Pay off mortgage or trade up?

H

homeseller

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AGE: 44
Spouse’s/Partner's age: 42

Annual gross income from employment or profession: E110,000
Annual gross income spouse: 0
Monthly take home pay: E 5500 (approx...)
Expenditure pattern: Modest expenditure and regular savers.

Rough estimate of value of home: E750,000
Mortgage on home: E150000
Mortgage provider: AIB
Type of mortgage: Variable : E860pm
Interest rate : 2.8%

Other borrowings: None.

Do you pay off your full credit card balance each month? Yes

Savings and investments:
A total of E180,000 across savings and investments and E25000 in current acct



Do you have a pension scheme?
Yes, but spouse does not have one

Do you own any investment or other property? No.

Ages of children: 4 children - 5 to 13

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

We are looking to trade up and move from a semi - d to detached. On paper everything is fine but we live in south d and 3 of the 4 children attend fee paying school (our choice). Therefore we have school costs of approx 18k a year. We are mortgage approved and have found a property but we are concerned about only having 50k as a reserve once we buy into a new home. We don't want to change them from their schools. We have both worked hard to save up and would love to own a detached house and we feel we could make it work. However we are concerned that our education reserve would be depleted very quickly. My wife has the option of returning to work which is definitely feasible. If we don't move should we look to reduce our existing mortgage to 100k and just focus on being mortgage free in as short a time as possible and give up the new home dream? Thanks
 
How have managed to be in such a strong position financially? e.g. did you inherit money? I’m struggling to see how €5,500 a month net got you there.
 
Hard to comment without further info.

What is the new mortgage amount you would be taking on?
I am unable to see why you would be concerned about a 50k reserve if you are currently paying school fees now + still saving
What is your monthly expenditure now vs future with increased mortgage / when does the 4th join fee paying school.
Your wife returning to work at what salary level? - This probably has a material impact on your monthly income levels.
 
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"However we are concerned that our education reserve would be depleted very quickly" - does this mean that you think that after the move you would not be able to survive month to month without dipping into your 50k reserve? Surely very much dependent on whether you have a new income coming into the house or not.

I'm also at a loss to understand this: "would love to own a detached home"
What's so great about detached houses versus semi-detached? Surely location, house type trumps whether another house happens to be stuck to yours or not? If you're not happy where you are, maybe better off focusing on things like quality of house, neighbourhood, proximity/ease of getting to schools, length of commute, quality of life etc.
 
I would say that it should affect OP's decision. It's hard to see how OP has built up €600k equity in PPR and has 200k savings while supporting a family of 6 on €5500/m. Spouses salary if they return to work would be a big influence, particularly if they are in a similar salary range at €100k

If a large percentage of their current PPR was purchased with an inheritance, then it would be unlikely that they can afford to pay the increased mortgage and pay for 3rd level based on their income alone. I'm assuming they will all go to 3rd level if they are already in fee paying schools.

It all depends on the value of the new property and how much the spouse can earn, maybe they can afford it
 
I agree... Think it has an impact also on how best to give advice here... Would imagine it's a combination of big rise in property value, double income for a long period prior to the 4 kids etc
 
We didn't get any inheritance. I wish! We both worked full time on good salaries and worked on a house and sold it. Just simple hard work!

My wife gave up work a while back and we all benefitted from her being home. She would not be going back full time. Our concern really is around having no reserves really as we will use the cash for education and college, but we would like a detached house. As we are in dublin we can imagine our children may live with us for a while!
 
homeseller said:
We didn't get any inheritance. I wish! We both worked full time on good salaries and worke
Click to expand...

In that case, well done to be in such a position. I was half guessing that you both had good salaries at one point. I suppose now you need to work out what your new mortgage would be and what savings you would have if you upgrade. Basically how much would your ideal home cost you, would it be a €1m property or above? It would definitely help if your wife could return to work.

The kids can also get a part time job through college too, you can fund their education but you don't have to fund their lifestyle
 
@Gordon Gekko

If the OP has received an inheritance is it relevant to the question asked?

If it is not relevant why did you ask?

When the reasoning is questioned, why fall back on quasi-insults?
 
Thirsty said:
@Gordon Gekko

If the OP has received an inheritance is it relevant to the question asked?

If it is not relevant why did you ask?

When the reasoning is questioned, why fall back on quasi-insults?
Click to expand...

Of course it’s reasonable!

Have you any experience of advising anyone?!

The OP has €800k of wealth on €5,500 a month with 3 out of 4 kids in private school.

My question is who are you to query my bona fides? It’s clearly a legitimate question I’m asking; i.e. what’s the missing part of this puzzle, e.g. inheritance, was the other spouse on big money and might that recommence?

Yet you feel you’ve the right to try and start and argument! What are your bona fides? Have you anything helpful or constructive to bring to the table?

I wouldn’t even consider it lateral thought to try and understand how a person got here before trying to guide them somewhere else; I’d consider it a pretty mundane part of the advice process especially when someone has got themselves into a quite stellar position which sticks out like a sore thumb. But you seem to think it’s something untoward or rude. Laughable.
 
So if the inheritance is relevant, then explain why that is the case.

It seems to me that you are reading far more into a simple question that is raised out of curiosity than a single sentence can reasonably be expected to bear.
 
It is obviously relevant: How did you amass your current wealth?
a) From a large inheritance...bad idea to take on more debt based on single income
b) from hard work and 2 good incomes...reasonable to upgrade if joint income increases again and OP's history of being financially prudent
 
The issue here seems to me how secure the €110k income is.

I assume that the amount of the mortgage repayments and the term are manageable withing your existing income.

If your income is secure then the issue of the reserve is not crucial. If your income continues, fine, if it does not a €50k reserve will not last long.

If the cashflow depends on your wife returning to work, maybe she should do that first before taking on the mortgage.
 
I didn't take any offence in relation to inheritance..glad someone thinks we're in a good position! It is really all our own work. Thank you for the feedback.
 
You are halfway through the game of life.

The main disadvantage of buying again is that it will cost money. What will you lose if you buy?

It would mean you will work for longer before you retire or you will retire with less disposable income, or you commit to downsize later in life or your partner goes back to work.

How much more expensive is the new house?

How well set are you for retirement?

The value of more house vs less retirement depends on how you feel about it and working.
 
Considering just the short term 5500-1500 school - say 1500 new mortgage leaves you 2500 for all the rest. Is it enough for your lifestyle?
 
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