Should i sell rental property to clear home mortgage?

[Ben147]

Personal details

Age : 46
Spouse’s/Partner's age: 45

Number and age of children: 3 Age 10,11,13


Income and expenditure
Annual gross income from employment or profession: €118,000
Annual gross income of spouse:€0

Monthly take-home pay €4,300 reduced as I put 10% into share scheme and also max pension.

Type of employment: e.g. Civil Servant, self-employed
Private Sector.

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

I tend to just break even.. struggle to build any real cash savings.


Summary of Assets and Liabilities
Family home worth €280k with a €80k mortgage
Cash of €15k
Defined Benefit pension fund.
Valued at 30k per year when I reach 65. Scheme now closed.
Defined Contribution pension fund: €197k.
I am paying max AVC per year into DC .. approx €28k.
Would like to retire between 58 to 60.
Company shares : €75k but that's over the next 3 year vest period. So approx 25k per year.
Buy to Let Property worth €170k with mortgage of €65k

College fund of 12k.


Family home mortgage information
Lender Bank of Ireland
Interest rate 3%
If fixed, what is the term remaining of the fixed rate? 1 year..

(No need to tell us the monthly repayments or what term is left)

Other borrowings – car loans/personal loans etc

Do you pay off your full credit card balance each month? YES
If not, what is the balance on your credit card?
Car loan 10k


Buy to let properties
Value: €170k
Rental income per year: €9,000
Rough annual expenses other than mortgage interest : €1,000
Lender Bank of ireland.
Interest rate 1.85% tracker
If fixed, what is the term remaining of the fixed rate?

Other savings and investments:

Do you have a pension scheme?
Yes. Details above


Other information which might be relevant

Life insurance: cover with work. Wife gets 3.5x salary


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

Would it be wise for me to sell the rental property now for say 170k ( I bought it for 176k 10 years ago) Good Tennant.

Pay off remaining mortgage of 65k
Allowing for 10k cost ,fees.. have 95k remaining.
Use this to clear my home mortgage of 80k and car loan of 10k.

Then focus on putting 20k per year for the next 5 or 6 years into college fund while keeping max AVC allowed.


Thanks in advance.

 

[Brendan Burgess]

Number and age of children: 3 Age 10,11,13

College fund of 12k.

Then focus on putting 20k per year for the next 5 or 6 years into college fund while keeping max AVC allowed.

You need to clarify your thinking on this.

Buy to Let Property worth €170k with mortgage of €65k

Rough annual expenses other than mortgage interest : €1,000
Lender Bank of ireland.
Interest rate 1.85% tracker

This is a very profitable investment.

You have €9k rent and €2k expenses, so your profit is €7k and your profit after tax is about €3,500

Not a bad return for an investment of €100k

If you pay off your home mortgage, you will save €2,400

 

[Brendan Burgess]

Company shares : €75k but that's over the next 3 year vest period. So approx 25k per year.

College fund of 12k.

Car loan 10k

1) Your investment property can be your College Fund. In other words, sell it if and when you need cash for college which won't be for at least 5 years.

2) Your shares are also your "college fund".

3) You should not have €12k in a deposit account earning nothing, while paying 3% on your mortgage. So pay this off your home loan.

4) You don't say what the interest rate is on your car loan, but if it is more than 3%, pay off your car loan first.

5) Sell off your shares as soon as they vest and pay down your home loan. You will have it cleared in no time.

By the time, one of your children reaches college you will have
1) No mortgage payments on your family home as you will have cleared your mortgage
2) Some shares vesting
3) A much reduced mortgage on your investment property

At that stage, I would imagine that you will be able to fund your college fees from your income and from cashing shares. But if not, you could sell the investment property then and that will leave you with plenty of money.

Brendan

 

[Ben147]

Sounds a very solid plan Brendan thanks for reviewing.
My plan was to put between 15 to 20k per year from sale of shares into a college investment plan...
But I like your idea of using this money to pay off mortgage quickly.. and then be in a good place when college cost arrive.

 

[Ben147]

With the investment property as a back up / safety net.

 

[SPC100]

Would it be wise for me to sell the rental property now for say 170k ( I bought it for 176k 10 years ago)

That sounds very surprising. I would expect it to have much higher value if bought in 2011.

Are you confident on the current value and purchase price numbers?

 

[Ben147]

My mistake. It was 2006 when I purchased at 176k.
Now valued between 170k to 190k

 

[SPC100]

Time flies! Those dates and values make more sense to me!