Late 30s, 10 years left on mortgage with a clawback. Advice please on moving or staying

Discussion in 'Money makeover' started by becky3b, Feb 12, 2017.

  1. becky3b

    becky3b New Member

    Posts:
    1
    Age: 38
    Spouse partners age: 37

    Annual gross income from employment or profession: €42,500 (civil service )
    Annual gross income spouse: €43,000 (private sector)

    Monthly take home pay: €2480 (including child benefit)

    In general are you
    (A) spending more than you earn
    (B) saving
    We are spending what we earn

    Rough estimate of value of home €270,000

    Amount outstanding on mortgage €81,000 plus a clawback.. at % of profit

    What interest rate: locked into co co mortgage unless we pay the clawback

    Other borrowings : €25,000 credit union
    €4000 bank loan
    €4000 car loan

    Do you post off full credit card balance each month: no
    Balance €2000

    Savings and investments €5000 in credit union

    Do you have pension scheme: I have pension (in public service 20 years)

    Do you own any investment or other property: no

    Ages of children: 14 & 8

    Life insurance: civil service life insurance


    15 years ago we bought our home under the affordable housing scheme. We currently have 10 years left and we pay €700 pm.

    Our house is quite small it is small open plan downstairs which means if we have any visitors we have no seperate room downstairs. This is especially difficult if our teen has friends around. We were looking at some new builds in our area of €340,000.

    Our clawback is calculated by a percentage of the profit we make. It was 20% and goes down 10% after each year after 10 years we have 5 years clawback left. We bought the house for 160,000 and the market value at tyre time was 230,000

    Should we bite the bullet sell our house have a bigger mortgage over a longer term with new house or stay where we are with our low mortgage. We could possibly put on an extension but to remortgage we have to pay the clawback anyway. The council dont do remortgage and to go to a bank we have to pay the council the clawback.

    Would we even get a mortgage for a house worth 340,000 with our outstanding loans or would it be consolidated?

    Another idea could be to buy a bigger house in the next town, they are considerably cheaper at 275000. The children could stay in their schools but obviously it would be a commute and we would need after school childcare which we don't have any childcare costs atm.

    Any help would be greatly appreciated.
     
  2. Sarenco

    Sarenco Frequent Poster

    Posts:
    4,286
    I don't mean to should harsh but I think the extent of your non-mortgage debts should tell you something about your ability to comfortably service a higher mortgage at this stage.

    If I was in your position, I would forget about consolidating your debts and focus on paying down your existing non-mortgage debts within a realistic timeframe (maybe 2 years?) with a view to thinking about trading up at that stage. Start with clearing the most expensive debt (presumably the credit card), then clear the next most expensive debt, etc. The fact that the affordable housing scheme clawback will also become less significant in a few years time should also help.

    I appreciate that ideally you would like to move now given your family's circumstances but I don't think that's very realistic at the moment. However, with some good budgeting I've no doubt you could get there within a few short years given your salaries.

    Hope that helps.
     
  3. PaddyBloggit

    PaddyBloggit Frequent Poster

    Posts:
    2,945
    You're at the pin of your collar at the moment. Taking on more debt would not be a good idea.

    As Sarenco says, clear the non mortgage debts and see where you are at that stage.

    If you are looking for something for teens, put up a garden room for them. Lots of companies are doing these at the moment.

    First search I did came up with a 10 x 10 garden room for €5k - a lot less than taking on a larger mortgage.
     
  4. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    33,028
    There seems to be something a bit odd in your numbers

    If you are earning €85k between you, your take home pay should be a lot higher.

    If you are earning €85k between you and if you have a very small mortgage €81k at Local Authority mortgage rates, your repayments should be very small. OK, I see that your repayments are €700 a month.

    If your repayments are small, how come you have racked up €30k of expensive non-mortgage debt?

    How is the clawback calculated?
    Profit = €270k - €160k = €110k
    Clawback was 20% or €20k
    Reduced now to €10k . Is that right?

    So your equity is €180k (€270k - €80k - €10k)

    YOu neeed to borrow €160k (€340k -€180k)

    €160k @3.5% over 25 years would be €800 per month.

    If you are borrowing when your repayments are €700 per month, you will be under a bit more pressure at €800 per month.

    Brendan
     
    mtk likes this.
  5. vandriver

    vandriver Frequent Poster

    Posts:
    1,615
    You figures don't seem correct.Your initial discount(clawback %age) appears to be 30% not 20%.
    As you should know,the clawback is 30% of the sale price,not the profit.
    In your case,30% of 270k,ie 81k.As you only have 5 years left on the clawback,you would owe 40,500 to the council.
     
  6. wednesday

    wednesday Frequent Poster

    Posts:
    122
    I am a little confused with regard to the clawback. I have a similar stipulation on my own property as the land was purchased from local Council. I remortgaged after 18 months to get better terms etc. Are you sure that the clawback comes into play if you change providers? I thought that the clawback was to prevent someone from getting a sweet deal and selling on quick. Maybe see what the story is with regard to the clawback and if its better value for you then change provider and extend or convert attic etc for extra space
     
  7. Gerry Canning

    Gerry Canning Frequent Poster

    Posts:
    2,514
    becky .
    If you take on new mortgage that also kills your k33 other debts and does not increase your payments above todays mortgage and the amount you pay on other loans , it might make sense financially..

    What I mean is, If your extra mortgage ends up @ k100 with all other loans gone = it could make sense from a money view.
    Children will so soon grow up and do you want more debt? + I presume you are settled were you are.

    I am taken with PaddyBlogits shed idea , now I reckon kids would love that .
    no matter what you end up doing/trying , I suggest try to lower those other debts , starting with Mr Credit Card !.
    And good luck.