Can we afford to move?

A

Amelie2024

Registered User
Messages
10
Personal details

Your age : 46
Your spouse's age (husband): 46

Number and age of children: 2 – ages 9 and 11


Income and expenditure
Annual gross income from employment or profession: €105k

Annual gross income of husband 123k
Annual gross income of husband €36k (from DB Pension)
Bonus: Approx 18k

Monthly take-home pay: €11k approx

Type of employment –Public Sector (wife),
Retired from PS with DB pension now permanent - private sector (husband)


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


Summary of Assets and Liabilities
Family home value: 620k
Mortgage on family home: €190k
Net equity: €430k

Total investments : 220k
50k - long term managed fund
Trade republic - 100k
AIB deposit account - 70k

Also ACV - 60k


Buy to Let Property value: n/a
Buy to let Mortgage: na/


Family home mortgage information
–tracker .75 over ECB

Other borrowings – car loans/personal loans etc
- PCP car - 240 per month 2.9%

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

Pension information
Wife - DB pension (pre-2001)
Husband - DB pension 35k p/a
Husband - DC pension 8% employer contribution and matched with 9% contribution from husband

Buy to let properties
- None

Other savings and investments:
- None



What specific question do you have or what issues are of concern to you?
Financially, our situation has changed/improved somewhat in the last number of months.
While we at the time were holding cash with the view of some house improvement and as an emergency fund we now feel that our money would be best spent trading up to a larger house in the same area. Our current home is just too small and has no scope to extend.

We would need to spend anywhere between 800k and 900k to purchase the type of property that will meet our needs and ensure that it’s our ‘forever home’.

I suppose my concern is taking on a bigger mortgage given that we have two dependents and are both mid 40s.We are saving at least 4k per month and aim to have 200k out aside for a move.

Is a mortgage of 250k/300k too much at our age or should we keep saving for another couple of years and aim to borrow less?
 
Last edited by a moderator:
Amelie2024 said:
Summary of Assets and Liabilities
Family home value: 620k
Mortgage on family home: €190k
Net equity: €430k

Cash: 220k
50k - long term managed fund
Trade republic - 100k
AIB deposit account - 70k
Click to expand...

Amelie2024 said:
Other borrowings – car loans/personal loans etc
- PCP car - 240 per month 2.9%
Click to expand...

Amelie2024 said:
We would need to spend anywhere between 800k and 900k to purchase the type of property that will meet our needs and ensure that it’s our ‘forever home’.
Click to expand...

So, you have €650k equity after selling your home.

To buy a house for €900k, you would need a mortgage of €250k

You seem to have an income of €270k, so this would be a very comfortable mortgage.

Your repayments over 20 years would be about €1,500 a month.

You are paying close to that anyway now!

Amelie2024 said:
We are saving at least 4k per month
Click to expand...

€250,000 over 5 years at 4% would cost about €4,500 a month.

So borrow the €250k over 20 years, but pay it off quicker.
 
The question is can you and should you buy the new house first and then sell your old house.

House value : €900k
Less cash: €220
Mortgage required: €700k
+ existing mortgage: €190k
Total borrowings : €900k

Total income: €270k
Loan to income : 3.3 times.

I think you should be able to trade up first and then sell your existing home.

1) Get mortgage approval for an additional €700k
2) Go house hunting
3) As soon as you go purchase agreed on the new house, put your own house on the market.
4) Try to get both contracts signed at around the same time with the closing date for the sale of your house about 1 month after the closing date for the purchase of your new house.

Then you can move from one house into the other with very little hassle.
 
You can relatively easily afford a mortage of that much, ending for you both at 65. Our mortage is still significantly more at older ages and less income and it’s comfortable. Your issue is probably going to be finding a house needing no work to suit your needs. I’m in an area with a lot of people in what sounds like similar smaller houses and massive competition for the bigger ones that come up. Prices can go crazy for them.
 
Yes, you can and you should buy a bigger family home. Not only it will provide more living space to family but also increase your overall assets and wealth at the time of retirement.
 
You can easily afford it.


House Equity€430K
Cash & Savings€440K
House Purchase Price€1000K
Overall Mortgage (purchase - assets)€130K

If you paid off mortgage at €4K per month (your current savings) you would have it paid off in 3 years.

But don’t actually do it this way. Follow Brendan’s advice.

Get loan approval for €800K+ over 20 years
Buy your €1 mil house with your savings and mortgage.
Sell your current house, and use the cash to pay down your new mortgage. Maintain the term of the loan at 20 years, while having a reduced monthly payment. Check the terms of your new mortgage very carefully, as some have rules around paying off lump sums in the first 1-3 years.

And pay off your pcp loan, there is no need to have a car loan with your level of income.

And the talk to an independent financial planner about growing your income into future wealth, you will still have a lot of potential after the house purchase.

Best of luck, you are both in a great financial position to enjoy a new roomy house while having a very reasonable debt.
 
Thanks everyone for your advice and reassurance. We're going to push ahead and get mortgage approval for the maximum amount possible. We were nervous about taking on additional debt but we have the capacity to repay so just need to overcome that psychological barrier.

Brendan Burgess said:
The question is can you and should you buy the new house first and then sell your old house.

House value : €900k
Less cash: €220
Mortgage required: €700k
+ existing mortgage: €190k
Total borrowings : €900k

Total income: €270k
Loan to income : 3.3 times.

I think you should be able to trade up first and then sell your existing home.

1) Get mortgage approval for an additional €700k
2) Go house hunting
3) As soon as you go purchase agreed on the new house, put your own house on the market.
4) Try to get both contracts signed at around the same time with the closing date for the sale of your house about 1 month after the closing date for the purchase of your new house.

Then you can move from one house into the other with very little hassle.
Click to expand...

My understanding is that bonus is not reckonable for mortgage purposes, is that correct or does it depend on the lender?
 
Clamball said:
You can easily afford it.


House Equity€430K
Cash & Savings€440K
House Purchase Price€1000K
Overall Mortgage (purchase - assets)€130K

If you paid off mortgage at €4K per month (your current savings) you would have it paid off in 3 years.

But don’t actually do it this way. Follow Brendan’s advice.

Get loan approval for €800K+ over 20 years
Buy your €1 mil house with your savings and mortgage.
Sell your current house, and use the cash to pay down your new mortgage. Maintain the term of the loan at 20 years, while having a reduced monthly payment. Check the terms of your new mortgage very carefully, as some have rules around paying off lump sums in the first 1-3 years.

And pay off your pcp loan, there is no need to have a car loan with your level of income.

And the talk to an independent financial planner about growing your income into future wealth, you will still have a lot of potential after the house purchase.

Best of luck, you are both in a great financial position to enjoy a new roomy house while having a very reasonable debt.
Click to expand...
Clamball said:
You can easily afford it.


House Equity€430K
Cash & Savings€440K
House Purchase Price€1000K
Overall Mortgage (purchase - assets)€130K

If you paid off mortgage at €4K per month (your current savings) you would have it paid off in 3 years.

But don’t actually do it this way. Follow Brendan’s advice.

Get loan approval for €800K+ over 20 years
Buy your €1 mil house with your savings and mortgage.
Sell your current house, and use the cash to pay down your new mortgage. Maintain the term of the loan at 20 years, while having a reduced monthly payment. Check the terms of your new mortgage very carefully, as some have rules around paying off lump sums in the first 1-3 years.

And pay off your pcp loan, there is no need to have a car loan with your level of income.

And the talk to an independent financial planner about growing your income into future wealth, you will still have a lot of potential after the house purchase.

Best of luck, you are both in a great financial position to enjoy a new roomy house while having a very reasonable debt.
Click to expand...

Sorry, I think my original posting wasn't clear, we have savings of 220k total not 440k
 
Hi all,

Back after two years and several disappointments on the house hunting hunt front. Market is extremely competitive in our area and we have been outbid a number of times.
As it stands, we are actively bidding on a property that we could live in straight away in our preferred area. Three active bidders and it’s likely to finish at close to 900k.

Would really appreciate your perspective and whether pushing ahead and securing this house is financially viable (and responsible )

We would ideally both like to retire at 60.

Updated status

Personal details

Your age : 48
Your spouse's age (husband): 48

Number and age of children: 2 – ages 11 and 13


Income and expenditure
Annual gross income from employment or profession: €111k
Annual gross income of husband 125k
Annual gross income of husband €36k (from DB Pension)
Bonus: Approx 18k (not guaranteed)


Monthly take-home pay: €11k approx after AVCs etc

Type of employment –Public Sector (wife),
Retired from PS with DB pension now permanent - private sector (husband)


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


Summary of Assets and Liabilities
Family home value: 625-650k
Mortgage on family home: €180k
Net equity: €445k


84k - Zurich long term managed fund earmarked for college
Trade republic - 100k
AIB deposit account - 70k
cash on deposit - 50k

Buy to Let Property value: n/a
Buy to let Mortgage: na/


Family home mortgage information
–tracker .75 over ECB

Other borrowings – none

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?

Pension information
Wife - DB pension (pre-2001)
Husband - DB pension 36k p/a
Husband - DC pension 8% employer contribution and matched with 12%contribution from husband

Buy to let properties
- None

Other savings and investments:
- company shares and investments - 30k
 
Amelie2024 said:
84k - Zurich long term managed fund earmarked for college
Trade republic - 100k
AIB deposit account - 70k
cash on deposit - 50k
Click to expand...

Amelie2024 said:
- company shares and investments - 30k
Click to expand...

I don't think that the principle has changed here.

You have €445k of equity and €330k of investments. So you are borrowing a net €150k to buy a house for €900k

If you want to move, then do so.

The strategy I set out still stands. Buy a house first and then put your own on the market. In the last year or so, bridging finance is back which would make it easier for you to do this.
 
Amelie2024 said:
84k - Zurich long term managed fund earmarked for college
Click to expand...

While most people do this, it makes no sense at all. If you have such a fund and a mortgage at the same time, you are effectively borrow to invest in a taxable investment product. You should not be doing this.

With your income and good savings habit, by the time your kids are ready for college, you will have cleared your mortgage and will be able to fund college out of your net income.
 
Thanks so much for taking the time to reply Brendan.

I think my secure public sector job makes me nervous about the lack of same for my other half’s private sector job hence the fact we gave opted to ring fence savings and investments in favour of a larger mortgage.

From my limited knowledge, I understood that investing long term trumps paying down mortgage debt? This may just depend on individual circumstances?
I’m trying to strike a balance between a comfortable level of debt and appropriate level of investment.
 
it just does not make sense to borrow money to invest. Which is what you are doing.

You have a secure job. His is not as secure. I don't think that this makes a difference. If there was an imminent danger of his losing his job and not finding another one quickly and not getting a generous redundancy payment, it could make sense to put some savings aside.

If you are mortgage-free and he loses his job so your income is halved, you will get by fine.

If you have a big mortgage and lose half your income, you could come under pressure.

So get rid of the mortgage.
 
Brendan Burgess said:
it just does not make sense to borrow money to invest. Which is what you are doing.
Click to expand...
I’d have to disagree with this as a blanket piece of advice. Once you hit kids’ college years, the bills don’t care if you’ve got 500k or 50k left to go on your mortgage, your monthly repayment is your monthly repayment. So this is only appropriate advice for someone who absolutely can clear their mortgage before the college years. The alternative is potentially taking on more expensive debt to cover the period, instead of spreading the cost over many more years through investments in advance. And that’s before getting into a discussion about unplanned/unexpected costs along the way, and retaining greater optionality through having investments to tap when necessary versus having a smaller outstanding mortgage but with the same monthly commitment, either way.

That said, maintaining a mortgage balance that could be cleared by liquidating some investments is a different question, and perhaps that’s the scenario you’re commenting on?
 
The eldest child is 13, so they have 5 or 6 years to go to college. Plenty of time to clear the mortgage and start building up new savings.

It would be different if the child was starting college in the next year or two.
 
Brendan Burgess said:
you are effectively borrow to invest in a taxable investment product. You should not be doing this.
Click to expand...
Borrowing at 3.25% to invest means they need a gross return of 5% for their strategy to be successful. Not having this fund and relying on their saving ability (about which we have no information) to pay for university which may be starting in 4 years seems imprudent.
 
conor_mc said:
I’d have to disagree with this as a blanket piece of advice.
Click to expand...

Hi Conor

In the OP's case, with an income of €250k, it seems clear to me that they will be able to afford to pay college fees out of their income in 6 years. It is very likely that they will have paid off their mortgage in full by then, so they will have the extra money available which they are paying on the their mortgage at the moment.

I have set out a fuller discussion of the issue here

Saving for a "College Fund" - 3 to 20 year term.

This comes up a fair bit, so here is a Key Thread on the topic. 1) You should look at your entire financial position when doing any financial planning. 2) You should not have a separate account for a College Fund. 3) The best way to fund college fees payable in 10 years is to maximise your...
www.askaboutmoney.com
 
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