Money Make Over : 130K to invest

[A99]

Age: =43 / Spouse’s: 43
Type of employment:
Company owner - providing professional services, busy & secure contract in place for next few yrs
Expenditure pattern:
Not a lavish lifestyle, always able to meet bills + save
Rough estimate of value of home
€ 400,000
Mortgage on home
€ 85,000
12 years left on mortgage
Mortgage Interest rate
4.50%
Other borrowings – car loans/personal loans etc
None
Do you pay off your full credit card balance each month?
Yes direct debit each month
Savings and investments:
Access to 130K available now
Do you have a pension scheme?
Company pension plan in place worth 200K, contributing approx 1,200 / month
Do you own any investment or other property?
1. Value = 250K, mortgage = 160K at 4.5%, 13 years left : Have long term good tenents with below market rent but hassle free
2. Value = 300K, mortgage = 275K at 1.5%, 12 years left : property has regained value over 2 last years & rising. Have long term good tenents with below market rent but hassle free
3. Value = 150K, mortgage = 17K at 4.5% : currently using as a holiday home / will probably rent out from next year on at market rent
4. Wife owns half share in rental property, value = 175K, mortgage = 30K, long term good tenents with below martet rent. Hassle free
Ages of children:
12, 10, 8
Life insurance / Income protection
Fully insured & covered. Worth more dead than alive
What specific question do you have or what issues are of concern to you?
I have 130K to invest now & considering the following options ;
a. use the money to pay off some of my mortgages, look at switching the remaining mortgages for better rates & then draw less salary from my company + divert more money into my pension
b. if I was to use 130k to pay off some of my mortgages is it better to pay off a mortage account with a low value + high interest rate, or an account with a high value + low interest rate
c. keeps things as they are as things are managable & use the money to buy another property / 2 properties for letting purposes + try to arrang better mortages rate in the process + increase my pension contributions by small amount

Interested in opinions on best thing to do today with 130K
Thanks in advance

 

[Brendan Burgess]

First of all, pay off the mortgage on your home in full. That is the equivalent of getting a risk-free, tax-free return of 4.5% on your investment.

That will leave you with €45k

I presume you are not getting tax relief on the holiday home. So consider paying this off in full as well for the same reasons.

The Loan to Value of the Investment property is 160k/250k = 64%
If you pay €35k off this, you will bring it down to 50% LTV

I am not familiar with buy to let mortgage rates. You might be able to get a lower rate than 4.5% if you bring the mortgage down to 50% LTV. But it's also possible that 60% is the lowest figure on which you get a discount, in which case pay off the holiday home in full.

You have 3.5 investment properties with hassle-free tenants. At some stage, you will end up with hassle and it will be very time and energy consuming. It sounds as if you have a good business. Focus on the business. You do not want to be distracted by tenants.

You already have a huge exposure to property. You should not buy any more. After paying off your expensive mortgages, you should invest in your pension or invest in the stockmarket outside your pension fund.

Brendan

 

[LS400]

It it aint broke, dont fix it.

Your investment properties are working out well. I would be inclined to continue down this road. Ending up with hassle could be applied to any business venture if given enough time.
Could you buy the other half share of your wife's investment property, and still pay off some bills, there-by getting the best of both worlds?