Moneymakeover Couple in 30s, how to plan for future?

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YurtyAhern

New Member
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1
Age:
32
Spouse’s/Partner's age:
32

Annual gross income from employment or profession:
E70,000
Annual gross income spouse:
E80,000

Type of employment:
Both public sector employees

Rough estimate of value of home
E375,000
Mortgage on home
E330,000 - we've been paying our mortgage for 1 year now.
Type of mortgage: Tracker, interest only, fixed rate
PTSB Fixed at 4% (fixed for 2 more years)

Other borrowings – car loans/personal loans etc
Both have no loans

Savings and investments:
Joint savings of E70,000 (across different savings accounts)

Do you have a pension scheme?
Public Penison

Ages of children:
None.

Life insurance:
No.

What specific question do you have or what issues are of concern to you?
I go through our finances and realise that we have spare cash every month. For now we would feel comfortable funneling about E800 of it into either

a) AVCs
b) overpaying our mortgage each month
c) investing

Which would make the most sense considering we are currently in a 2 bed apartment which we sell in the future when we have kids. Due to the nature of our jobs, location is not fixed yet.
 
As you will probably be moving to a house at some stage, locking your money away in a pension is not a good idea.

The best investment for you is to overpay your mortgage. So pay the €70k against your mortgage and you will earn a guaranteed return of 4% tax-free for the next two years. However, check if there is an early repayment penalty. It will probably still be worth it.

Your current Loan to Value is 88%. After you pay off €70k, you will reduce the LTV to 70% and should get a lower rate as a result of the lower LTV.
 
If you are going to have full service public pensions at a decent salary, AVCs are less of an issue too (apart from early retirement) So depends how many years service you have and if you see yourself staying there for your full career. If so, definitely concentrate on the mortgage in preparation for the new house, and a nest egg to cover extra costs of kids etc (including maybe managing on one income for a bit if plans change) if in your plans
 
PTSB’s offering around fixed rates is very good, it will be offset against capital to reduce your interest bill thus giving you that guaranteed 4% DIRT-free return, but also you can hold a significant part of your rainy day fund this way since it’s held separately as a credit on your mortgage so you can make repayments from it if you need to. It can’t be withdrawn for other purposes is the only thing. But good option if kid #1 comes along and one of you has to take time off work.
 
conor_mc said:
PTSB’s offering around fixed rates is very good, it will be offset against capital to reduce your interest bill
Click to expand...

I had that in my original post but deleted it because, I wasn't sure if it counted in the calculation of LTV?
Of course, might not be an issue until the current 4% rate is up.
 
Overpaying your mortgage would seem the easy choice to me. 4% tax free, risk free return.

Couple of other thoughts.

1. 4% is no longer a competitive mortgage rate. Might be worth exploring paying a break fee and seeing if it comes out better over the subsequent 2 years. Will depend on interbank swap rates so you won’t know until you ask. They can’t take back the cashback they gave you at drawdown so don’t worry about that.

2. Assuming a net income of c.€8k and mortgage of c.€1.5k. €800 off additional saving looks pretty light given no kids etc. Might be worth looking at your budget. If you plan to have kids and upsize you’ll need to either dramatically increase one of your incomes or reduce spending.
 
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