting a few years of predictable payments to get set up. TBH, a few things went better than expected over the last 2 months, hence the position I'm in now.
 
Consult101 said:
I had expected a drop in income due to taking up a new opportunity, but that never arose (I was able to do both).
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That makes sense.

I tend to advise fixed for long if mortgage is a high % of income, and if there is little chance of salary increase.

It depends on what your lender offers, but shorter terms are usually cheaper. This is of course if you can afford any rise in rates (and are happy to take the risk).

Otherwise you have a lot of spare income at the moment and it makes sense to get the mortgage balance down.
 
You don't need a 50k buffer. You're both working with no dependents.

Overpay mortgage now.

You've a 35 year term - shorten that. I don't believe any lender charges a break fee for doing so. If you pay 50k lump sum, and reduce term to 20 years, your repayments will be 1400 per month, which leaves you a lot of headroom each month. You could be mortgage free in your 40's very easily.

If you're going to remain self employed long term, the 'use it or lose it' aspect of tax relief on pensions is less important, but I'd still look into getting one started. If you've a lot of money, you'll start to see 'lifestyle creep' eating into it, and it might be harder to cut back later. Talk to your accountant about how much of a pension you could fund from company tax efficiently.

I'd also look at the life assurance. 300k in addition to mortgage is a lot of cover when you've no children. You haven't said how much its costing. I'm assuming the cover is a reducing amount, so the amount covered when you're 60 is a lot less than now? I'd be inclined to split the mortgage protection from everything else - your needs will change as circumstances change.
 
RedOnion said:
You don't need a 50k buffer. You're both working with no dependents.
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This really is key. Between the two of you, you have three jobs. One of which is a public service job.

You are saving money every month. You don't need a €50k buffer or any buffer. If you expect to be spending €10k on something, save up for it. Otherwise get the mortgage down.

As soon as it's down to 60% look at switching.

And then start contributing to your pension.

Brendan
 
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