Moneymakeover rental property sale to pay off mortgage?

H

hgf

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Personal details
Your age: 47
Your spouse's age: 45
Number and age of children: 2 children, age 9 and 13.

Income and expenditure Annual gross income from employment or profession: €84,800
Annual gross income of spouse/partner: €58.000
Monthly take-home pay: combined (€7,326)
Type of employment - Employees Employer type: public servant (me), Full time private company (husband).
In general are you: (a) spending more than you earn, or (b) saving?

Saving (me approx 1k per month)

Summary of Assets and Liabilities
Family home value: €650,000 Mortgage on family home: €218,000 Net equity: €432,000

Rental Property value: €495,000 (Mortgage free) Rental return currently €2150 gross, probably about €1100 nett.
Family home mortgage information
Lender PTSB
Interest rate fixed 2.25% ends Feb 2027
Type of interest rate: fixed. If fixed, what is the term remaining of the fixed rate? 4mths

Remaining term: Just over 15 years
Monthly repayment: €1068, payments currently being covered in full by rental income 2nd property

Other borrowings – car loans/personal loans etc

Do you pay off your full credit card balance each month? No credit cards owned, no loans or debt apart from mortgage on current home.

Pension information
Value of pension fund:

(Me) Public pension plus AVC worth €64,000 this will be used to retire early at 56.

(Husband) € 205,172 / DB € 240,959

Other savings and investments:
Zurich investment fund
Children Savings plan for college - will have 10k by the time each child chooses to go to college, if they do.

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

Current rental property is paying taxman (50% ish) and mortgage on current home.

Considering selling the rental property in summer 2027, due to new tenancy rules and other reasons.

· What do we do with the expected return of approx €380,000 return on this? Should we pay off the mortgage on current home of approx. €218,000? Or is it wise to retain a small mortgage on this property?

· Considering maxing out my own AVC with some of my portion, (currently only paying in 3% when I could pay in 25% of income)

· Any other insights or ideas welcome to build future wealth, but that allows us to enjoy this long term investment coming to fruition also.
 
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hgf said:
Any other insights or ideas welcome
Click to expand...

What's the CGT on the rental? What is happening in 2027? I don't see that the rental is paying your mortgage, those are separate matters. But you are paying 50%+ on tax + costs. It's not giving you a great return, but presumably there is a sizeable capital appreciation that you can get at if you sell now.

Why did you put in that it was only you doing the 1K savings? Are your finances not joint? I would delete your profession for privacy reasons.

It's better to put as much as you can into pensions where there are good tax advantages.

Life insurance is not mentioned. Your husband's job is more precarious than yours.

Your mortgage is a form of saving, it's on an excellent interest rate. I'd be slow to pay that off. (if it were me I'd buy a rental with a better return)

You haven't put in how much you have in the children's college fund.

Do you guys go on holidays, asked because you've no credit cards.

hgf said:
What do we do with the expected return of approx €470,000 return on this
Click to expand...
That's an assumption of house prices rising.
 
Thanks for your reply
Apologies.
Taking selling fees and CGT into account we will have a possible gain of approx €380,000. this figure comes from a current valuation we hope will hold and a calculation of CGT which is only partial as it was our PPR for most of the last 20 years.
No life insurance - advised in the past that as we had the 2nd property mortgage free life insurance wasn't a big deal. Maybe bad advice?

Mortgage on home is on an excellent interest rate but this expires in Feb 2027.

Children's college fund at maturation should yield 10k per child should they choose to go to college.

We do go on holidays but don't out them on credit cards. We pay in advance and in full on Debit cards.
 
I'd recommend selling the rental property when you have the opportunity in summer 2027. You may not get that opportunity again, plus the current net yield is very small. If you re-let in summer 2027, you will presumably get a higher rent, but again, after taxes and costs, the net yield will still not be that attractive. I am assuming your current tenant is leaving next summer.

Considering all the risks involved and that you'll have reduced CGT as the house was formerly your PPR, I would sell.

As to what to do with the proceeds, I think a mixture of paying off your mortgage, AVCs and some rainy day savings if you don't have these already. Presumably if you fix again, the rate will not be as good. Plus I think for sheer peace of mind, a fully paid off PPR is a great think to have.
 
1) Sell the property when you can. What is the relevance of summer 2027? Are your tenants voluntarily leaving?
2) Clear the mortgage on your home - so when the fix ends, go for a variable rate or a one year fix to minimise any penalty for early repayment.

Both actions simplify life. You are busy and you are well off. You don't need a complicated life.

3) Maximise pension contributions.
 
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