Moneymakeover Just took on vast mortgage

[CharlieMac]

I am currently investigating whether I will be Irish tax resident, but non-ordinarily resident and not domiciled in Ireland when we move back. (we will stay for only a few years before heading off again).

Are you planning on staying in Ireland forever or no? If you expect to leave the country in a few years again then does that change the advice given?

 

[Zion2022]

part of me still thinks that making the full mortgage payment would be fine, especially if we got a long fix to eliminate rate risk. the downside of losing the house is very very unlikely, and the upside of a larger pension earlier with more time to compound tax free has lots of benefits (deposits for children's homes, money for care later in life)

Mathematically from a pure wealth maximisation perspective, this is true. Ultimately we came to the decision that feeling tight during our 30s/40s with a young family wasn’t worth it in order to absolutely maximise wealth in what should be a comfortable retirement anyway.

That is attitude to risk and lifestyle views from one perspective though. No ‘right’ answer here!

€11,000 a month ish after tax income assuming 10% pension contribution each. €4,500 mortgage, €1,500 childcare (assuming you only plan to have the one!). Leaves you €5k to live on. It’s obviosuly doable but feels tight for a gross household income of €250k+.

 

[Zion2022]

could of course sell the BTL. we thought hard about doing it as part of the purchase to reduce our mortgage, but decided against. unlike many I have never struggled with being a landlord. my current tenants are a delight. I do the whole thing myself and manage it over whatsapp with them direct. they've been there for a few years and show no signs of leaving, and I show no signs of putting up the rent

It’s not directly analogous due to the frictional costs of buying & selling, but if you posted your exact scenario, living in Ireland with no BTL & v large mortgage, and said you were considering taking out a £200k mortgage and using £130k cash to buy a property to rent out in London - the responses you would get would be quite amusing.

I would sell without any hesitation.

 

[Persius]

You mentioned in the first post that you are planning on only staying a few years in Ireland before heading off again. What do you plan to do with the house then? If you were thinking of selling it, I wouldn't get a long-term fixed-rate mortgage. The break clause penalty could be quite high for such an early break and large sum.

Regarding VRT exemption, you used to have to clock up a minimum number of miles as well as the 6-month period. But now you just need to show that the vehicle was used abroad during that 6 month period. So make sure to do some driving and get some fuel or service receipts or something.

 

[hilhid]

But you plan to cash out at 50! I doubt that this makes any sense. It's much better to leave your pension accumulating tax free until you actually need it which might well be in your late 60s.

Or do I misunderstand you?

Well, only the 25% one is allowed to cash out in both the UK and Irish systems. My thinking was that it's basically a way to turn a stream of tax-free cash now into a larger lump of untaxed cash later. But clearly the closer you can get to taking the maximum tax-free amount (assuming that still exists in 20 years), the better you have done out of it. So again, my thinking was muddled on this: my strategy would have "made money" but yours makes more money over a longer timeline, and with more security (I think that's right, isn't it, that the closer you get to €800k before taking 25% from PRSA the better?)

Are you planning on staying in Ireland forever or no? If you expect to leave the country in a few years again then does that change the advice given?

You mentioned in the first post that you are planning on only staying a few years in Ireland before heading off again. What do you plan to do with the house then? If you were thinking of selling it, I wouldn't get a long-term fixed-rate mortgage. The break clause penalty could be quite high for such an early break and large sum

the plan is to stay in ireland forever, but to be away for a few years every few years. the house we just bought is the "forever house" barring unforeseen circumstances. so no plans to sell. in fact the long fix helps because we don't have to worry about getting mortgages if one of us takes foreign currency jobs while we're away.

Mathematically from a pure wealth maximisation perspective, this is true. Ultimately we came to the decision that feeling tight during our 30s/40s with a young family wasn’t worth it in order to absolutely maximise wealth in what should be a comfortable retirement anyway.

That is attitude to risk and lifestyle views from one perspective though. No ‘right’ answer here!

€11,000 a month ish after tax income assuming 10% pension contribution each. €4,500 mortgage, €1,500 childcare (assuming you only plan to have the one!). Leaves you €5k to live on. It’s obviosuly doable but feels tight for a gross household income of €250k+.

I have come the same conclusion having made this thread, especially with useful number-checking by OkGo which has made it clear how little money I am currently getting in exchange for tight finances to maintain the flat

I would sell without any hesitation.

Am planning to hesitate just a little as the current early-termination fee on the mortgage is £5k, which just seems like money I don't need to pay. from next may that goes down to £2k, then fix ends the following may. shout if that's stupid

Regarding VRT exemption, you used to have to clock up a minimum number of miles as well as the 6-month period. But now you just need to show that the vehicle was used abroad during that 6 month period. So make sure to do some driving and get some fuel or service receipts or something.

good thought, thanks. it'll obvs be taxed and insured etc and we'll use it to go down to my parents a good bit rather than the train (since we'll have the car anyway)

 

[Brendan Burgess]

Am planning to hesitate just a little as the current early-termination fee on the mortgage is £5k, which just seems like money I don't need to pay. from next may that goes down to £2k, then fix ends the following may. shout if that's stupid

Not stupid at all.

Strategically, you should sell the investment property.
Tactically, the timing will depend on such issues.