40 years old & need advice to steady the ship

Just on this point, and bear with me please.

The apartment is not that fantastic an investment. You've rent of 1750 on a market value of 350k. That's a gross yield, before expenses, of exactly 6%.
The thing that's valuable is the tiny margin tracker mortgage.

If your dad wanted to invest in property, he can get 6% yield any day of the week.

But if I give it up, I’ll never get sonething like it again. Just playing Devils Advocate.
 
Just on this point, and bear with me please.

The apartment is not that fantastic an investment. You've rent of 1750 on a market value of 350k. That's a gross yield, before expenses, of exactly 6%.
The thing that's valuable is the tiny margin tracker mortgage.

If your dad wanted to invest in property, he can get 6% yield any day of the week.

Totally agree with this, plus given you are paying pretty much 50% of the rent in tax (as the interest you are paying is so low), the return is not great at all, especially when you look at the rates you are paying for your debt. If you throw in a monetary value for teh extra stress it's likely not worth it.

Have you actually done the maths in terms of your net profile on the apartment i.e. how much you clear in cash after tax, expenses etc.? I am sure it would open your eyes as to how much it is really bringing in.
 
But if I give it up, I’ll never get sonething like it again. Just playing Devils Advocate.
Quite possibly. Or you could have cash in 10 years, when interest rates and yields are higher and get a 10% yield with no debt.

If we're playing Devils advocate!

Just remember, the valuable bit is the cheap debt, but you have expensive debt in your overall position.
 
The life insurance side of things is covered completely.

All of those bank/credit union loans have 8 years remaining; 7.5% on the bank ones and 8.5% on the credit union ones.

.

In what way is the life insurance totally covered?

Any chance you'd put up for each loan the monthy repayments?

It's odd that all loans are exactly 8 years remaining.
 
Husband age 40
Income 1€140,000
Bonus of €50,000
Health insurance covered
Pension fund €250,000 (cheap global equity option (0.2%)
Employer contributes €14,000
Husband contributes €28,750 - (so 43K going into that)

Wife age 38
Income 2 €70,000 public sector
DB pension

Net salaries: 11,916 (Sean said he'd another 10K meaning 5K)
Bonus: 50K / 12 = 4166 (surely there's tax on that, I'll assume he gets 50%)

11916 + 2083 = 14K

3 kids under 10


Home
Value: 1,800,000
Mortgage €700,000
Interest rate is 2.75% Variable (AIB)
Repayment: €2,950
Term remaining: 30 (ages would be 70 - not good)
Equity:1,100,000 = 60% very good

Investment property
Value €350,000
Mortgage €180,000
Interest rate 0.55% (Pepper)
Mortgage repayment: 1200
Rent €1,750 monthly = 21K annually
Costs?
Profit?
Tax: 500 = 6K
Equity: 170K - 50% - very good

Debts

A Credit Union 1
€30,000 (€570 a month)
Term: 8
Interest rate: 8.5%
Savings? not answered

B Credit Union 2
€40,000 (€610 a month)
Term: 8 years
Interest rate: 8.5 %
Savings? not answered

C Bank loan 1
€26,000 (€352 a month)
Term: 8 years
Interest rate 8.5%
Which bank?
D Bank loan 2
€30,000 (€600 a month)
Term: 8 years
Interest rate: 8.5%
Which bank?

E Family loan (probably parents, of one or both)
€100,000

Repayments on bank and CU loans: €2130

Credit Cards - Nil

Investments/Savings

W
€ 50K bonus, but not if it just goes into general spending
X €80,000 coming back to me from a private company investment that has unwound at breakeven.


Y € 0 savings
Z €100,000 share options (in 2020)
 
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Other:
Groceries €600 - normal
Creches €1,600 - normal, and not forever
Golf €178/2K annually, probably needed for job plus stress reducer and healthy
Gym €165 / 2K
Petrol €100 - normal
TV etc €200
Gas €140 - ok
ESB €130 - ok
Charities €150
AA €20 - ok
Tolls/Parking €40 - ok
Mobile phone €40 - ok
Bins €25 - ok
Mortgage protection €100 - is this the life insurance? On the mortgage? Where is the house insurance?
Helping relative €450 - 5K
Leisure €800 = 10K, sounds on the low side to me. Presumably there are some costly family holidays and high spending, bet this is more.


Monthly costs are 11.5K on an income of 14K. Missing 3.5K. But there may be a mismatch due to the dribs and draps posts.

Advice
- Get your figures more accurate
- Clear the 2 credit union loans, I'm confused about how much you have in savings versus loan when you said net of savings. 1K extra a month from this can then go elsewhere. These are the costliest loans.
- use 1K to pay largest bank loan
- set up a SO of savings to another account.
- set up a SO to parents
- pay off Bank loan 2 when you get your bonus. Watch out for penalties for early repayment.
- pay off your parents with each subsequent bonus
- reduce your pension this year, and next, making sure you get the max employer contribution
- life insurance if it's death in benefit is not enough because you lose that if you lose your job

Opinion

Stress is probably caused by the disarray in the finances coupled with the two jobs, the three kids, the house disaster, and the borrowings all over the place.

Home and investment have good equity, investment home does not need to be sold, it has a low tracker and good rent. The home end term of 30 years should be helped by overpaying the mortgage once being back on track. And overpaying is a no brainer on a mortgage that high, especially if interest rates start to rise.

A future job loss must be factored in.

Pension should be maximised with the tax benefits born in mind. I would recommend an expert to advice you on that. There are posters on here like SBarrett for example who are really good on things like this.

Exotic holidays, very doable. But only after you pay down the debt. In any case the kids are very young, so it's pointless going with them at these ages. Other than maybe a weekend at Disneyland Paris. I can wholeheartedly recommend a magical place called Efteling in the Netherlands. Fly into Eindhoven and stay in the hotel directly on sight. Two nights and you will never regret it.

Much more structure needed as to outgoings. But impressed that most costs were readily available to post on here. I think you're doing fine. Try never to borrow so much so that you don't end up with loans all over the place spending money on high interest rates when a little bit of tightness for a while will have you sorted.

Lastly, move mortgage to get a cheaper rate.
 
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@Sean Bateman Sorry to bring up an old thread. I meant to reply to this previously, but things were busy over the summer. We are our 'road BBQ' at the weekend, and one of the discussions I had reminded me of this, so here I am !!

- We owe €700,000 on our home. The interest rate is 2.75% Variable with AIB.
We had saved €350,000 to purchase our new home. €250,000 went on the deposit and we had €100,000 set aside for renovations and furniture. We ended up spending about €350,000, wild I know, although that did include an element of being shafted by a builder). We had it valued at €1.8M recently.

By my calculations, you spent 950k on the house (700k mortgage + 250k deposit). You then spent 350k doing it up, some of which was being shafted by the builder. That means the house cost you 1.3 million.
Sorry, but I am struggling to believe a 1.8m valuation. That's close to a 40% uplift in value in probably a 2 year window.
Very rarely do renovations on a house result in the corresponding increase in value. Normally, the renovations done will add value, but not 1-1 on the money spent. The renovations are done to your taste, which is unlikely to mirror 100% to someone else's. Yes, there are exceptions especially when a house is majorly rundown and the renovations get it back to 'liveable' standard, but not when it comes to high end specifications.
People do those kind of renovations for themselves, and just like buying a new car, its very difficult to get your money back on them.

Coupled with that, there is a slow down in the high end property in Dublin (which I assume you are in). The 1m+ houses are on sale for longer, and have seen a number of houses go sale agreed, only for the sales to fall through.

Personally, if you got 1.25m for the house, I think you would be doing well in the current climate. Now maybe I am wrong, but I just doing see the 1.8m valuation. Of course if you bought the house in 2011/12, that's a different story.


Employment is very secure (more than 12 years in the same place). Not impacted by Brexit and get headhunted reasonably regularly.

Over the last 12 months or so, I have encountered a lot of people in a similar situation to where you would be in 10 years time (early 50's having spent 20-25 years with the same company and at a pretty senior level in it). A surprising number of these have been placed on 'gardening leave', albeit with a package. However, a number are struggling to get back into the market at a level they feel they should be at, or at a similar salary anything close to what they were at. They have been very lucky and grew their packages where they worked, but finding it difficult to transfer that value outside of that company.
During good economic conditions these changes are normally a result of an external event, such as a buy-out or restructuring or something similar. During poorer economic conditions, these changes can be caused by any number of factors.

So while you think your employment is secure for the moment, you need to think of various other factors which may influence your career and earning potential. I don't believe any job is absolutely secure - even public sector got hit with a 15% pension levy in the last crises.
I worked in telecoms when the dot.com bubble went - and saw an entire industry crash to its knees. It made no difference how good or bad you were, no one was hiring for a 2-3 year window and there was massive lay-offs. The number of people who left the industry at the time was nothing short of phenomenal - and a large number would have said 6 months earlier their role was very secure.


In summary, while things are pretty good in the garden at the moment, there are clouds on the horizon and some will impact you along the way. You know you are over leveraged, and your income/debt ratios are too high.
The logical thing to do at the moment is stop paying into a pension fund and may down your most expensive debt. You are basically borrowing at 8% to invest in a pension. I accept pension tax rules may change, but you have more immediate challenges.
While on paper, I would say you should downgrade your new house to something more modest (around 1m mark), I don't believe you will release 800k equity from it, as I don't believe the valuation.

At a career level, I would consider the option of doing a 'jump-ship' relatively shortly (next year or so), so you don't become too institutionalised in the same company. It may offer you more alternatives in the medium term. If nothing else, changing company does refocus people and they tend to get a new lease of life in their career as a result. Just a thought....
 
I can wholeheartedly recommend a magical place called Efteling in the Netherlands. Fly into Eindhoven and stay in the hotel directly on sight. Two nights and you will never regret it.

@Bronte Thanks for the recommendation on Efteling. We are planning to do it next Easter or June with the girls, so glad it gets a seal of approval. It does indeed sound like an amazing place.
 
Hello gnf ireland,

We bought the house circa 3 years ago and it wasn't in great shape. We've transformed it, & modernised it completely in terms of BER, solar, etc. It stands us €1.35m and two estate agents have advised €1.75m and €1.9m.

By the way, the €80,000 came through and two expensive loans have been cleared plus €20,000 of the family loan.

I sat down and worked out a plan to be debt free other than the two mortgages and to have €75,000 of emergency cash by Christmas 2020. I also set out a plan to be mortgage free by age 52 which we think is reasonable. I want to be flexible in my early to mid 50s in terms of moving to a less stressful job.

Thanks...

SB
 
Hi Sean

We bought the house circa 3 years ago and it wasn't in great shape. We've transformed it, & modernised it completely in terms of BER, solar, etc. It stands us €1.35m and two estate agents have advised €1.75m and €1.9m.

I understand what you are saying regarding the estate agents valuations. But to be fair, they have often been a country mile off as well. Especially for higher value houses which would not be so 'easy' to value and replies on finding the right buyer at the perfect time.
If you look at myhome as to houses currently on the market within that range, you will see the type of properties that fit into the bracket
https://www.myhome.ie/residential/dublin/property-for-sale?minprice=1750000&maxprice=2250000
Most are lower BER values with large plots, which allow their new owners to create their dream home, rather than taking someone else's version of it.
But thinking of it logically, you bought a house 3 years ago for say 1 million. If you done nothing to it, its likely it would have increased by a max of 20% in the meantime due to property prices - so lets say its now worth 1.2 million.
You invested 350k in it, and admit the builder kind of ripped you off.
The estate agents now claim the house is with 1.9 million.
That means you got an increase in value of 2 euro for every 1 euro you spent, on achieving a high end spec house customed to your needs.
I accept some of the money would see a return, especially around modernisation, but it is unlikely to see a 1-1 increase unless you are very lucky. A 2-1 increase would be exceptionally surprising, and go against the vast majority of building projects.
So either you bought the house originally at a steal, or the value is not as high as estate agents think, or you have been exceptionally fortunate. I don't know the answer. I am simply saying the numbers don't add up in my head - but I don't know the house/area either.

By the way, the €80,000 came through and two expensive loans have been cleared plus €20,000 of the family loan.
Well done - first step towards reducing your debt profile and enabling you to sleep a little bit better at night

I sat down and worked out a plan to be debt free other than the two mortgages and to have €75,000 of emergency cash by Christmas 2020.
I sat down and worked out a plan to be debt free other than the two mortgages and to have €75,000 of emergency cash by Christmas 2020.
I assume this is based on a realistic spending budget that you agreed with your wife? Yes of course things like this can be done, but just be careful not to be too drastic and react in panic, as its likely you wont be able to keep to it. Drastic change is sometimes needed, but its not always the best answer. Reasonable change, done incrementally, is sometimes a better approach. Everyone still needs to live and have fun. No point working all hours under the sun if you cannot enjoy yourself


I also set out a plan to be mortgage free by age 52 which we think is reasonable.
I like the fact you use the word "we" here, but I do caution that that may have to be flexible. Its difficult to plan 12 years into the future, and in particular the impact of rising interest rates etc. That is one of the reasons you should want to reduce your debt profile.
Have you considered private secondary schools for the kids (depending on where you live) and also the cost of 3rd level etc.
I am all for aggressive clearing of debt, as long as there is a life being lived as well. Kids in particular are only young once, and if you are time poor to spend with them it very easy to end up spending on experiences the kids will remember for every. Say a trip to Lapland for Christmas might set you back ~5-7k, depending on how you do it (tour or DIY)


I want to be flexible in my early to mid 50s in terms of moving to a less stressful job.
This may be easier said than done, and you might find it difficult to get a role you are 'overqualified' for. Again, if that is the aim, you need to consider how you want to go about it and I suggest a few potential moves between companies to show flexibility and adaptability to different organisations and ways of working.

Finally, good luck with it all and remember to have a life. Yo work hard enough for it !
 
Hi gnf,

I hate to disagree with you but prices in Dublin are up 40% since we bought AND we put €350,000 into the property AND we feel that we got decent bang for our buck irrespective of the problem with the builder.

€1,350,000 x 140% is €1,890,000, so I'm not wildly off. I also built a one bed studio for guests which could easily generate €14,000 a year tax free if needs be, an aspect that greatly interested the two estate agents. They also looked at it based on a per square foot basis relative to our neighbours houses which sold recently and weren't as well specc'd. But who knows I suppose.

Thanks for the kind words.

Sb
 
I hate to disagree with you but prices in Dublin are up 40% since we bought AND we put €350,000 into the property AND we feel that we got decent bang for our buck irrespective of the problem with the builder.
We can respectfully agree to disagree here. I am not sure where you are getting 40% increase from, but of course you are entitled to your opinion.
If you look at the Daft reports from Q2 2015 and Q2 2018, you will see the average asking price in houses in South Dublin has gone from 526,313 to 599,194 - an increase of 72,881 or 13.85%. Of course these reports are not fool-proof, but are a reasonable indication of movement.
https://www.daft.ie/report/2018-Q2-houseprice-daftreport.pdf
https://www.daft.ie/report/q2-2015-daft-house-price-report.pdf


I also built a one bed studio for guests which could easily generate €14,000 a year tax free if needs be, an aspect that greatly interested the two estate agents.
With all due respect, I cannot see someone purchasing a house for ~2 million euro and then renting a studio for 14k a year in tax free earnings. It does not really go with the lifestyle of someone who can afford a 2 million euro house. They might use it for an au-pair, or some hired help. Would it be handy for guests, family and young adults - absolutely, but in terms of a rental option it does seem a bizarre proposal (unless it has its own access and is completely isolated from the rest of the property).

They also looked at it based on a per square foot basis relative to our neighbours houses which sold recently and weren't as well specc'd. But who knows I suppose.
Correct - both of us do not know unless you put the house on the market and see what price it actually goes for. We are both entitled to our different opinions here.


The final comment I will make is most people in the know (not me btw) will say that your home should not be considered an asset to you. You gain no money from it and it actually costs you money to maintain, repair, insure, pay mortgage interest on etc. For you, it is likely to be classified as a liability, although is an asset for your children or if you were genuinely willing to sell it in the future to downsize. The fact that property tax is now a further consideration, the only person* to benefit from an increase in valuation are the Revenue Commissioners. I am sure they will be delighted with your revised 1.8 million valuation when the time comes !
[*Excluding your own ability to lower your mortgage rate based on LTV]

As I said in the original post, the value of the house is largely immaterial unless you were considering selling it. I was just saying not to always believe estate agents valuations. You are going exceptionally well income wise, but you know high debt levels are a concern and I would just caution getting too comfortable in one company as you may end up 'institutionalised' and unable to transfer the value you add there to a different organisation as easily, especially if there is any sort of blip in the market. Think of what happened to some of the people in your industry who may be ~15-20 years older than you when the last recession hit and how they fared in the fallout. Good luck with it all
 
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