Refurb and extend (big job) now or wait....or move....or smaller job.

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DundrumQ

Registered User
Messages
14
Hi. Hoping I can get some advice. We're looking at doing a significant job to a 1900s house. Needs re-wire, re-Plumb, insulation, new windows, refurb (kitchen, bathroom). So that's the bare minimum. This would cost 150-200k est.

We have tenders in for a much bigger job, including the bare minimum plus a 2 storey extension giving us bigger kitchen dining, additional living room, another bathroom (2 grown kids, 2 adults, 1 small bathroom), better light and space. Tenders coming in around 450k all in.

We're finding it difficult to make up our minds....do the minimum, the bigger job, or move to avoid the hassle of doing any job. We love our current location so moving is unlikely. Though if house market were to crash it might be an option as we'd be trading up.

Financially we're in a pretty good place, summary below, though doing the big job means borrowing about 250k, leaving total borrowing at about 400k with house value about 1.3m.

Personal details

Age: 49
Spouse’s/Partner's age: 48
Number and age of children: 14 and 17


Income and expenditure
Annual gross income from employment or profession: 135k
Annual gross income of spouse: 25k

Monthly take-home pay: 7k
Type of employment: private sector, PAYE

In general are you:
(a) spending more than you earn, or
(b) saving?
Saving


Summary of Assets and Liabilities
Family home worth 900k, 140k outstanding.
240k cash.

Family home mortgage information
AIB tracker, 1% margin

Other borrowings – None
Do you pay off your full credit card balance each month? Yes

Buy to let properties: None

Other savings and investments: None

Do you have a pension scheme?
Yes. Contribute 4% salary per month matched by employer, worth about 35k.
Also have a buyout bond worth about 920k. I could access at age 50 if I needed to.

Do you own any investment or other property?
Potential company flotation worth 60k-80k in next 2 years.

Other information which might be relevant
We both have a parent that may leave us assets/money. In their late 70s and healthy, hopefully they'll live another 20nyears....reason I mention it (at the risk of being crass) is that we're likely going to see a lump sum of 200k or thereabouts at some stage.

Life insurance: yes, via work


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

Should we borrow 250k to do the big job?

Someone please tell me how bad an idea it is to have as a rainy day idea to access the buyout bond at 50! And also how bad an idea it is to make this decision on potential income via inheritance at an unspecified date!

That said, assuming work is secure (it is v likely to be) and we stress test borrowing expecting higher interest rates, then it feels we'll get q fair bit of bang for our buck with the bigger job. House would be worth about 1.3m after it. South Dublin, nice area.

Should we wait for prices to come down - may never happen, and the sooner we do the big job the better.

We bought near peak in Aug 2008, feels like we might be timing this awfully again....interest rates going up, inflation, cost of refurb, bloody awful seai grant schemes etc.
 
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Will the kids continue to live at home during college? If so I would go ahead and do the refurb on your current house. 1- you love the area. 2-You don’t love your current house in the state it is in. 3- it is very affordable for you, both the mortgage and the extension. 4- you anticipate an increase in your assets of €950K from the bond, €200K each? From inheritance, €60K from flotation, so the risk of it not being affordable is low.

If the kids are moving away then make it a very nice house for the two of you. Probably could do a good job with your current cash. Or be smart with the design and make a self contained section that you could have an adult child live in, in the future.

The only issue I see is you have a very small pension pot and you don’t mention if your spouse has one. You could make significant contributions to your pension funds from your savings in the next 10-15 years which might be prudent.
 
In your shoes, I would do the bigger job. You are in a really strong financial position. You have €240k in cash and the ability to access circa €230k almost tax-free from the BOB in reasonably short order. You might be a little optimistic to think that €450k spent on a €900k house increases the value by €400k though.

You are in ‘secure’ employment, which is a positive. Yes, you have the BOB, but I think your 4% pension contributions are too low and need to be increased.

I would discount potential future inheritances and the potential IPO money from my thoughts completely.
 
DundrumQ said:
Should we borrow 250k to do the big job?
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I think so. You have a high income and a good asset position and there isn't huge personal risk as I see it given the presence of the buy out bond in a few years.
DundrumQ said:
That said, assuming work is secure (it is v likely to be) and we stress test borrowing expecting higher interest rates, then it feels we'll get q fair bit of bang for our buck with the bigger job. House would be worth about 1.3m after it. South Dublin, nice area.
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I agree that you are unlikely to add so much value with that expenditure but that's not a reason not to do it. It's more enjoyable to live in your wealth than to watch it sit in the bank and if it's likely that your kids will live at home into their 20s it makes sense that everyone is comfortable.
 
Clamball said:
Will the kids continue to live at home during college? If so I would go ahead and do the refurb on your current house. 1- you love the area. 2-You don’t love your current house in the state it is in. 3- it is very affordable for you, both the mortgage and the extension. 4- you anticipate an increase in your assets of €950K from the bond, €200K each? From inheritance, €60K from flotation, so the risk of it not being affordable is low.

If the kids are moving away then make it a very nice house for the two of you. Probably could do a good job with your current cash. Or be smart with the design and make a self contained section that you could have an adult child live in, in the future.

The only issue I see is you have a very small pension pot and you don’t mention if your spouse has one. You could make significant contributions to your pension funds from your savings in the next 10-15 years which might be prudent.
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On your question on pension pot - 1 have near 1 million, between current exec pension (~ 40k after 4 yrs) plus ~920k buy out bond, so I feel I am good here. Wife has a pension too, about 100k I think. I'll be keeping an eye on opportunity to increase contributions, my expectation for next couple of years is that the extra mortgage will mean things are tight enough. 2 kids in private school = 1400 per month. So won't be prioritising increases or AVCs.
Undecided if they kids go to college in Dublin. It would be a great experience for them if they went elsewhere but more financially attractive if they stayed here. Have thought about an older version of the house with the big job, could have a generous ground floor apartment & separate upstairs, but that's a long way off.
Gordon Gekko said:
In your shoes, I would do the bigger job. You are in a really strong financial position. You have €240k in cash and the ability to access circa €230k almost tax-free from the BOB in reasonably short order. You might be a little optimistic to think that €450k spent on a €900k house increases the value by €400k though.

You are in ‘secure’ employment, which is a positive. Yes, you have the BOB, but I think your 4% pension contributions are too low and need to be increased.

I would discount potential future inheritances and the potential IPO money from my thoughts completely.
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Thanks for the input. Solid advice to discount things that might not happen, or where timing is out of our control.

I'd be loathe to touch the buy out bond but it is there as a rainy day option if we need it. Am also saving €1300 per month from now as if paying a new mortgage to stress test ourselves. Every month there seems to be something else that needs to be paid, so not 100% sure how comfortable we'll be with the new mortgage, but know we will make it work.

On pension - if I have excess cash month on month when we have the new mortgage then the pension is where it'll go, but I don't want to put pressure on monthly disposable income - really want to live life now as well as provide for the future. I guess it's about balance. We're also thinking that we could rent out a room if we needed additional cash, but I don't think I want to do this to pay more into pension, this would be to add to disposable income if we needed to.
NoRegretsCoyote said:
I think so. You have a high income and a good asset position and there isn't huge personal risk as I see it given the presence of the buy out bond in a few years.

I agree that you are unlikely to add so much value with that expenditure but that's not a reason not to do it. It's more enjoyable to live in your wealth than to watch it sit in the bank and if it's likely that your kids will live at home into their 20s it makes sense that everyone is comfortable.
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Good point on the value of the house, and I would agree. But we're not looking to make a return on the investment as such. We've no intention of ever moving unless we have to. Short walk to friends, shops, sports etc. Hope to be taken out of here in a box!

Bottom line for me summed up by "living your wealth" or living for the now, rather than leaving loads behind. We'll be a long time dead. And this doesn't seem anything approaching reckless, we've just always been careful. It'll give us a family house where kids and their friends can come and hang out, and in the future we can host grandchildren fingers crossed.
 
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You probably should access the BOB…

a) To save yourself interest on loan repayments

b) To preserve your Standard Fund Threshold

I plan to do the same as an aside.
 
Interesting....I hadn't thought about that angle too much because my default is "leave the pension grow, tax free pot" etc

I hadn't really been too concerned about SFT....given I'm not contributing too much now to my exec pension, but I guess that 920k could compound/grow quite fast in the next 10 years.

Re accessing the BOB, is this the right way to think about it?
  • Accessing BOB would allow me to fund the build with little or no borrowing
  • Repayments on borrowings is on already taxed income, and rates are rising
  • If I have zero/low mortgage I can start to max out pension and so build up the element of the BOB I eat into
  • From next year that could be up to 35k, all tax free (age 50, 25% of salary)

Any other thoughts on pros and cons of accessing the BOB? Seems a good option assuming I continue to remain employed at this level for 5 or 6 years, in which time the pension total should be pretty much restorer to what it is now.

The only thought I had about accessing the BOB now is that now is maybe not the most efficient time, given I would not be using any of the 20% tax rate that can apply to the amount over 200k. But maybe I am overthinking things.
 
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The €200k/€300k tax-free/20% elements are lifetime limits so you can still use the remainder of your €300k band later on based on current rules.
 
We were in a very similar boat last year and decided to go for the cheaper route (still ongoing but the bulk of the work is done now). We're spending 150k vs a quote of 350k and likely 400k. Our house is worth 850/900k.

For us, when we analysed it spending 350k+ on a huge job made little sense. We would have been better off to sell and buy another house!
Also, your kids are 17 and 14 - almost adults. It's very likely at least one, and maybe both, have left your house for good within five years.

For us it came down to Need vs Want. We needed new bathrooms, a kitchen and a remodelled interior, plus a retrofit. We thought we wanted something much bigger. We didn't need it.

Good luck with your choice!
 
Truffade said:
We were in a very similar boat last year and decided to go for the cheaper route (still ongoing but the bulk of the work is done now). We're spending 150k vs a quote of 350k and likely 400k. Our house is worth 850/900k.

For us, when we analysed it spending 350k+ on a huge job made little sense. We would have been better off to sell and buy another house!
Also, your kids are 17 and 14 - almost adults. It's very likely at least one, and maybe both, have left your house for good within five years.

For us it came down to Need vs Want. We needed new bathrooms, a kitchen and a remodelled interior, plus a retrofit. We thought we wanted something much bigger. We didn't need it.

Good luck with your choice!
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We've looked at selling/buying. Only makes sense if it's walk in condition. And any we've seen have been inferior location and not to our taste or previously rental and need money spent. So no real saving and a few compromises on top.

Unless people can tell me we'd be mad to cash in BOB I think we will go for the bigger job.
 
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