Living abroad advice

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Iklo22

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Personal details

Age: 34

Spouse’s/Partner's age: 30

Number and age of children:
0

Income and expenditure
Annual gross income from employment or profession: C €65,000 Tax Free depending on $ - € FX rate.
Annual gross income of spouse: C €50,000 Tax free depending on $ - € FX rate.

Monthly take-home pay C €9500

Type of employment: Expat in foreign country with no income tax.

In general are you:
Saver but enjoy spending.


Summary of Assets and Liabilities
Family home worth €215k with an €88k mortgage
Cash of €90k.
Defined Contribution pension fund: Public Service. 1 x pre 2011 entrant 1 x Post 2011 entrant. Career break since late 2019 so paused.


Family home mortgage information
Lender UB
Interest rate 2.7%
If fixed, what is the term remaining of the fixed rate? 3yrs

(No need to tell us the monthly repayments or what term is left)

Other borrowings – car loans/personal loans etc

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


Buy to let properties
Value: PPR rented is absence
Rental income per year: €16200
Rough annual expenses other than mortgage interest : €3000
Lender UB
Interest rate 2.7%
If fixed, what is the term remaining of the fixed rate?

Other savings and investments:

Do you have a pension scheme? €3k in Cornmarket AVC scheme. Was not paying in long before moving away.
Do you own any investment or other property? Classic car worth €10k.

Other information which might be relevant

Life insurance: N/A Need to get something in place!


What specific question do you have or what issues are of concern to you?

We are debt free bar mortgage which is paid for us by tenants. As we are registered as non resident with Revenue, tax is only 20% on rental income instead of 48%.

Looking to maximise savings potential over the next 3 years. Currently have €90k on deposit and would likely see that rise €5k per month until late 2024. Inflation is eating away at that cash so I'd like to offset that. Liquidity is important as we wish to trade up when we move home.

PPR was bought as a long term investment in mind. Highly rentable in regional Irish city where we will move home to. It is an older house and will need a rewire and replumb in the medium term. Had been overpaying 50% but brought it back down as we felt it wasa waste when the tax bill was lower.
 
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The default position should be to clear your mortgage. The interest rate after tax is 2.1%. That is a great tax-free, risk-free return.


Say you return to Ireland in three years.
At your current rate of savings, you will have €180k.

At that stage you can trade up and you will have about €400k.

But you may wish to buy a new house and keep the old property as an investment.
In that event, you would have been better off holding onto the €90k cash as you would then have a deposit of €270k instead of €180k.

What will your combined salary be when you return?
If we assume it's €100k, you will be able to borrow €350k + €180k would allow you to buy a house for €530k.
If that is enough, then pay off your mortgage now.

If that is not enough, hold onto the €90k.

Summary
1) If you are definitely going to sell your house and trade up, clear your mortgage now.
2) If you might want to keep the house and buy a new house and if €530k is enough, then clear the mortgage now.
3) If you might want to keep the house and buy a new house for more than €530k, then hold onto the savings.
 
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If you go for option 3, then invest the €90k in some tax-efficient equity based product in the country you are living in.

Be careful though because a lot of advisors target gullible ex-pats and sell them very high cost products.

Make sure it's a flexible low-cost product which you can cash in early if your plans change. There should not be entry and exit fees.
 
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Brendan Burgess said:
Summary
1) If you are definitely going to sell your house and trade up, clear your mortgage now.
2) If you might want to keep the house and buy a new house and if €530k is enough, then clear the mortgage now.
3) If you might want to keep the house and buy a new house for more than €530k, then hold onto the savings.
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With respect to option 1), are there any considerations in relation to being a returning expat that might inhibit ability for OP to get a new mortgage as opposed to moving the mortgage from one house to another? I note both civil servants it would likely be ok, but I imagine moving a mortgage from one property to another is easier than getting a new one. However, it would be an expensive option to purchase at 2.7%.
 
AhComeOn said:
With respect to option 1), are there any considerations in relation to being a returning expat that might inhibit ability for OP to get a new mortgage as opposed to moving the mortgage from one house to another? I note both civil servants it would likely be ok, but I imagine moving a mortgage from one property to another is easier than getting a new one. However, it would be an expensive option to purchase at 2.7%.
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You will need 6 months under your belt in your new job in Ireland to get the new mortgage from what I understand.

Good point about transferring an existing mortgage, I assume you would need the same 6 months especially if you are losing your rental income to buy a family home.
 
An update to this. Sold house this year however since I wrote the OP we are now 3. Savings took a bit of a hit. Changed the car and paid in cash, new baby cost us a nice chunk as it was on our dime from start to finish.

Salary increased for both of us and we are currently taking circa €11000 pm.

Childcare is circa €550 pm

Rent & bills circa €2500 pm

A good month of savings, we can send home €5000 pm and we have 13 paydays left before we come home for good and will slot into our old gov jobs in Sept 24.

€250k on deposit, zero debt but zero PPR and we are actively looking.

My main question is, a mortgage will more than likely be required and I am getting polar advise. One broker is telling us there is only one option and it isn't ideal, the other is saying as we are on career break and are going to be resuming work soon, any bank will be willing to lend to us. Max borrowing will be €250k on top of our €250k which should get us what we want.
 
Iklo22 said:
My main question is, a mortgage will more than likely be required and I am getting polar advise.
Click to expand...
Your situation is quiet unusual which explains the polar advice.

To be clear, you are currently on a career break from permanent public sector jobs in Ireland, and working abroad earning a non-Euro salary?
And you plan to return to those public sector jobs?

This isn't a case that fits into any banks standard decision tree, so needs to get before proper credit underwriters.

Firstly, remember since 2016 there is a large legislative hurdle. The Mortgage Credit Directive means that a lender cannot advance a Euro mortgage against foreign currency income, unless the lender can also offer you interest rate hedging options (you don't have to take them, but the lender must be able to provide).

To the best of my knowledge, BoI withdrew from that market, so AIB / Haven are your only option.

What I've seen happen in a couple of cases is a bank providing mortgage as a "buy to let", and once you return home convert it to a PDH rate.

Or only being able to draw down mortgage once your first payslip comes through after returning.
 
RedOnion said:
Your situation is quiet unusual which explains the polar advice.

To be clear, you are currently on a career break from permanent public sector jobs in Ireland, and working abroad earning a non-Euro salary?
And you plan to return to those public sector jobs?

This isn't a case that fits into any banks standard decision tree, so needs to get before proper credit underwriters.

Firstly, remember since 2016 there is a large legislative hurdle. The Mortgage Credit Directive means that a lender cannot advance a Euro mortgage against foreign currency income, unless the lender can also offer you interest rate hedging options (you don't have to take them, but the lender must be able to provide).

To the best of my knowledge, BoI withdrew from that market, so AIB / Haven are your only option.

What I've seen happen in a couple of cases is a bank providing mortgage as a "buy to let", and once you return home convert it to a PDH rate.

Or only being able to draw down mortgage once your first payslip comes through after returning.
Click to expand...

Yes, we return in July 24 and resume work in September 24. The first payslip will be in mid Sept 24. We are both in permanent roles in the public sector. We want a max mortgage of €250k as it means we can strike balance between having a large budget but keeping the repayments at a comfortable level.
 
@Iklo22 is it correct to say that upon returning your job will have been held for you in the Public Sector for the last 5 years?
 
Iklo22 said:
Yes, we return in July 24 and resume work in September 24. The first payslip will be in mid Sept 24. We are both in permanent roles in the public sector. We want a max mortgage of €250k as it means we can strike balance between having a large budget but keeping the repayments at a comfortable level.
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I did a little asking around, and as far as I gather AIB / Haven are the only ones will really look at this before you return to Ireland. Once you're back here you shouldn't really have any trouble getting a mortgage with any lender on condition that first salary arrives before drawdown.

Haven is a broker channel of EBS, a subsidiary of AIB. A broker cannot apply directly to AIB, but you can. But, a broker might have a better chance with Haven, as they get to include a cover letter outlining your case, etc, and might have a better chance of getting it to underwriters. Haven & AIB are completely separate legal entities, with their own policies and back office, etc, but in this instance they have a similar approach.

A pretty standard condition of these mortgages is that you occupy the house 'immediately' on completion (I'm not sure what 'immediately' means, but it has to become your main residence). Borrowing less than 65% of the value makes it a bit easier.

You've mentioned that you've spoken to 2 brokers. Brokers get paid a commission of the mortgage amount, so ignore the one that said it's not possible. If he doesn't think he'll get paid, he won't spend any time looking at your case.
 
I spoke to my second broker & financial advisor yesterday. Confirmed a lot of that was mentioned above for us.

1. An expat mortgage is possible via Haven but only one product is available, the Green mortgage which requires a B3 minimum cert.

2. Investor mortgage with high interest rates and converting to a local mortgage rate when we return.

3. Alternative financing which I do not wish to elaborate on on a public forum which we likely access.

The financial consultant manages a lot of our families interests and has advised we leave our large pot liquid for now which makes sense. I have some bonus money sitting in an S&P500 ETF. My wife had a few grand in an old account and he suggested if there was no need for it, to throw it in my ETF as a top up which we have done.

When we return, we were advised to aggressively save into our AVCs which we will do but not until Jan 1 2025 to take full advantage of tax relief.

Thanks for all the replies, I think we have done as much as we can reasonably for now.
 
Iklo22 said:
I have some bonus money sitting in an S&P500 ETF. My wife had a few grand in an old account and he suggested if there was no need for it, to throw it in my ETF as a top up which we have done.
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Separate to the mortgage, get advice on what to do with the ETF investments before returning to Ireland, or what the tax treatment might be if you hold onto them.
 
RedOnion said:
Separate to the mortgage, get advice on what to do with the ETF investments before returning to Ireland, or what the tax treatment might be if you hold onto them.
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I asked about that and he said to leave them as they are as they are only worth €5k roughly or to cash them in once we become resident again and plough the cash into the AVC in a lump.
 
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