financing house extension

S

soul train

Registered User
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5
Age:
52
Spouse/Partner’s age:
56
Annual gross income from employment or profession:
E35,000
Annual gross Spouse’s income:
E40,000 approx., but lately very irregular
Type of employment:
Private sector employee
Type of employment spouse:
Self- employed work basis
Expenditure pattern:
We are not big consumers.
Rough estimate of value of home:
E160,000
Mortgage on home:
€60k outstanding
Mortgage provider:
Ulster Bank
Type of mortgage:
Fixed mortgage- 8 years left
Interest rate:
fixed at 2.6% - 2.5 years left on fixed rate. We pay back E670/ month
Other borrowings- car loans/personal loans etc:
E12,000 on car loan from KCB- 4 years left on loan. No personal loans
Do you pay off your full credit card balance each month?
I have a credit card, although I have never used it.
Savings and investments:
E10,000 in savings
Do you have a pension scheme?
One available at work- pays 6% of pensionable salary (to my 4%). I have not availed of it yet.
Do you own any investment or other property?
No.
Ages of children?
Two (10 and 11 years old)
Life insurance:
I have, my partner does not
Health Insurance:
Yes
What specific question do you have or what issues are of concern to you?
We need E20,000 towards finishing an extension to our house.
We have E28,000 to draw down on our mortgage. We approached our mortgage provider a year ago but, as my spouse is self-employed, they want to see his income returns over at least two years. We have still one year to go till we ask them again; his work is sporadic and we are not confident that he will meet the bank requirements next year.
I asked KCB for a home improvement loan (of E20,0000), but have been turned down.
Should I:
  • Approach another bank for a home improvement loan/personal loan?
  • Use my E10,000 savings to get a CU loan?
  • Consider switching to a different mortgage provider and increasing borrowings to cover work costs.
  • Use my savings to substantially finish the house extension, and then finish the work using our incomes?
I have been reluctant to use my savings due to my spouse’s uncertain work pattern, and the security of having a ‘rainy day’ fund.
 
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soul train said:
We have E28,000 to draw down on our mortgage. We approached our mortgage provider a year ago but, as my spouse is self-employed, they want to see his income returns over at least two years. We have still one year to go till we ask them again; his work is sporadic and we are not confident that he will meet the bank requirements next year.
Click to expand...

I don't understand what you mean by €28k to draw down? Have you been approved for it?

You have a mortgage of €60k. Borrowing another €20k will give you a total of €80k

Repayments would increase to €920 or thereabouts.

It would be tight enough with two young children and an uncertain income.

Having said that, most of the repayment is capital. The interest element would be only €160 a month.

If a lender allowed you to extend the term to 14 years, when your husband will be 70, the repayments on €80k would be €560 a month.

soul train said:
Use my savings to substantially finish the house extension, and then finish the work using our incomes?
Click to expand...

If you can't get a mortgage, then this is what you must do.

But a longer term mortgage would be preferable. Go to a mortgage broker who would present your case in the best possible light.

Brendan
 
Hi Brendan,
In answer to your question, when we originally got the mortgage, there was €28K to be drawn down over a second phase on completion of renovations to our house (we got a mortgage approved for €138K in total); at the time we didn't need the additional money and never availed of it

I take your advice of talking to a mortgage broker and presenting it in the best light. €920 of a monthly repayment doesn't sound excessive.
Would this be the preferable route rather than using my savings?

Thanks,
soul train
 
Ideally you should get the additional €20k at mortgage rates.

Then use the savings to clear the expensive car loan.

But if you can't get a top-up or new mortgage, use the savings.

Brendan
 
soul train said:
Do you have a pension scheme?
One available at work- pays 6% of pensionable salary (to my 4%). I have not availed of it yet.
Click to expand...

I missed that completely.

Soul Train are you saying that if you contribute 4% of your income, your employer will contribute 6%?

If you contribute nothing, your employer will contribute nothing?

Well if that is the case, then you absolutely must contribute the 4% ahead of all other considerations.

Brendan
 
Thanks for those comments. Yes I never joined pension and feel like it's almost too late now??
Also, I am confused how much I need to contribute each month to get my employer's max contribution.
So my gross salary is 35,000. I come out with about 2,270 per month after tax, vhi etc. How much would I need to contribute each month to get max from employer? Also, I get a bonus each year which is about 2000 and I was thinking to add that to pension this year if I join. I lose 50% of bonus each year to tax. Thanks
 
It is never too late to start a pension.

A small pension fund is better than no pension fund.

You need to check the rules of your pension fund with your employer.

But assuming that they contribute 6%, if you contribute 4%.

You will put in 4% of €35,000 which is €1,400 gross.
Your employer will contribute 6%, which is €2,100
So your fund will then be worth €3,500

But the real cost to you will be only 50% of the €1,400 or €700

Brendan
 
abc_xyz said:
Spouse is on (irregular) €40,000. So no benefit there, unless the irregular drops below €26,300.
Click to expand...

As a couple, their income is 75,000
They pay higher rate on income over 70,600 (i.e. 2 X 35,300)
 
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Thanks for those comments. I will join the pension after your advice. I was sceptical in past as a lot of people lost money and worried I mightn't get the money at retirement (not that I will have much at this rate). Regarding my tax situation I pay tax as a single person. I pay some at 20% and the remainder at 40%. I think my income is higher than 35,000 per year?? Must look up how much I am on now.
My partner and I are taxed as singles as we aren't married.
Would we save much if we were taxed as couple??
He is self employed but work is irregular at moment. He is thinking of getting a full time job for a company soon. We want to do the extension also.
Thanks,
Soul train.
 
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