First time house bought, new job started. What next!

R

Rationaleyes

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22
Age: 28

Annual gross income from employment or profession: 62000 before bonus or OT (beginning in Sep). Just made a job and title change increasing from 42000.

Monthly take-home pay: 3580 (again beginning in September)

Type of employment: Full time, permanent employee in private sector

In general are you:
(a) spending more than you earn, or
(b) saving? Saving. Over the last 3 years I have been able to save ~50% of my net salary including pension contributions, every year while on ~35-42k per year

Rough estimate of value of home: 285000 (valued right before pandemic)
Amount outstanding on your mortgage: 136500 (inherited a third of the house and bought out siblings share for 160000 in total)
What interest rate are you paying? : 2.95% with ptsb 3 year fixed. Drawdown is happening this week with payments beginning after.

Other borrowings – car loans/personal loans etc: n/a

Do you pay off your full credit card balance each month? n/a
If not, what is the balance on your credit card?

Savings and investments: ~30000 in current account (keeping for now as there are some roof repairs due. Eventually planning on holding 7500 in here max)

Do you have a pension scheme? ~22000 in pension from current job. Had been contributing 15% and matched 5%. It will be 6 months before entering new pension scheme with 8% match, plus stock options etc.

Do you own any investment or other property? N/A

Life insurance: N/A


I currently live with my girlfriend and have two of my friends also renting rooms. The two friends pay 550 in rent between them and the 4 of us split all regular bills.

So I am planning on paying 1000 euro each month in total to the mortgage (478.48 over-payment). With ptsb I'll be getting 2% of every regular mortgage payment back to me with the right kind of account, which I have. I am also planning on lump sum contributing to the pension 15% once my 6 months waiting period is up. After all that I'll contribute the max amount to the pension going forward (20% at 30 years etc.), then I plan on using any other cash not spent above my emergency fund of 7500 and investing in ETFs and individual share

Questions

1. Is this level of overpayment on the mortgage suitable. I could pay more to it certainly but I like the idea of diversifying some of my capital away from the property as well. This would mean that even though 7500 of an emergency fund is available, any potentially larger costing emergencies can be pulled from the relatively liquid shares/etfs

2. The stock options at work (without revealing the workplace) are likely to be something that do yield fairly good returns. Bonuses and such can be paid tax free into the shares at fixed prices and vest periodically over a period of 4 years. Without the full detail package I cant elaborate yet on how it works exactly but, aside from a major drop in value of the company, is it typically worth availing fully of stock options in a company that is likely to see growth going forward in the next decade.

3. For the next 6 months I wont be contributing to a pension. I plan on making up the difference when I have access to the pension scheme and putting a lump sum of 15% of gross earnings in 6 months into the company scheme there and then for the tax relief. Is this the best idea, or would it be prudent to open a prsa and just avail of the tax relief in my own personal account for now. And then when I am in the company scheme, would it be a good idea to keep the prsa and commit all my AVCs through that or just let the pension scheme with my employer take all the AVCs also. (I understand without knowing exact fees and expenses this isnt going to have a perfect answer, just want to know what to look out for.)

Thanks in advance!
 
Rationale eyes

You are in a very envious position at only 28 years old, so congrats

Whilst there are likely future costs which will impact your ability to maintain savings levels, you are well ahead of the pack with regards to awareness on where best to direct your income for future benefit.

1. re the overpayment, the loan is already >50% LTV. I wouldn't be in any rush to overpay esp if you want to do any alterations to the house down the line. but otherwise it makes sense as you make a guaranteed return of the interest saved vs investing elsewhere which carries risk.
2. no brainer - you gain immediate 40% on the tax saved, sell as soon as you are allowed, the company needs to tank for you to lose on this - do not keep longer term as it does not make sense from a diversification perspective to build up stock where you rely also on a wage.
3. I would go with the first option, just sign up to the company scheme after the 6 months and if you have cash then top it up to 15% in the following year (you can do this up to Oct the following year)

rgds
50+O
 
Don't have time at the minute for a longer reply, overall you're in a great position, the one thing that stood out to me was the "2.95% with ptsb 3 year fixed". Why go with PTSB at this rate when there are a lot better rates available on the market? You could get 2.25% with KBC or 2.3% with Ulster Bank, and both allow generous overpayments while on their fixed rates.
 
You are not going far wrong.

Same question as the warrior: Why ptsb? While it might be too late to change now, don't fix for 3 years, so you can escape from them as soon as possible.

If you do stay with ptsb, can you overpay a fixed rate without penalty?

Brendan
 
@50andOut Thanks for the advice, much appreciated. I'm certainly aware of my fortunate financial position, a mix of got financial role models, being a natural minimalist (not to mention advice from this forum and others).

@Brendan Burgess and @Coldwarrior as for PTSB, I think it is a mistake I made going with them but due to the circumstance of the job change and going into a probationary period I stuck with their approval since I would have found it perhaps more difficult to change and get approval when I was in the new job. As for overpayments PTSB do allow for regular overpayments or any amount as long as you dont pay the balance off in that time. They also do a 2% cashback on drawdown + a 2% cashback on each payment (including overpayments) as long as you pay from a certain type of account you hold with them. Probably still not ideal but I'll know to scrutinise the competition more come the end of this period of fixed term.
 
Actually I just thought of another question. My current employers pension scheme I have 22-23k in by the time I am finished up. Would it be simpler to move this into the new pension scheme when I enter it. Or should I ask for a full breakdown of costs/fees with both schemes before making a decision on that. Just in terms of keeping track of multiple pension accounts and for potential rebalances in years to come. Appreciate any input!
 
The advantage of keeping more than one pension is that you can 'retire' out of them at different stages.
 
Ah thats not really something I have read about before. So you can take a 25% lump sum from one at 50+ and draw 4% out of that in an ARF while then being able to allow another to accumulate tax free still? And then in a few years to come do the same with the other pension pot? That could be a good way to structure it depending on circumstances.
 
Rationaleyes said:
Ah thats not really something I have read about before. So you can take a 25% lump sum from one at 50+ and draw 4% out of that in an ARF while then being able to allow another to accumulate tax free still? And then in a few years to come do the same with the other pension pot? That could be a good way to structure it depending on circumstances.
Click to expand...

That's correct. Or you could take the 25% lump sum at age 50 and take no income from the ARF until the year in which you turn 61 (which is when the requirement to start drawing the 4% from an ARF kicks in). As you say, a lot will depend on your circumstances at the time, but I think it's a good idea to leave your options open.

I wrote a bit about whether or not to amalgamate pension funds a while back. [broken link removed]
 
Overall you are in a very healthy position at 28 so well done. As for your questions 1&2

1. Your current over payment has you on course for a 14 year mortgage term so I think you are doing well with that. Just bear in mind that you may be kicking your friends out in the not too distant future if you want to live alone with your girlfriend so maybe plan for that scenario. Even if it was just the 2 of you, you could very comfortably make a payment of 800-1000. And as others have said, shop around for a better interest rate once you are over your probation period.

2. It sounds like your new employer is operating an [broken link removed]. These are generally good ideas unless you really need cash right now but you seem very comfortable cash-flow wise so I would definitely be doing it. For example, if you got a 10k bonus, it would be worth 5k net. In these schemes, you get to purchase roughly 9k of shares with the 10k bonus (you are still liable for USC and PRSI). So you are up quiet a bit as long as you can wait the 3/4 years to satisfy the IT exemption and as long as the share prices don't plummet
And once these shares begin to vest, you will have the option to clear a large chunk off your mortgage so it will be gone in no time.

It also sounds like you have inherited a slightly older property as you are already planning and saving for roof repairs so again, think about what else might need to be done in the next 5-10 years in terms of maintenance or upgrades. You could avail of some SEAI grants when doing this kind of work
 
@_OkGo_ For 1. Ya for sure the lads wont be living with me for more than a couple of years I'm sure, certainly not both of them and its something I factor in.

For the house age, the roof leak is actually on a new extension that is 2 years old. It is at a point where a flat roof meets a pitched roof but the angle of the pitch was actually built too low and causes build up of water. The rest of the house is all extremely recently refurbished and, barring any more unknown build issues, should require very little modernising/repair for years. Thanks!
 
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