Cashflow -v- Investment.

M

milka

Guest
Age: 36
Spouse’s/Partner's age: 36
savers



Annual gross income from employment or profession: was made redundant, started regular withdrawings from investments
Annual gross income of spouse: housewife
Type of employment: private sector
Rough estimate of value of home 400,000
Amount outstanding on your mortgage: 430,000
What interest rate are you paying? tracker
NO car loans, personal loans etc.
Do you pay off your full credit card balance each month? yes




Savings and investments:
NO pension scheme
Do you own any investment or other property? two investment properties, current value: 450,000

mortgage on inv.props.: 280,000, monthly income from two properties rented: 2,200 also have 370,000 invested in bonds
Childcare benefits are going into children's savings accounts.
Ages of children: two children under 4


Weekly outgoings
petrol, bus, food, household stuff, nappies, toddler group: 250


Monthly outgoings
mortgages: 1500,1450
mortgage insurances: 30, 60
life insurance: 65
broadband and telephone: 50
2 mobils: 110
waste disposal: 30


Yearly outgoings
home insurance: 300
landlord's insurance: 160
mnagement fee of investment prop. 700
TV licence: 180
car insurance: 320
car service: abut 300
medical insurance: 1440
car tax: 550


apart from finding a job, any suggestions? use invested money to pay part of the mortgage on our home? Bear it out and when things get better pay lumpsums to mortgage from interest?
 
Re: recession is killing us

You might want to change the thread title as it could be taken as misleading & some people here may take exception to it.

According to your figures you have €1.2 Million in Assets and owe €680k.
You have no personal loans or credit card or overdrafts.

Your Mortgages come to €3000 and your rental income €2200 ! !

To be honest I dont know what you are worried about if I have your figures right.


You appear to have far far too much money tied up in Investments currently. Your only worries appear to be which ones to sell ! ! No offence but its a position that most people would love to be in . . .

These are my opinions so take what you will from them . . .

Payoff the Mortgage with the bonds (assuming little or no penaltys on bonds, do you know the tax implications of selling them?). Investment Properties are paying for themselves (of course I am speaking generally on what little information you have put up here).

Then you have a mortgage of €60k or so which will save you buckets on a monthly basis (would assume you may save up to €1500 per month which you should see as a salary gain in the family).

Perhaps leave yourself a couple of thousand in a demand deposit account and give yourself a modest salary until you get up on your feet. (eg leave 24000 on deposit taking 2000k per month, remember to inlcude reduced Mortgage in your figures).

Another alternative is to sell 280k worth of Bonds and payoff your Investment property Mortgage. The you are getting €2,200(-Deductions) salary into your hands. Since interest rates are low, some would argue that theres no need for any rush in paying off your house Mortgage. If you used the rental monies to pay your mortgage you would still have a couple of hundred left over.

In all fairness Milka, it seems like you should not be overly worried at all because you appear to have so many options open to you. You have a very healthy "portfolio" of investments, but you should consider rearanging them immediatly.

I would assume that the Bonds would be the quickest and easiest way to get your hands on capital as selling properties can be time consuming.

Perhaps you are just feeling a little panicked that you are not working?
 
Re: recession is killing us

Thanks NorthDrum.
Point taken. Do you know how I can change title?
I suppose I am rather worried about the job situation.

According to our financial advisor, just keep taking an income from the funds for as long as we need, do not touch them to pay off either mortgages. Apparently in the long run we'll be better off keeping the money in bonds/funds and having one mortgage on tracker and the other paid by the rents. Who to believe? What to do? What if we find no tenants? With the kindof job I have, I cannot look forward to a huge monthly income in the near future.
 
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Re: recession is killing us

if the figures are correct, then you are currently well into negative equity on your PPR.
Its perhaps slightly strange that your financial advisor allowed you to buy your current house taking on a very large mortgage, and invest the 370k (from previous house sale perhaps?) in bonds. Stranger still that your bank didn't ask for a bigger deposit if they knew of the 370k, reducing the risk from both yourself and the bank.

as stated above, you're not in a bad position whatsoever, you have 3 properties with a 800e pm mortgage shortfall.
As you don't appear to have any other loans or debt, then you have 2 choices as I see it:
1. reduce the 800e it costs you to service the mortgages, or
2. leave everything as it is for now, and use the first option if you need to.
 
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Re: recession is killing us

yes, the price of our house went down with nearly 100,000 in the past year and a half. we have a lot of the 370,000 in the hands of the mortgage provider, ie. we cannot get out of the bonds unless to pay the mortgage in lumpsum.
 
Re: recession is killing us

milka said:
Thanks NorthDrum.
Point taken. Do you know how I can change title?
I suppose I am rather worried about the job situation.

According to our financial advisor, just keep taking an income from the funds for as long as we need, do not touch them to pay off either mortgages. Apparently in the long run we'll be better off keeping the money in bonds/funds and having one mortgage on tracker and the other paid by the rents. Who to believe? What to do? What if we find no tenants? With the kindof job I have, I cannot look forward to a huge monthly income in the near future.
Click to expand...

I would imagine that your financial Advisor is guiding you appropriatly based on more information they have.

What I would say is that what is most important to you, is what makes you happy and what makes you comfortable.

Assuming you were taking Lets say 5%-10% (comes to roughly €18500 -€37000PA) from your Bonds, your advisor would probobley be assuming that your investment should at least match 5% that annually (broad assumption).

Im sure you have been notified that investing in bonds does mean that your investment may go down aswell as up. With Interest rates so low, I would guess that your advisor is thinking that its worth keeping your house Mortgage as its cheap money (particularly on a Tracker).


Questions for yourself:



Job loss aside
  • are you happy continuing on taking a salary from your Bonds?
  • Have you notified your advisor of your concerns? Depending on Tax and costs there maybe another way of rejigging your finances that may help calm some of your concerns.
  • Have you discussed all options with your advisor?
  • Have you good interest rates on your Investment property? Would it be worth looking at paying off the RIP mortgage and use the €2200 to pay your Mortgage (use €700 excess as salary) and take a percentage salary off your Bond. Just means you are reducing your overheads, if you take your Bond money of 280k as making €26400 PA (€2200 x 12) then its a nice return on your investment (just over 9%) - Very Rough figures by the way and tax or charges arent included, just looking at another way of rejigging your finances.
 
Thank you.
You helped us clear our heads a bit and stop panicking.

(Losing a job tends to screw the head!)
 
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