Childcare and trying to pay mortgage down aggressively

pumba

Registered User
Messages
26
So this time last year we commenced a switch of our mortgage from BOI variable 3.3% to EBS 1yr fixed term 2.9% taking advantage of the 2% cashback. Switch took ages and was finally completed in mid December. I had anticipated that we would switch again or do a multiple switch and was going to be getting the paperwork ready around now to be ready to switch as soon as the fixed term ended, however our personal circumstances are due to change a lot in the next 1-2 months.

current circumstances:
Mortgage: 280,000 balance , term left 24 years. House value 515,000
Myself Age 40: self employed - gross annual income 140,000 euro
Husband age 43- public sector - gross annual income 50000 euro approx (net 33,000 euro)
Children: 6y, 5y, 2y, 1y
Pension myself: max contributions to PRSA every year
Husband- public sector pension- deducted from payslip
Income protection - both have it in place
Term life insurance in place instead of mortgage protection.
Death in service benefit: husband
Work insurance policy pays 180,000 to husband on my death while still working.
Debts- none
Savings - 30K
Credit card and cars fully paid

However we are both essential workers and have struggled with childcare during the pandemic. After long discussions and doing some figures we could see that all of my husbands take home pay has been going to pay the childminder, we have decided that my husband will take some time out and mind the kids for a few years (1 -5 yrs) . If it’s a disaster after 1 yr he will return to work and we will have to find childminder, if a success he would like to get the 4th child to primary school and if he wishes, return to work then.

We are both savers and recently discussed our mortgage and would really like to reduce the term to 15 years. With my job I am in the position to increase my income by approx 20,000 per annum and will potentially have the occasional bonus in addition to that. Our ultimate goal is to try and pay the mortgage off in 5 years which may be pie in the sky but we really anxious to pursue it.

My questions are:
- will his giving up his job scupper our ability to switch mortgage in that we won’t meet the stress test or will the reduction in childminder fees offset his loss in income as regards the stress test?
- any other things we’ve missed out when considering him stopping working financial disadvantages e.g his lost pension contributions and loss of death in service benefit while not working, or advantages?
- any tips or advice on us pursuing our goal of aggressively paying down our mortgage? If we are approved for a switch, what would be the best approach in terms of reducing the term, fixing or not keeping in mind our goal of aggressively overpaying.

We are realistic that it will require sacrifices on our part but we do still intend having fun and enjoying this time with our kids but I naively/optimistically think it’s possible. Would welcome any advice or thoughts on our situation. Thanks
 

RedOnion

Frequent Poster
Messages
4,598
I'd say go for it. My wife took a step back from her career to look after our children, and we wouldn't go back and change that decision for anything. The sacrifices were worth it.

From a financial perspective, the only thing is her pension funding is very light, but when she returns to work we can afford to pay the absolute max possible into her pension. It's planned for.

I'm guessing your husband can take a career break rather than leaving completely, so has the option of going back at the same level rather than starting out again? That'd be a big advantage.

You'll be well able to meet affordability criteria to switch mortgages, so long as your income is stable. You might have to keep long term for application, and then reduce the term or aggressively overpay. You really need to work out what your net pay will be with 1 income to get a proper handle on it. At the moment, almost all banks offer better rates for fixed, so you'd want to have a serious reason not to fix.

Trying to pay it off in 5 years looks a tad ambitious, but you'll be able to make a serious dent in it.

Just 1 thing that is a big overhead when you've one income, and I had completely underestimated - a 2nd car.
 

Brendan Burgess

Founder
Messages
42,166
You need to disentangle this.

Here are the decisions you need to make in order of importance. (This is what I think the order should be)

1) Should your husband take a career break to raise the kids?

It seems absolutely clear that he should, if he is happy to do so.

You say that it breaks even financially. Fine. But even if it cost you to do this, it would probably be the right thing to do. You can well afford it.

2) Should you pay off your mortgage in 5 years?

Absolutely not! This sort of target makes no practical sense.
Your current loan to value is under 50% ( 280 - 30/515)
Your Loan to Income is comfortably less than 2 (250/140)

You have fully funded pensions.
You have 25 years left to normal retirement age.

By all means pay down the mortgage. But don't set a target of 5 years.

Your eldest is 6 which means that you won't have expensive education costs for a long time yet.

Our ultimate goal is to try and pay the mortgage off in 5 years which may be pie in the sky but we really anxious to pursue it.
You have no call to be anxious over money. You have plenty of it. Use your surplus income to pay down the mortgage, but so what if it takes 10 years?

After 5 years you will have a much smaller mortgage. That should be fine. And if you happen to pay it off over 5 years, that's fine too.
 
Last edited:

Brendan Burgess

Founder
Messages
42,166
Should you switch mortgage?

Absolutely. You should not be paying such high rates.

But maybe hold on to see what the new entrant Avant Money is offering. I understand that they will have a fixed product with a mortgage rate under 2%.

But your problem is that you want to pay down your mortgage quickly.

If fixed rates are the cheapest available after Avant launches, then you should see about getting a mortgage with one part fixed and one part variable. So you can clear the variable part without penalty.

But the mortgage issue is a secondary issue.
1) Make the decision on your husband's career break.
2) If possible, defer that until the switch is in place. But if the switch is taking too much time, then take the career break and hope that you will get a mortgage based on your own income, which you should do comfortably.

Brendan
 

niceoneted

Frequent Poster
Messages
1,957
Would you consider an au pair and your husband to job share? we are in a somewhat similar situation re the childcare and him taking time off work. I think for him it will be too much to be at home all the time. Part time gives him time outside the home and it is great to have a back up for minding the kids.
 

pumba

Registered User
Messages
26
Thanks a million for all your replies. It’s really helpful to get some objective advice. I know my thoughts were a bit muddled when I put up our details but reading through your responses has helped us see things more clearly and order our priorities
- decide on husband’s career break ( he has decided since I posted definitely that he wants to do this)
- Mortgage switch- unfortunately can’t do this before my husband stops working as we have no childcare lined up from end of September despite extensive efforts on our part
- after my husband stops working I’ll gather docs for mortgage switch and see what Avant money’s rates are like. Will either aim for lowest variable on offer or split mortgage part fixed at low rate and part variable.
- will not worry too much about the term for now but will try to knock some time off it if our finances allow, in conjunction with overpayments when possible.
- lastly re: au pair will try to get babysitter/childminder for half or full day every week so my husband gets some free time and doesn’t go mad! Cheers guys, thanks for the helpful input.
 

OMG_OMG

Registered User
Messages
49
You can pay down the mortgage without reducing the term - just in case.
Im about 7 or 8 years older than your husband.
We saved a lot of money every year and put it into equities.
After a couple of years we decided to use some if it to pay the mortgage down.
Then after that we did the same almost every year/ Always made sure we had plenty left for a rainy day.
The mortgage more or less took care of itself after that.
Recently, many years earlier than the term, it went to ,zero. A lor of expenses just disappeared when I stopped working.
Childcare was one.
The resulting disposable income difference is worth more than 1 wage to us, so I retired.
I have 60 hours more a week to spend on myself and my family that I would otherwise be working. Thats priceless.
Loving it so far. And dont think I would ever go back to work.
I did take 18 weeks parental leave a few years ago. My wife did too, the next year.
I liked it and didnt miss work one bit, she was happy to go back to work after it as she really loves her job.
So you could try that and see how it fits.
 

Brendan Burgess

Founder
Messages
42,166
Hi OMG

That is a really interesting case study.

Would you consider writing a more detailed account in a separate thread?

Brendan
 

Ndiddy

Frequent Poster
Messages
122
Is it preferable to take Parental leave initially or career break? is there more protection one way or the other?

The OP has 4 children so there is a possibility for 4 sets of PL?
 

cream1

Registered User
Messages
7
Is it preferable to take Parental leave initially or career break? is there more protection one way or the other?

The OP has 4 children so there is a possibility for 4 sets of PL?
PL is preferable as you could take it around holidays, esp if the ops husband is a teacher
 

OMG_OMG

Registered User
Messages
49
Hi OMG

That is a really interesting case study.

Would you consider writing a more detailed account in a separate thread?

Brendan
Hi Brendan,
I posted in here.


Got great advice from the good citizens of AAM too. Really settled the nerves.
 

OMG_OMG

Registered User
Messages
49
PL is preferable as you could take it around holidays, esp if the ops husband is a teacher
22 Weeks per child :) And you get all the normal holidays you accrue, and bank holidays.
If you dont know if you like retirement after that .... And you could even go back to work between them for a holiday :)
 
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