put savings toward home or investment property?

I

IceB70

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Age: 46, spouse 45
Salary: €125k, spouse salary €90k
Combined monthly take-home:€9.3k
Both PAYE private sector workers
In general we are: saving

Home: mortgage €407k, value €580k, rate 0.55%
monthly repayments ~€1700
Borrowings: contributing €570 per month to cover investment mortgage shortfall

We pay off credit cards each month

Savings and investments: 380k

Pensions ?
Current value ~ €370k. 5% contribs, employer matching 5%
Spouse Current value ~ €270k. contribs 5%, employer matching 8%

Do you own any investment or other property?
Investment Property 1
mortgage €225k, value €240k, rate 5.5%
monthly repayment:€1,700
rental income €1,300
annual property mgt fee €1400

Investment Property 2
mortgage 250k, value 275k, rate 1.1%
monthly repayment:€1,680
rental income €1,510

Ages of children:
11, 8

Life insurance:
with work pension scheme

What specific question do you have or what issues are of concern to you?
Have school/college fees to consider in future, so need to keep some savings
Risk averse and like to keep a savings cushion
Above that, we should use savings to reduce debt

Investment Property 1 has expensive mortgage (5.5%)
don't have original purchase price to hand, but was > 240k, so no CGT in event of sale
Main question is whether the forum would recommend
a) Paying off Investment Property 1
b) Selling Investment Property 1

2nd question: With remaining funds, would you
c) pay toward Investment Property 2
d) pay toward PPR

What other options would you suggest?
 
I think if I was in your shoes, I would pay off the mortgage on Investment Property 1 and use the resulting increase in your cash flow to max out your pension contributions (AVCs).

I would maintain a high allocation to equities in your pension funds and would keep the bulk of your remaining cash savings in 5-year State Savings Certificates.

I would be fairly relaxed about paying down the other mortgages ahead of schedule given their low rates.

Hope that helps.
 
I'd agree with @Sarenco . Pay off the mortgage on investment 1. It's a 6.5% gross yield, which might not be fantastic, but what else would you do to get a return without taking on risk?

For a high earner, you've relatively low pension contributions. Max those out and you'll have a good investment risk across property and equities (via pension).

How long is left on your PPR mortgage? I'd look at clearing it before your youngest finished college if you've any plans for early retirement.
 
Thanks Sarenco.
Thanks RedOnion. The PPR mortgage has 20 years left on it. Bought just before the top of the market (2006) I’m afraid!
 
Paying off the mortgage on property 1 is clear.

In normal times,I would recommend selling property 1 as you have too much property - but where would you put the proceeds?

Shares might be too high at the moment, so its not necessarily less risky than property.

Who is the home loan with at 0,55%? Ask if they will give you a discount for early repayment. I doubt it but if its a vulture fund they might.

Brendan
 
To echo what others have said, I’d clear the mortgage on Investment Property 1, I’d make catch up AVC payments for 2017, and I’d look to maximise the AVCs going forward.
 
That Mortgage is with Pepper (from Danske) - will ask about discount.

Thanks for all the feedback.
Like the forum itself, it’s veen very useful.
Thank you!
 
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