Can we afford /Does it make sense in any way to move house & any other advice

N

newbie1234

Registered User
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17
Age 44
PAYE Worker & Director with shareholding
Income €80000
Bonus approx. €18,000 PA

Pension: New Ireland Executive Pension
Current Value €190,000
Current Employer Contribution 12.5%
Total annual contribution between employer and myself @ €26400 PA


Spouse Details:
Age 44
Teacher In position since 23 years service
Income €70,000
Pension -Teachers’ Pension
AVC - Current annual contributions @ €6,000 (monthly circa €500)
Current Value @ €120,000
This has just been transferred out of cornmarket to a New Ireland fund which is heavily geared towards equities.


Other:

●3 children, 9,8,6
●Main PDH – Currently € 100K Mortgage O/S
mortgage @ 1000pm ( I overpay)
Value circa 460k
Currently on 2.9% with UB however well along in the process of switching to Avant at 1.9% fixed and reducing the term.

●Rental Property – Currently € 90K Mortgage O/S (value circa €150K)
monthly rental income @ €950 / Mortgage @ €810
Currently with UB at 1.9% fixed 10 years
We currently overpay this a little every month.

● Small holiday home in Spain, no mortgage & no income generated. Will not rent it out as did so in the past and was a disaster.
It's used a lot in normal times by wife and kids given her holidays

●Investment Purchase of Commercial Site / Land – value circa €60K but should increase. Mortgage free.
No income from same.

●Shareholding – currently hold a small shareholding % of employers business which if sold today would be worth approx. €150,000.
Ive been told in annual review discussions that there is an intention there to double this shareholding at no cost to myself in the coming 5 to 10 years. (its not bankable I know but good to know its in the pipeline)

Car Loan @ 15k of which I'm clearing 500pm

No credit card debt
Very little savings (circa €20K)

I currently have a serious illness insurance policy in place.
Also a 4 times death in service policy thru employer.
€1m life policy on each of us as well as the life policies that are tied to the mortgages.

Would expect to be the beneficiary of an estate worth approx 300k in the next 25 years

...............
Query
1) anything jump out at people that you would change??

2) kids are getting to the age where the house is beginning to seem a bit small and very noisy which has lead me to looking around. To get what I would need to justify us moving we would be looking at an outlay of 800k and after getting to the position we are in to go back into such debt quite frankly would give me the heeby jeebies.
Am I wrong to have such concerns? As realise it would be paying into a cgt free asset..would love an objective view. .. Which brings me to the point that the aspirational property would only be paid off and would we would be looking to downsize most likely to a property much like the one we are in now in the location we are in now? Or on the flip side, given Kildare location will the kids be in the house a lot longer than we think so is a bigger place justified now..

3) Another option would be to extend our current property at a cost of circa 70k which would give us the extra living area space that we think we need.

4)in the background of all this is a wife who would love to retire at 55 (she is on the old teachers package with respect of pension etc, the name of which I forget but I know its better than what new entrants to the profession get) and possibly do substitute work when it suits her.

5) I would possibly like to retire myself at 58/60 and spend 6 months of the year in sunnier climates.

Thats about it.
Thanks
 
So, is this correct?
1648292948628.png
You would need to borrow €350k to buy an €800k house.
Or €410k if you want to hold onto the investment property.

With an income of €150k before bonus in your mid 40s, you should not be worried about that.

So make the decision about what you want in terms of living space over the next ten years. Then worry about the finances afterwards.

If you can get 90% of what you want by spending €70k, then go for it.

But even after the kids have gone to college, they will be back at weekends, that is if they are not commuting.

Could you pick a location which was close to the train line so that they could commute easily to Dublin for College and work?
 
newbie1234 said:
●Shareholding – currently hold a small shareholding % of employers business which if sold today would be worth approx. €150,000.
Click to expand...

Is there any value in this at all?
What happens when your retire or if you leave your employer?
Does your employer have any plan to realise the value of the company?
Do you get a dividend?

If there is some plan to realise this over the next ten years, then, you should be even less worried about about borrowing to trade up.

Brendan
 
newbie1234 said:
Current Employer Contribution 12.5%
Total annual contribution between employer and myself @ €26400 PA
Click to expand...

Talk to your pension company about structuring this so that it all comes from your employer. You both save PRSI if you do.

It looks as if you are contributing about €13k per year. Is this optional? If so, then you should stop contributing for the moment and build up the cash to move house. When your move is done and digested, resume contributions.

Brendan
 

Brendan Burgess said:
So, is this correct?
View attachment 6159
You would need to borrow €350k to buy an €800k house.
Or €410k if you want to hold onto the investment property.

With an income of €150k before bonus in your mid 40s, you should not be worried about that.

So make the decision about what you want in terms of living space over the next ten years. Then worry about the finances afterwards.

If you can get 90% of what you want by spending €70k, then go for it.

But even after the kids have gone to college, they will be back at weekends, that is if they are not commuting.

Could you pick a location which was close to the train line so that they could commute easily to Dublin for College and work?
Click to expand...
Yes Brendan that's a correct summation.
When you boil it down like that it's really a toss up between bigger house now or earlier retire in 10 /15 years
 
Brendan Burgess said:
Talk to your pension company about structuring this so that it all comes from your employer. You both save PRSI if you do.

It looks as if you are contributing about €13k per year. Is this optional? If so, then you should stop contributing for the moment and build up the cash to move house. When your move is done and digested, resume contributions.

Brendan
Click to expand...
Had never even thought of looking at that. Will do
 
Brendan Burgess said:
Is there any value in this at all?
What happens when your retire or if you leave your employer?
Does your employer have any plan to realise the value of the company?
Do you get a dividend?

If there is some plan to realise this over the next ten years, then, you should be even less worried about about borrowing to trade up.

Brendan
Click to expand...
There's an agreement that the company will purchase off me using an independent valuation when I either retire or indeed if I ever leave the company.
 
newbie1234 said:
When you boil it down like that it's really a toss up between bigger house now or earlier retire in 10 /15 years
Click to expand...

I don't see it like that at all. The two are not mutually exclusive.

newbie1234 said:
●3 children, 9,8,6
Click to expand...

With a 6 year old, you are very unlikely to be retiring in 15 years. You are definitely not going to be retiring in 10 years.

You might do, but I think it's unlikely.

So plan for the next 10 or 15 years with a family of 3 kids. So that means a bigger house which you can well afford.

If the kids finish college and get great jobs and move out of home, then you can trade down and retire.

But in reality, you will probably want to keep working to build up funds to help your kids get on the housing ladder.

In other words, plan as if you are not going to retire early. But change those plans if it becomes possible.

Brendan
 
Brendan Burgess said:
I don't see it like that at all. The two are not mutually exclusive.



With a 6 year old, you are very unlikely to be retiring in 15 years. You are definitely not going to be retiring in 10 years.

You might do, but I think it's unlikely.

So plan for the next 10 or 15 years with a family of 3 kids. So that means a bigger house which you can well afford.

If the kids finish college and get great jobs and move out of home, then you can trade down and retire.

But in reality, you will probably want to keep working to build up funds to help your kids get on the housing ladder.

In other words, plan as if you are not going to retire early. But change those plans if it becomes possible.

Brendan
Click to expand...
Appreciated Brendan, thanks.
I know what you are saying makes sense however I deal with risk everyday and I'm naturally a risk adverse person, with a real fear of getting in the position we saw so many in after the last bust with thier trophy homes. But yea, look what you are saying does as I say make sense. Thanks
 
newbie1234 said:
I'm naturally a risk averse person, with a real fear of getting in the position we saw so many in after the last bust
Click to expand...

You have to balance it.

You have two good jobs - one in the public service.
You have a holiday home which I have excluded from the calculations.
You have €150k worth of shares which I have excluded from the calculations.

You are borrowing at less than 50% Loan to Value.

The people who got into difficulty with huge mortgages were borrowing 80% to 100% LTVs and much higher multiples of salary.

If there is another mortgage crisis like the last one, it will take the banks a long, long, time to get to you. They will have far bigger problem mortgages to deal with.

I think that you are in a position to decide what is best for your family over the next ten years and then go for it.

Brendan
 
newbie1234 said:
Rental Property – Currently € 90K Mortgage O/S (value circa €150K)
monthly rental income @ €950 / Mortgage @ €810
Currently with UB at 1.9% fixed 10 years
We currently overpay this a little every month.
Click to expand...
You are building up equity but this is presumably cash flow negative given you are both taxed at the higher rate. Your rate is not very low either compared to trackers that some people have.

There is also risk involved. A tenant who stopped paying and took 18 months to clear out would nearly wipe out your savings.

I doubt this is worth holding on to particularly if you want to trade up.
 
newbie1234 said:
●Rental Property – Currently € 90K Mortgage O/S (value circa €150K)
monthly rental income @ €950 / Mortgage @ €810
Currently with UB at 1.9% fixed 10 years
We currently overpay this a little every month.
Click to expand...

Let's look at the numbers on this.

Rental income: €11,400
Estimated costs: €2,000
Interest on mortgage : €2,000
Interest on equity : €1,800 (€60k @2.9% - this is how much he would save by selling and paying down home loan)
Profit before tax: €5,600

This is a very profitable investment and probably should be kept, if you have good tenants. But you can decide if the hassle is worth €2,700 after tax.

Brendan
 
Brendan Burgess said:
You have to balance it.

You have two good jobs - one in the public service.
You have a holiday home which I have excluded from the calculations.
You have €150k worth of shares which I have excluded from the calculations.

You are borrowing at less than 50% Loan to Value.

The people who got into difficulty with huge mortgages were borrowing 80% to 100% LTVs and much higher multiples of salary.

If there is another mortgage crisis like the last one, it will take the banks a long, long, time to get to you. They will have far bigger problem mortgages to deal with.

I think that you are in a position to decide what is best for your family over the next ten years and then go for it.

Brendan
Click to expand...
Update on this,
both properties on the market and have a bid in on the "forever" property today at 920k pending sale of main pdh.
Reasons for selling investment property was 2 fold, am an accidental landlord and and this reduces my property exposure. Same also frees up funds for the purchase and reduces borrowing which makes me more comfortable.
Felt physically sick putting in the bid and still do.... (grew up in a area where that money would buy 4 family homes easily so my outlook is somewhat skewed.. Mrs newbie on the other hand came out with the gem "I'm not afraid of debt" in a discussion today....id love such confidence.
Anyhow thanks for the advice on here.
Fingers crossed.
 
newbie1234 said:
Update on this,
both properties on the market and have a bid in on the "forever" property today at 920k pending sale of main pdh.
Reasons for selling investment property was 2 fold, am an accidental landlord and and this reduces my property exposure. Same also frees up funds for the purchase and reduces borrowing which makes me more comfortable.
Felt physically sick putting in the bid and still do.... (grew up in a area where that money would buy 4 family homes easily so my outlook is somewhat skewed.. Mrs newbie on the other hand came out with the gem "I'm not afraid of debt" in a discussion today....id love such confidence.
Anyhow thanks for the advice on here.
Fingers crossed.
Click to expand...
€920k for a house in Kildare must be some house, but if it's for you and your family and your forever home why not?
 
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