Looking for Financial Advice

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PeanutButter

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Personal details

Age:51
Spouse’s/Partner's age:51

Number and age of children: 3 (24, 19,15) One in college, youngest starting in 3 years. Oldest working full time and contributing a small amount towards food while saving for a house.

College fees paid from 14k saving and from bonus which is 3k after tax (not included in salary figure below)

Income and expenditure
Annual gross income from employment or profession: €100k
Annual gross income of spouse: 12k (part-time)

Monthly take-home pay =

Take home pay €4689

Children’s allowance €140

Rental income = €1000 (rent pressure zone so we can’t increase it)

Total income per month = €5829

Type of employment: e.g. Civil Servant, self-employed = Private sector

In general are you:
(a) spending more than you earn, or
(b) saving?

Breaking even, not saving


Summary of Assets and Liabilities
Family home worth €800k with a €200k mortgage
Cash of € 14k in saving account
Pension fund: €200k

State savings 8 years left 180k invested, €208 when it matures 2030
Buy to Let Property worth €250k with mortgage of €120k


Family home mortgage information
Lender - Pepper
Interest rate = Tracker.6 above ECB

Other borrowings – car loans/personal loans etc
Do you pay off your full credit card balance each month? Yes, no other loans

Buy to let properties
Value:250k
Rental income per year: 12k
Rough annual expenses other than mortgage interest: 3.5k a year (tax, rtb, insurance)

Lender BOI
Interest rate Tracker .9 above ECB, 9 years left


Other savings and investments:

Do you have a pension scheme? 200k value

Contributing extra 25% a month on top of employer 7% = total 37% a month (This is maxed out)



Other information which might be relevant

Life insurance: Just Death in service through employer - 3.5 times salary


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

We are breaking even each month. We are unsure what’s the best way to make our money work in the long term. We are worried about rising interest rates (we got used to the very low tracker rates) we are considering fixing our PPR mortgage to a 4-year fixed 2.05% or a 7-year fixed for 3% but we are not sure if this is a good idea to lose the tracker.

Rental property is costing us about 5k a year but tenant is paying 12k in rent a year.

1. Should we move to fixed mortgage for PPR from the tracker

2. Should we continue with our state savings or pay off some of the mortgage

3. Should we sell rental property now
 
PeanutButter said:
1. Should we move to fixed mortgage for PPR from the tracker

2. Should we continue with our state savings or pay off some of the mortgage

3. Should we sell rental property now
Click to expand...
1. No, just pay it off with the state savings.

2. It's madness to have that amount of money out of reach in state savings when your only problem is a cashflow one. Use all of it to clear the majority of your PPR mortgage and free up the monthly payment

3. It's not the best rental but once you use the State savings to clear the PPR, it'll be a lot easier to manage the cashflow. So I think your choice depends on your desire to remain a landlord. You can either redirect some of the extra cashflow to clearing the BTL or choose to get rid of it
 
You are maxing out your pension income each month and locking it away; you have €180K locked away in state savings; you are essentially funding the deposit for a house for your oldest each month and you are funding a household, with 3 adults & 2 older teens, as well as running a rental property costing you €5K per annum.

OkGo is right, you are locking away too much of your assets when you need the money to fund your day to day lifestyle.

So pay off your mortgage with your savings; reduce your pension payments to increase your take home pay and stop having the 24 yr old live at home without contributing to the household expenses in a significant way. Lay out the cost of fuel, electricity, insurance, maintenance, and monthly shop and agree an equitable contribution to the household costs.

Once your mortgage payments have stabilised then resume funding you and your spouses pension, but with the 19 yr old in college and the 15 yr old heading in that direction the next 7 years are going to be spendy, so you need to be realistic about extra payments into your pension.

Whether you should sell the btl, I don’t know, others may be able to determine the yield and risk better than myself.
 
I wouldn't agree with charging the 24 year old rent. You are in a good position, will yr child ever be in such a position when you are alive? Unless they are waiting money/wages, then leave them save you for their house deposit. I don't think you should take it from them. I do things for my children, I wouldn't charge them for the reasons I've outlined.

You seem to have 15% return on state savings. I'd be more inclined to leave that as is, sell the BTL and use that to clear your PPR, or at least reduce the balance significantly.
 
Yeah, you're going to save
PebbleBeach2020 said:
You seem to have 15% return on state savings.
Click to expand...
Is the original poster sure about that?
Maybe it's an earlier issue of the 10 year National Solidarity Bond offering a total return of 15%?
That's still not great as it's not even keeping pace with inflation.
Using the money to reduce one of the mortgage loans would almost certainly be a better guaranteed effective return.
 
I don't remember the 10 year bond in 2020 offering 15%. I could be incorrect on this at a guess, I would say they are getting 10%. But you get 0% interest for the first 3 years and 0.25% after year 4.

I agree with OKgo, madness keeping so much money in cash when you can pay off debt and start getting an income from the rental property.
 
Thanks for the comments;

Would the following be a sound plan?

  • Take the savings and pay off PPR - this would free up circa €1500
  • Use some of the €1500 - say €500 - to overpay the BTL, reducing the term and ultimately eliminating the mortgage early - this would take 3 years off, completing in 2028
  • The remaining €1000 to be used for monthly expenditure and some savings
  • Maintain current Pension contributions
 
By my calculations, you are making a gross profit of about €5k per annum on the rental as things stand. Assuming the rental is in your joint names (it would be more tax-efficient if it was in your spouse's sole name), that's about €2,400 after tax.

If you cashed out the €120k equity in the rental and applied it against the PPR mortgage, that would save you €3,120 in interest (€120[email protected]%).

This is very much as things stand - any more rises in the ECB rate will have a direct impact on your figures.

So, I think you should sell the rental and apply the net proceeds against the PPR mortgage.

I would also cash out €80k of the State Savings and clear the balance of your PPR mortgage having applied the net proceeds of your rental.

The remaining €100k could stay in the State Savings product and you could invest your pension 100% in a global equity fund.

You should definitely continue maximising your tax-relieved pension contributions - the balance looks light relative to your other assets.

Hope that helps.
 
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