Our plan is to build up our cash savings to be in a position to buy a new home (c. €450-€500k) in 5-10 years
Earlier this year I started drip feeding money (c. €200/m) into an all-world ETF via online broker. The plan is to continue investing each month and leave the money for 5 – 10 - 15 – 20 years depending on our needs.
I thought about using existing cash savings to purchase an investment property
We would then evaluate whether we would sell the original house or try let it out
Not really, today you have equity of €150k and cash of €65k with a base income of €105k so the potential to borrow 3.5x of €367k .1) Does the above plan seem sensible?
This won't really work. In 5 years, you will still have a mortgage on your PPR of €175k. I'm assuming no overpayments and that you have a 30 year term so correct me if I'm wrong.Our plan is to build up our cash savings to be in a position to buy a new home (c. €450-€500k) in 5-10 years without having to sell our existing home (to avoid being in a chain). We would then evaluate whether we would sell the original house or try let it out (aware of the difficulties facing landlords). With our current rate of saving’s we should be in a position to have the 20% deposit in the next few years even allowing for savings to take a hit if/when we have kids.
Yes, you are missing the obvious. You are currently in a great financial position so don't ruin it just to avoid a chain sale2) Are we missing anything or is there anything else we could be doing better to maximise our position?
Have factored in some house price growth but planning to buy in a slightly different area where prices are currently lower so while I can't say for certain, I hope we wont be going above the €500k mark!With the way property prices have been rising, are you worried that you won't get much more house for 450-500k than you already have? Do you risk wanting to trade up again a few years later just for the sake of avoiding a chain?
Reasoning behind this is to have some money invested in equities over the medium/long term which can beat inflation. If we need the funds to purchase the "forever home" we'll cash it in but ideally we would not use it for the house purchase and continue to let it grow. We're happy with our current location and are in no rush to move which is why I noted we'd hope to purchase in 5-10 years (i.e. we may not move straight away once we can afford to).By doing this you're delaying your ability to trade up by diverting funds elsewhere.
Correct!I presume this is invested 100% in Global Equities
Yep, more or less. I have some equities but I'm not going to add to them again until we have traded up. Investments returns can be great when you leave them to compound over years and decades. In our case we will need the money in the next 2-3 years so the risks far outweight the potential upside.Is your approach to maximise cash savings until you can afford to purchase?
While we hopefully see some increases in our salaries, we're not banking (excuse the pun) on having a combined salary of €165k in order to purchase. There’s a lot of mixed commentary on the process of buying a forever home while keeping a starter home. From talking to banks and mortgage brokers, some banks won’t count your existing borrowings if the expected rent of the original house covers twice the mortgage repayments for it (which would be the case here).But you will have existing borrowings of €175k and will be looking at borrowing €400k. Will your combined income be €165k by then to stay within the LTI rules?
Alot to be said for that approach. While we're in no rush to move, the above is definitely a viable/attractive option. Will give it some thought. Thanks for the reply.After all of that, at 40, you could be over the worst of childcare costs, have a well funded pension and a very manageable mortgage. If you still fancy being a landlord at that point, then go for it.
- Prioritize your future family by saving for unpaid maternity leave
- Aggressively overpay your PPR mortgage with whatever else you have
- By the time kid #2 comes along, you can ease off pension contributions if necessary to manage childcare costs
You could probably just benefit from narrowing your focus a bit and keeping things simple:
- Save for your distant-future through your pension
- Save for your near-future in cash
- Buy what you want whenever you can afford it (even if that means entering a chain...)
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