Should we buy better house?

H

House2020

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Age: 44
Spouse’s/Partner's age: 43

Annual gross income from employment or profession: 109k plus 6 to 9% bonus
Annual gross income of spouse: 10,000 invalidity pension

Monthly take-home pay: Approx 5000
Spouse take home: 820 per month
Child allowance: 280 per month
Total: 6000

Type of employment: Public sector civil service equivalent

In general are you:
(a) spending more than you earn, or
(b) saving?
Now saving but have been “breaking even” until now with refurbishment of house

Rough estimate of value of home: €435,000
Amount outstanding on your mortgage: €260,000

What interest rate are you paying? 2.6%

Other borrowings – car loans/personal loans etc:
Home improvement loan of 13k paying down at 485 per month.
No car loan

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

Savings and investments: 14k savings - saving bonus payments, odd additional savings plus 280 a month child allowance

Do you have a pension scheme? Yes, approx 11% of my salary going into it. No AVCs. Employer puts 9%. Balance at around 300k. Partner had pension when working balance only 30k

Do you own any investment or other property? No

Ages of children: 4 and 6

Life insurance: Mortgage protection plus 8 times salary by employers. Small other life insurance policy that was linked to property I used to own. Also have income protection in work.

Partner has mortgage protection but no life insurance.

What specific question do you have or what issues are of concern to you?
We are considering selling our house and upgrading to a larger house in better neighbourhood. This will result in a mortgage of about 360k on a house of 525k purchase price. Equity in sale should also clear down existing home loan. No requirement for any further house refurbishment

Are we crazy to do this in our situation?

Partner will hopefully return to work over next 2-3 years on a reduced hours basis due to health issues. Possible income of about 25 to 30k per year reduced hours.

Other items. Will inherit about 200k in a 5 to 10 year timescale.
 
I’m not planning a murder I promise! My (very much loved) parent is quite open and honest about wills and finances and unfortunately of failing health. Probably not relevant at all to our financial planning and certainly wouldn’t want to count on it.
 
Yes we can afford the new mortgage if she doesn’t return to work and also have tested if her invalidity payment was discontinued. Mortgage payment will be about 1900 a month. I also added in a 10% pay cut, 2% rate increase and it would still be manageable (no holidays, meals out etc but manageable).

The new house also puts us in the catchment for an excellent non-fee paying secondary school so it means school fees would not be an issue - although would still need to save for university fees for the kids.
 
Are you really sure you can afford the higher mortgage?

You've effectively zero savings (when you net off the home improvement loan), which would suggest you're pretty much just breaking even at the moment. Your pension contributions are also pretty low (IMO) for somebody at your age.

I would have thought you should hang fire for the time being.
 
Yes we are definitely spending too freely at the moment - maybe test ourselves over the next 6 months and aim to get the loan paid down and then consider.

My pension is due to be about 1m at retirement - I thought this was ok? What would be a good contribution level at age 44?
 
Your current position looks something like the following:

4022

So your total loan repayments are €1,800 a month

If you borrow an additional €100k and add what is left of the home improvement loan to the mortgage, you will have the following:

4023

So your repayments will rise by only €150 a month.

So, yes, you can clearly afford to trade up now if you wish.

My only reservations would be that upgrading by €100k doesn't usually get you a lot more. So you probably should upgrade by about €200k to make it worth it.

As your eldest is 6, you can presumably wait a few years before school fees kick in.

What is the interest rate on the home improvement loan. I think you should probably clear it and start saving again.

You have a very secure job so you don't need much of an emergency fund.

Brendan
 
Hi there - thanks everyone for all the comments. Great food for thought.

Interest rate on the home improvement is credit union rates so quite high. We are planning to pay this off with equity from sale of house but I think we are going to test really curbing our spending, no more house improvements etc over the next 6 months and get this down by an additional 500 per month or more.

Re the 100k not buying much more - We are in a what I think is a fairly unique position as we have a 3 bed starter home (1 bath) which currently sell very quickly due to being one of the cheapest 3 bed semi options in south county Dublin to buy and in the catchment for a couple of fantastic primary schools. Also south facing and 10 mins walk from Luas. We have about 180 equity if it sells at current mkt value due to sheer luck of buying at a good time.

And at the same time the houses we like slightly further out (typically nw facing so giving up that ideal aspect, 4bed, 2.5 bath, 450 sq feet more than current house, better maintained estate but another 10 mins walk from Luas) seem to have softened slightly - so it does seem like we could get decent value for about 100k increase on mortgage.

We would also be happy to rent a room in the new house to a student for digs if we did need to put more into my pension.
 
Ah sorry I see what you mean Brendan - we should use the savings to clear down the loan. Good point.
 
Also best to check that the secondary school you are eyeing have the space to take your kids even if you move there. In our area the free secondary school is so popular, people put down names as soon as a baby is born!
 
Not crazy. I would move to a better area and ideally within walking distance of primary and secondary schools. I wouldn't get hung up on aspect or distance to Luas. I wouldn't count on partner ever returning to work or any inheritance. I wouldn't rent-a-room. I would buy a modest house.
 
CURRENT HOME

Sale price 435
Mortgage 260
= 175
- 10 L costs = 165
Loan 13K paid off by savings

NEW HOME
Purchase price 525K
Mortgage 360K
Deposit 165K
Costs 5K (is there stamp duty)

That's very tight.

Current mortgage 1400
Loan 485
Savings - child allowance 280
Savings - other?
Total 2165
All that can be used for the new mortgage of 1900. So it's certainly affordable given your permanent employment.
 
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Luckily our kids are both “in” the good primary school - one currently there and the other will get in with sibling policy. We don’t need to stay in the direct catchment although won’t be far outside it either (1km) so can still walk or cycle to school.

Kids names both down since birth for the free secondary and the primary is a feeder school so hopefully ok there. Schools are mad in this area so we’ve covered all the bases there with names down deposits paid etc.

We could stay put and just live with the space issues. There is no point building on due to price of construction and existing ceiling price for houses in our estate. Part of me worries that if there is a flood of first time buyer type houses new to the market with good BER etc (ie cherrywood) we might see our very easy to sell house become more difficult to sell and the ability to trade up might disappear. But I’m probably engaging in blinkered thinking here as I did get caught in severe negative equity in the boom - appreciate this is getting into market analysis territory aswell.

The trade up house would be our forever home - a nice 4 bed in a well maintained estate with good residents committee and nice community. I really couldn’t see us wanting to trade up again.
 
Secondary schools are generally filled by feeder primary schools. If you buy in your proposed location, would you get into one of the feeder primary schools with your older child? Would the distance from public transport have an impact on your time at home?
 
House2020 said:
And at the same time the houses we like slightly further out (typically nw facing so giving up that ideal aspect, .
Click to expand...

Nothing will ever persuade me to live in a non sunny house ever again, and if I was in Ireland more so. It is quite amazing how positive an impact a sunny side facing house has in cold climates.
 
Moving home is an expensive and stressful process, especially with kids. I have been through it recently.

You will be looking at a broad figure of €20k to move that you will never see again. All below are rough costs and include VAT

Stamp duty- €5,250
Estate Agent- €6,000
Solicitor Sale- €2,500
Solicitor Purchase- €2,500
Engineer- €500
Valuation- €200
Movers/Storage/Van Rental- €1,500
New Home improvements- ? There is always something, New alarm, Locks, etc.
Short term accommodation, may be a few days/weeks between sale and purchase

If I was in your shoes I would want to be sure that the new house is somewhere you can see yourself living long term so have a chat with some banks and see how much they are willing to lend.
 
Bronte said:
Nothing will ever persuade me to live in a non sunny house ever again, and if I was in Ireland more so. It is quite amazing how positive an impact a sunny side facing house has in cold climates.
Click to expand...
That’s a very interesting perspective. We both do appreciate the light in the back of our our current house. In fact we tend to sit in the kitchen rather than living room from April to September in the evenings.

I agree it is very important to mood and mental health in Ireland. We don’t use the garden hugely though. New house must have SOME decent light (however we think we could live with S or SW to front of house and just use living room more)
 
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