Mortgage decision money makeover

N

Notsavy

Registered User
Messages
18
Urgent advise required PLEASE!!


Married - Age category 45-55
age of children:
16,14 & 12


Income and expenditure
Annual gross income from employment
€20k approx. Permanent part-time work

Annual gross income of husband :
Approx 46kp.a.

Savings:
40k credit union
43k kids education - current account
Both earning no interest really.
Also used for rainy day .

Summary of Assets and Liabilities
Husband pays into PRSA due to mature in approx 11 years. Pay in currently 486€ per month in line with inflation,increases every yr. Can get details of this if needed.
No current pension for myself in P/Time role but very small pension from previous role payable in 12 years time-Annual Income of approx 3k,
One-off lump sum of 20k
No car loan, but car old and will need upgrade in next couple of years 15-20k
No other loans.

mortgage information
Main residence
Lender:pTSB
Type :Tracker
Rate above ECB: =+.75
Currently paying per mth : 1553 per mth
Loan Amount:400k
Balance remaining 186k
Term remaining:approx 12
Value of Property : approx 500k

PTSB offering the following now in terms of Fixed Rate:
Mgd Var Rate LTV 50-60%3.7% 1593.61 per mth -Total Interest Repayable for remaining term of loan - 46,713.58
2 Year Fixed Rate - 3.5% - 1575.43 per mth - Total Interest Repayable for remaining term of loan - 45,936.55
3 Year Fixed Rate -3.3% - 1557.38 per mth - Total Interest Repayable for remaining term of loan - 44,477.70
5 Year Fixed Rate - 3.4% -1566.39 permth - Total Interest Repayable for remaining term of loan -44155.74
Green 5 Yr -3.2%- 1548.40 per mth - Total Interest Repayable for remaining term of loan - 42,457.78 ( Do not believe BER rating would be in line for this)
7 Year Fixed Rate - 3.8%-1602.75 - Total Interest Repayable for remaining term of loan - 47,798.28

NB. letter with Offer of Fixed rate states cannot go back onto tracker after chosen period.


Investment Property
Lender :pTSB Residential Tracker Rate Loan
Type: Tracker - Interest only
Term remaining - 7.25 years
Balance remaining -216k
Rate above ECB= 1.05%
Currently paying per mth :637€
Montly rent =1,540 ( cannot increase pressure zone). Well below market rate
Property Purchase Price 174£- Irish, for CGT purposes -€220k in todays money as I understand.
Current Value of Property - 295,000€

Well aware we could have been paying off some capital throughout the years . Unfortunately we did not.
Starter home, took out equity ,moved to main residence and rental income facilitated us growing family, reducing hours etc

PTSB - won't offer fixed rate on this Investment Property Mortgage.

***Our Plan was to sell property in 5 to 6 years time and hopefully we might make 30-50k after CGT**
Could do so this sooner maybe in a year or 2 also - however The sooner we get rid of it , we have less cashflow no matter how small that it after tax ..and anything we make will soon dwindle with subsidising for monthly outgoings. We need every penny coming into us at present.

Happy to get out of this and breaking even in 5/6 years time, making a few grand would be a bonus.

What specific question do you have or what issues are of concern to you?
I really need some urgent advice as don't have long to apply for fixed rate currently on offer for main residence.
Should we give up our tracker rate ?
Could we in the short term use some of the savings to help situation - keeping in mind the College wheel starts in 2 years time
On my mind - paying something off capital currently either on main residence or rented property as short term measure to reduce increasing interest rates...
However, if paying some capital off on main residence, wont be able to gain anything back for kids education or own savings as this is our forever home..
Lets say if paid 20k or so now off capital for rented property, and then sold it in 2 years time????

I would be very grateful to hear your opinions as I’m currently feeling a little bit lost as to what is the best course of action in order to try to make the best of this situation.Also, there is no point in advising what should have been done. Damage is done. Aware of the risky situation.
As not financially savy, would love some really good advice,
 
You should become familiar with the SUSI thresholds https://www.susi.ie/eligibility-cri...e-thresholds-and-grant-award-rates/index.html . . these thresholds may increase before you need to apply to SUSI.

If you combined taxable income (gross minus pension contributions) is less than €62k you will get 50% of the student contribution covered. If you get that figure down to €50840 (currently) you get the full student contribution (currently €3k) covered. The thresholds increase when you have more than one dependent in further education.

Your income in the year prior to your SUSI application is the one used. If you have a dependent starting college in 2025 then the 2024 P60s (EDS') are used. Keep an eye on your likely earning each year and you can adjust by putting more into pensions/AVCs, using salary sacrifice schemes (Bike-To-Work or whatever) and unpaid leave to bring your combined figure to where makes sense.
 
michaelm said:
You should become familiar with the SUSI thresholds https://www.susi.ie/eligibility-cri...e-thresholds-and-grant-award-rates/index.html . . these thresholds may increase before you need to apply to SUSI.

If you combined taxable income (gross minus pension contributions) is less than €62k you will get 50% of the student contribution covered. If you get that figure down to €50840 (currently) you get the full student contribution (currently €3k) covered. The thresholds increase when you have more than one dependent in further education.

Your income in the year prior to your SUSI application is the one used. If you have a dependent starting college in 2025 then the 2024 P60s (EDS') are used. Keep an eye on your likely earning each year and you can adjust by putting more into pensions/AVCs, using salary sacrifice schemes (Bike-To-Work or whatever) and unpaid leave to bring your combined figure to where makes sense.
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Thank you very much. This is very useful to know going forward
 
Is it just rental income less mortgage interest paid that is counted or the full rental income amount ? Thanks
 
Notsavy said:
We need every penny coming into us at present.
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Being very blunt, you've acknowledged that you need all the money coming in as possible yet you are only working part time.

You have lost ~€6.5k in rental profit due to the ecb interest rate increases. And on your PPR you are paying ~€5.5k more in interest. Although from a cash flow perspective, the monthly payment has increased by ~€250/m or €3k/yr.

So for you to 'stand still' financially, you need to earn another €10k or so from employment. You really can't afford the luxury of working part time especially as there are further interest rate increases likely in the coming months

Notsavy said:
40k credit union
43k kids education - current account
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You have far too much cash on deposit. You still have 2 years before university starts so you should be using at least €40k immediately as a lumpsum payment. While the idea of paying it off the rental has the potential to return the capital when you sell, I think you should focus on the PPR as it gives you a better result in terms of cash flow.

As for university, you need to be very clear with your kids that they will need part time work to contribute to the costs. Otherwise it will be very difficult for you. You should familiarise yourself with SUSI but I would be very careful about trying to reduce your income to qualify for a grant. There would need to be a very clear benefit or payoff to do so and this will probably only happen if you are already very close to the threshold.

Notsavy said:
No car loan, but car old and will need upgrade in next couple of years 15-20k
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I don't think you can afford to do that. You will need to manage your budget extremely carefully over the next 10 years. 20k on car is not feasible.

Notsavy said:
Should we give up our tracker rate ?
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This is a difficult one because you have a a very good margin. It probably tips the balance towards keeping it. However, if you value certainty in your finances then the 7 year rate is an alternative option. I don't think any of the shorter terms justify giving up the tracker as you will come out of the fixed rate right in the middle of college expenses.

At least with the 7 year fix on your PPR, it gives you the option to keep the rental for as long as poss before the interest only finishes. You would hopefully have some gain from the rental sale that can be used to further reduce the PPR balance as the fixed rate ends or use it to fund remaining university costs
 
_OkGo_ said:
Being very blunt, you've acknowledged that you need all the money coming in as possible yet you are only working part time.

You have lost ~€6.5k in rental profit due to the ecb interest rate increases. And on your PPR you are paying ~€5.5k more in interest. Although from a cash flow perspective, the monthly payment has increased by ~€250/m or €3k/yr.

So for you to 'stand still' financially, you need to earn another €10k or so from employment. You really can't afford the luxury of working part time especially as there are further interest rate increases likely in the coming months


You have far too much cash on deposit. You still have 2 years before university starts so you should be using at least €40k immediately as a lumpsum payment. While the idea of paying it off the rental has the potential to return the capital when you sell, I think you should focus on the PPR as it gives you a better result in terms of cash flow.

As for university, you need to be very clear with your kids that they will need part time work to contribute to the costs. Otherwise it will be very difficult for you. You should familiarise yourself with SUSI but I would be very careful about trying to reduce your income to qualify for a grant. There would need to be a very clear benefit or payoff to do so and this will probably only happen if you are already very close to the threshold.


I don't think you can afford to do that. You will need to manage your budget extremely carefully over the next 10 years. 20k on car is not feasible.


This is a difficult one because you have a a very good margin. It probably tips the balance towards keeping it. However, if you value certainty in your finances then the 7 year rate is an alternative option. I don't think any of the shorter terms justify giving up the tracker as you will come out of the fixed rate right in the middle of college expenses.

At least with the 7 year fix on your PPR, it gives you the option to keep the rental for as long as poss before the interest only finishes. You would hopefully have some gain from the rental sale that can be used to further reduce the PPR balance as the fixed rate ends or use it to fund remaining university costs
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I have 1 week to revert to ptsb regarding their fixed rate offerings If we were to pay something off capital on ppr now, do I need to ring them advise them of same and then they re-issue an offer to us based on new balance remaining? As I know from news yesterday their raising fixed rates by .75% or would my current offer stand?
 
Notsavy said:
Currently paying per mth : 1553 per mth

Balance remaining 186k
Term remaining:approx 12
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Savings €83k

Notsavy said:
5 Year Fixed Rate - 3.4% -1566.39 permth
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Notsavy said:
Rate above ECB: =+.75
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1) The ECB rate is expected to be 3.5% later this month, so you will be paying 4.25%.
You can fix for 5 years at 3.4%
But you lose your tracker.

Very hard to know as interest rates are hard to forecast. ptsb has a long history of exploiting its customers. After 5 years, they could charge you anything.

I don't expect that ECB rates will be 3.5% for most of the next 12 years.

So on balance, stay on your tracker.

Brendan
 
You have €83k cash.
You are paying 4.25% interest on this. This is the amount you could save by paying it off your mortgage.
That is €3,500 a year.
Pay this off your mortgage today.

Your monthly payment will fall to €864k

You can build up the €700 a month savings into a new emergency fund or car purchase fund.


Brendan
 
Notsavy said:
Lets say if paid 20k or so now off capital for rented property, and then sold it in 2 years time????
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You get tax relief on the interest paid on your buy to let but not on your home.

So it doesn't seem right to pay it off the investment property.

Say ECB rate of 3%
Family home: 3.75%
Investment property 4% - less tax = 2.4% net cost.

The advantage of paying it off the investment property is that you "get it back" when you sell the property.

Not sure that this justifies the extra cost.

Brendan
 
Notsavy said:
***Our Plan was to sell property in 5 to 6 years time and hopefully we might make 30-50k after CGT**
Could do so this sooner maybe in a year or 2 also
Click to expand...

Notsavy said:
Lender :pTSB Residential Tracker Rate Loan
Type: Tracker - Interest only
Term remaining - 7.25 years
Balance remaining -216k
Rate above ECB= 1.05%
Currently paying per mth :637€
Montly rent =1,540 ( cannot increase pressure zone). Well below market rate
Property Purchase Price 174£- Irish, for CGT purposes -€220k in todays money as I understand.
Current Value of Property - 295,000€
Click to expand...

So you have to sell this anyway in 7.25 years.
It's a profitable investment
Rental income: €18,000
Mortgage interest: €10,000 (€216k @4.5%)
Other expenses : €3,000
Profit: €5,000
After tax: €2,500


Although it's profitable, it's risky from a number of points of view
1) The biggest risk is that you may not be allowed to sell it empty. You may have to sell it with the tenants which will greatly devalue it.
2) The tenants may stop paying rent
3) House prices might fall

You are not financially resilient enough to handle these risks, so sell the property as soon as you can and while you are allowed to do so.

Brendan
 
Summary
1) Pay your full savings off your mortgage immediately and save €3,500 a year in interest.
2) Tell the tenants you are selling the investment property - give them formal notice which is probably about 6 months.
3) Sell the investment property and decide at that stage what to do with the net proceeds after CGT - it will probably be best to keep it as the education fund.

Brendan
 
Brendan Burgess said:
You have €83k cash.
You are paying 4.25% interest on this. This is the amount you could save by paying it off your mortgage.
That is €3,500 a year.
Pay this off your mortgage today.

Your monthly payment will fall to €864k

You can build up the €700 a month savings into a new emergency fund or car purchase fund.


Brendan
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Hi Brendan,
Thank you for your advice
To clarify, pay 83k off current PPR mortgage,?
That leaves absolutely nothing in the pot for anything nor kids education in 2 years time, which is so important to us.
I absolutely understand why this would be best thing to do but I am very nervous about having absolutely nothing in an account to have access too in the case of an emergency.
It will take a few months to build up.
Would you have any other calculations that might make sense, based on keeping some savings.
 
Notsavy said:
Hi Brendan,
Thank you for your advice
To clarify, pay 83k off current PPR mortgage,?
That leaves absolutely nothing in the pot for anything nor kids education in 2 years time, which is so important to us.
I absolutely understand why this would be best thing to do but I am very nervous about having absolutely nothing in an account to have access too in the case of an emergency.
It will take a few months to build up.
Would you have any other calculations that might make sense, based on keeping some savings.
Click to expand...
Thank you Brendan, sorry just seeing your other posts now
 
If we were to pay 40k off PPR mortgage,
Hold 20k personal savings for rainy day and hold 23k in kids fund -
What would figures look like?
Tenants have about 11 months on contract left
 
Notsavy said:
Is it just rental income less mortgage interest paid that is counted or the full rental income amount ? Thanks
Click to expand...
I expect it's the former. In your position I'd do what Brendan suggests in post #15, and then I'd play the SUSI game; horses for courses though.
 
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