Hi RJN
We are becoming particularly nervous that we are too highly geared mortgage-wise on one income (and in the event of a property bust).
You have nothing to be nervous about, much less worry about it.
You need to take a long-term view. Long-term, you are two high earners. You have good assets: €290k equity in your properties, €50k in savings and a pension scheme.
You are currently making an investment in your children by taking time off work. During this period, your expenditure will be higher than your income. Think of this as an investment. You are not living beyond your means when you take a long term, or even a medium term, perspective.
A decline in property values won't hurt you. In fact, if you are planning to move, the house you would be moving to would be cheaper, so it might even be good for you.
You are getting around €11k a year rent on your investment property. If the rental market collapses and property prices go down, you will still be able to comfortably weather the storm from your €50k savings. If it lies idle for six months, you are still ok.
The worst that can happen to you is that you have to go back to work a little earlier than planned.
Where should you invest the €50k? Keep enough in cash for around 12 months to make up the difference between what you are spending and what you are earning.
You could pay off your home mortgage with the balance. However, deposit rates are so close to mortgage rates, that you won't save that much by doing it. I would put the balance into a unit-linked fund with no entry or exit charges. If you need more money in 12 months, then you can cash part of the fund. If share prices fall, you can handle the loss comfortably. Long term, and medium term, the stock market is the least risky place for your investments.
What rate are you paying on your mortgage? If you reduce it, would you qualify for a lower rate because of the reduced LTV? If so, it might be worth doing so instead of buying shares.
Brendan