Get a mortgage or wait to buy for cash

N

NewlyP

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Age: 39
Spouse’s/Partner's age: 39

Annual gross income from employment or profession: 235k base + 90k bonus (60% Stock options, 40% Cash)
Annual gross income of spouse: 0

Monthly take-home pay 10,500

Type of employment: PAYE

In general are you:
(a) saving - usually put 4k a month to savings. Bonus pretty much drops to savings too.

Rough estimate of value of home - we rent - costs 2.5k per month

Other borrowings – car loans/personal loans etc - none

Do you pay off your full credit card balance each month? Yep

Savings and investments: 240k cash, 60k stock options

Do you have a pension scheme? yep - 24% of salary per month (50/50 me and employer)

Do you own any investment or other property? just stock options

Ages of children: 9,6,2

Life insurance: yep - 1M cover

What specific question do you have or what issues are of concern to you?
Recent significant increase in income sees us saving about 100k per annum - we've started to think about buying a house for ourselves but not sure. I'm really conservative financially so we haven't let our lifestyle chase our income too much. I'm inclined to wait until we have cash to purchase property outright (I guess in 2 to 3 years) and buy then. My wife tells me I'm stupid....I'm guessing you will too but is there any reasonable counter argument?
 
You're wife is right. Financially buying a house should not be an issue. Don't see any reason to wait two or three years. Go for it.
 
In your situation the only question I would be asking is how big of a house will I be buying.

Assuming this newly increased salary is secure, its a no brainer to stop paying rent and purchase. Depending on location you are in your current cashpile could pay for a huge chunk of the house and thats before you add 100k each year. Start looking now, dont rush in and but the perfect property - each month you take to decide increases yr purchasing power.

I'd also increase your AVC's to the max - your employer is paying 12% and you 12% - you can pay 20% at 39 and 25% at 40.

50andO
 
The counter argument would be the interest that you would save. But I doubt that would be more than the rent you are paying. Get your mortgage approval. Use the likes of AIB or KBC that don't have sky high variable rates. Buy the house you want and then pay it off asap. Having a reasonable mortgage on your home is not taking risks with your money. You will then be able get back to saving €100k a year.

Also, companies don't pay high salaries for people to clock in at 9 and clock out at 5. You are probably putting in lots of hours. Will you be able to do that for 20 years? Get the cornerstones in place now so you are in a good position later. That includes getting a home for your family and using captial markets to grow your money (outside of your options. I also don't recommend you keep all your money in company stock when you vest. Unless you have other sources of wealth, it's not a good idea to to reliant on one company for salary and savings. Just look at AIB, Enron, Bear Sterns, Lehman Brothers. Lots of big companies (well, AIB are big in an Irish sense) that ended up with worthless shares.


Steven
www.bluewaterfp.ie
 
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