Overpaying Mortgage - should we trade up?

Tee

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Age: 35
Spouse’s/Partner's age: 35

Annual gross income from employment or profession: 92k
Annual gross income spouse: 99k

Type of employment: Private Sector

Expenditure pattern: In general are you spending more than you earn or are you saving - Saving

Rough estimate of value of home: 650K
Mortgage on home: 140K
Mortgage provider: EBS
Type of mortgage: Variable
Interest rate: Don't know

Other borrowings – mortgage on inv. property

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

Savings and investments: 7k savings account, 5k in a fund and very roughly estimate around 7k in shares. Pay 500 per month into the savings account and another 500 per month into the fund.

Do you have a pension scheme? Both our companies pay 8% non-contributory. I pay additional 700 per month AVC. Husband doesn't pay any AVC. In the past we have both paid in lump sums each (bonuses etc) and so both have fairly healthy I think pensions at this stage.

Do you own any investment or other property? Yes. Value roughly 320k, mortgage 240k (inc. remortgage used to renovate our live in home). Rental income 1,350 per month.

Ages of children: 2 year old and 1 on way.

Life insurance: both companies provide 8x salary. Also have mortgage protection.

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

Looking for opinions here as I'd not like to discuss finances or the like with friends. I'm very cautious by nature - and am wondering what other people would consider an acceptable mortgage versus income?

We want to move at some point in the future, we'd thought probably 5 years from now we'd take another mortgage. Houses in the area I like are probably 300k more expensive that where we live now. Currently we overpay our mortgages - paying 3k per month off our main residence (meaning I believe it should be paid off in 5 years from now) and 2.2k per month off our investment property - think that will be paid off in 15 years from now or perhaps a little less (though I'm not entirely sure on that one - I am sure we pay 2.2k though).

We're now thinking should we move sooner? If we move now we'll have a mortgage of around 500k exc the inv. property mortgage. This seems huge to me but on the banks websites it would appear we could easily get this much or more? Based on our incomes etc does it seem like a ridiculously large mortgage or am I just behind the times? Would we be better pumping money into a house we'd stay in forever (and accept having a mortgage for the next 20 or 25 years) than pumping money into overpaying a mortgage (as we do now) on a house we will eventually want to leave and also putting so much into pensions (I could stop or reduce the AVC - not pay in any bonuses etc)?

Our jobs are quite secure and my salary is based on 4 day week. I could go to full time and increase my earnings if necessary (i.e. in an financial crisis). I wouldn't do this just to move though.

We absolutely can't pay out any more than we do now and I'd in fact like us to increase a little the money we have left over for ourselves each month - by perhaps 500/700 euros.

Are we putting our money in the wrong places? It's not like we plan on retiring in 5 years so shouldn't we take on the 'big' debt now?

Apologies if this is unclear, thanks for your advise/help.
 
check out the treacle mortgage calculator, its an easy way to determine your long term savings by increasing mortgage payments now. I think you're doing it pretty smartly by overpaying the mortgage, it means that when you do decide to buy a more expenisive property, you will have a large amount of equity built up so banks will be willing to offer more attractive interest rates on any future mortgage based on a lower loan to value.

One thing i might suggest is that you find out the current rate on your mortgage, given your present LTV on your PPR is about 22% you should be in a strong position to ask your bank manager for a far more attractive interest rate, try NIB they offer good rates on low LTV's.
Also you may consider increasing mortgage on rental property to take advantage of the fact that you do not pay tax on the interest proportion of rental income. it would be well worth talking to a good accountant to get your money and property's working most efficiently for u.
 
Thanks for the advise - treacle mortgage examples are very interesting. I'd never have considered talking to an accountant (I guess I thought they were only for people in business or something)! But will look into that.

Even writing down our situation above made it a little clearer for me. I think now I can see that if we overpay our mortgage or trade up it's probably 6 of 1 or half a dozen of the other (while house prices are stagnant at least).
 
Hi Tee, I know a good accountant and mortgage broker who could help you with your query. Feel free to PM me and I will pass on the details

Regards
C
 
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