Moneymakeover Couple mid 40s - a couple of questions on paying off mortgage early, putting more into pensions, etc.

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vf949

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Personal details
My age: 46
Spouse's age: 46
Number and age of children: 4 kids aged 7, 8, 11 & 14.


Income and expenditure
My annual gross income from full time employment in private sector: €120k
My annual gross income from part-time farming: €28k
Spouses annual gross income from rental property: €23k. Management fees & other expenses take approx €3k/year.

We are both generally savers. We do get to go on a 7-8 day family holiday abroad most years.
In 2024 we saved €15k of the full time employment income
In 2025 we saved €14k of the full time employment income

I generally keep the farm income seperate to our personal finances and I have in the past purchased some additional land with the earnings from the farm.

My spouse generally keeps the rental property income seperate to our personal finances. The mortgage was paid off just in the last couple of months from the rental income. We see it as a good thing to have now going forward to help with putting our 4 kids through college.


Summary of Assets and Liabilities
Family home value: €500k
Mortgage on family home: €84k owed. On an EBS fixed rate of 2.1% until July 2026. 11 years remaining. Payment is €700/month. Currently approx €150 of this €700 monthly amount is interest.

Rental property value: €360k
Buy to let Mortgage: None

Farm value: €2m
Farm borrowings: €40k

Cash in personal bank accounts: €98k
Company shares: None


Other borrowings – car loans/personal loans etc
None
Credit card paid off in full every month


Pensions
I have a Zurich defined contribution workplace pension with my full time employment. I contribute €280/month and my employer contributes €80/month. Current value €100k.
I have a Zurich buy out bond pension from a previous employment. Current value €30k.
My spouse has a small pension from a previous employment
We should both qualify for the Irish State Pension


Other savings and investments:
Make use of regular saver account and 6 month fixed term deposit accounts whenever I see an opportunity for some surplus cash to make some interest.


Other information which might be relevant
Life insurance cover: On me as main earner €1m. On spouse €150k. In place until 2039.
Accelerated Life & Illness cover: On me as main earner €200k. On spouse €50k. In place until 2039.


What specific question do you have or what issues are of concern to you?
Myself and my spouse are in the very lucky position that we have got good assets. Some of these were gifted to us (farm land) while we have also both worked hard and saved hard to buy our family home and to buy a rental property (spouse). We are lucky in that we have higher than average earnings coming into our home.

Our car is due a change in the next 1-2 years as it is 16 years old and it is going to cost approx €40k to upgrade.

The mortgage on the family home will be down to approx €80k when the fixed term finishes in July.

Should we try and pay off the mortgage this year once it comes off the fixed term or would it be reckless to leave ourselves so tight on rainy day funds?

Should I be putting more money into pensions? I feel that I am not putting enough money into my work pension. Compounding is your friend, etc.

Are there any other suggestions that anyone would like to make as to how we operate or should operate financially?
 
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Few things , pension is low , contribution is low and er contribution is really low so I'd be focusing on that on a few fronts ( try max your personal contribution and see if you can get the employer to improve theirs)

28k annual income out of a 2m euro asset is very poor what's the plan for the farm ?
 
Thanks @Blackrock1

The pension is low alright. I just need to figure how much more I need to be putting into pension.

Yes it's a poor return from the farm alright but that's the way farming is. Lots of money tied up in assets but low income. With the type of farming enterprise that we run the money is probably fine as it doesn't take up much of my time and it allows me to still carry out my very busy full time employment. I also have a retired parent getting a small amount of money from the farm so it is making a bit more than the €28k and it is also repaying some borrowings. The land and family home have both probably doubled in value in recent years but that is no good to us unless we sell them which we have no plans to.
 
vf949 said:
Should I be putting more money into pensions? I feel that I am not putting enough money into my work pension. Compounding is your friend, etc.
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This is a common mistake. Compounding works on borrowing as well. If you pay off your mortgage, it is the same as investing at a compound rate of growth of the mortgage rate.

I am not saying yet which is correct. I am just pointing out this error in thinking.
 
vf949 said:
Mortgage on family home: €84k owed
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vf949 said:
Farm borrowings: €60k
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vf949 said:
Cash in personal bank accounts: €98k
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vf949 said:
Our car is due a change in the next 1-2 years as it is 14 years old and it is going to cost approx €40k to upgrade.
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It doesn't seem right to have €98k earning nothing while paying interest on €60k of farm borrowings.

What is the rate of interest on the farm borrowings? The net rate will be half that after tax relief.

I presume that you can pay off the farm borrowings now and if you need them again, you can get them again?

If so pay off the farm borrowings.
 
vf949 said:
Rental property value: €360k
Buy to let Mortgage: None
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vf949 said:
We see it as a good thing to have now going forward to help with putting our 4 kids through college.
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Again a common error of thinking about money. Why would you use the rental income as distinct from any other income you have to pay for your education expenses?

Your priority is to maximise your overall wealth to put allow you put your kids through college.
 
vf949 said:
I have a Zurich defined contribution workplace pension with my full time employment. I contribute €280/month and my employer contributes €80/month. Current value €100k.
I have a Zurich buy out bond pension from a previous employment. Current value €30k.
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You can contribute 25% of your salary or €25k a year into your pension and you should do so. It is by far the most tax-efficient long-term savings vehicle.

So it's very clear to me that you should sell the rental property and use the proceeds to max your pension contributions.
You should also clear all your borrowings.

Then invest the rest in a portfolio of shares, cashing enough each year to maximise your pension contributions, buy your new car, and pay for your children's education.
 
vf949 said:
Rental property value: €360k
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If you haven't done so already, you and your spouse should familiarise yourselves with the new rules for rental properties going forward. There are plenty of threads here.

Depending on your own appetites for risk, type of property, how long you intend to hold on to it for etc., the new rules may make it much less attractive as an investment.
 
Brendan Burgess said:
Are you sure about your employer's contribution? <1%.
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Yes I'm afraid my employer only contributes €80/month!

Brendan Burgess said:
I presume that you can pay off the farm borrowings now and if you need them again, you can get them again?
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Yes I probably could but it can take a long time to get finance. It is useful to have it there as a sort of stocking loan for the farm. The farm should be able to pay off the loan over the next few years.

Brendan Burgess said:
So it's very clear to me that you should sell the rental property and use the proceeds to max your pension contributions.
You should also clear all your borrowings.

Then invest the rest in a portfolio of shares, cashing enough each year to maximise your pension contributions, buy your new car, and pay for your children's education.
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This would be a big move for us but maybe money wise it would be the correct move to make. My spouse has made a lot of sacrifices to buy and pay for this rental property and has a certain attachment to it for that reason. I guess we thought that if we sold it then we would have no income from it and would just have the money. We would not be well up on shares but maybe the income from a portfolio of shares would be just as good as the income from the rental property and with less headaches regarding new RTB rules, etc!

Fortune said:
This stands out to me, but it's just one example of poor asset allocation going on here. You're borrowing against the farm to put money on deposit. Madness.
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We’ve been keeping our savings on deposit as a short-term strategy while the mortgage is on a low fixed rate. Once that term ends in July, we were planning to use those funds to pay off a significant portion, if not all, of the balance.
 
Greenbook said:
If you haven't done so already, you and your spouse should familiarise yourselves with the new rules for rental properties going forward. There are plenty of threads here.

Depending on your own appetites for risk, type of property, how long you intend to hold on to it for etc., the new rules may make it much less attractive as an investment.
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Yes we have been looking at the new rules alright. The govt have really made a mess of the rental market now. We had been thinking of holding on to it long term but we really need to have a hard look at this.
 
vf949 said:
I guess we thought that if we sold it then we would have no income from it and would just have the money.
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1) You would have an income in that you would no longer have a mortgage so you would no longer be paying interest
2) You would have an income in that you would no longer need stocking loans so you would not be paying interest.
3) You would be maxing your pension and getting a very tax-efficient return on that money
4) Whatever is left over would be earning capital growth and dividends.
 
vf949 said:
We had been thinking of holding on to it long term but we really need to have a hard look at this.
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Looked at in isolation, your spouse's after tax yield is good because of the 20% rate and personal allowance

But the after tax yield will decline based on your overall marginal rate, so you do have to look at whether what you are making on this currently makes the risk worthwhile. Also future upgrades, kitchens etc. only last so long, will eat into your return as well.
 
Lots of food for thought thank you guys.

We really need to look more at pensions and at the plan for the rental property.
 
In terms of your wife, is the rental her only income? If so and if she doesn't plan to go back to work long-term, rental income could help her to accumulate prsi contribution in the future.
 
Premos said:
In terms of your wife, is the rental her only income? If so and if she doesn't plan to go back to work long-term, rental income could help her to accumulate prsi contribution in the future.
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Yes it is indeed her only income.
 
Premos said:
In terms of your wife, is the rental her only income? If so and if she doesn't plan to go back to work long-term, rental income could help her to accumulate prsi contribution in the future.
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Perhaps I'm wrong. I thought that while you paid PRSI on rental income, it didn't count as a contribution towards social welfare.
 
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