Too much savings and want to move - but already burned by property.

Aladdin

Registered User
Messages
34
Age: 47
Spouse’s/Partner's age: 50

Annual gross income from employment or profession: 65k
Annual gross income of spouse: 100k (50k artists exempt)

Monthly take-home pay: Varies, due to nature of our careers. We just pay ourselves monthly household expenses, and rest goes straight into savings.

Type of employment: Both self Employed.

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

Rough estimate of value of home: 750k
Amount outstanding on your mortgage: 250k interest-only, redeem date 2029 - repayments: 220 pm
What interest rate are you paying? ECB + .5

Other borrowings – car loans/personal loans etc 210 pm - will be fully repaid in May.

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?

Savings and investments: 500k cash deposits.

Do you have a pension scheme? No, 50k of above income is tax-exempt due to husband's artist's exemption and we're focused entirely on rebuilding saving. Will consider this once we've sorted our property situ.

Do you own any investment or other property? 25k physical gold.

Ages of children: 11

Life insurance: Mortgage protection.


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

As above, we've too much savings at the moment, but we're carrying a Capital Loss of 250k from selling at a huge loss a property bought in the boom (2006) and using savings to get out of that. Because of that situ we moved to our current PPR which was previously a rental and sat tight for a few years to try and rebuild those savings, which we've now done. As mentioned we are both self-employed and due to the nature of our careers - earnings are patchy but at least some of it is tax exempt which helped us rebuild the cushion.

Our situation now is ideally we would like to move because the house we're in was more out of necessity after losing on the previous one, plus the int-only tracker allowed us some breathing space to save. But the location isn't the best; it's close to a local authority estate that is can be very noisy with barking dogs, loud parties and general anti-social stuff in the vicinity.

We did some renovations in the interim, so ours would present well and EA reckons would sell easily, but we're hesitant about using our savings to trade up and pouring the whole kit and caboodle back into property again, especially given the current crisis and how that might pan out economically. We could use savings to pay off the tracker but are reluctant to do this when the prospect of trading up is on the cards anyway.
Timewise though, we need to make a decision before redemption date in 2029 and more importantly, before secondary school becomes a consideration as don't want to uproot our son in the middle of that.

A wildcard is that there's a big site adjoining ours that's on the market for 200k (no planning). Due to rights of way/access issues we are well-positioned to add value to the land by changing entrances/access etc and could likely get planning to extend our current place onto it to make it work better for us, position living areas away from neighbouring noise etc. And could in time carve up the rest for another site to sell-on.

We're just not sure which is a better use of our money, and are very risk averse due to previous loss. So instead of trading up are wondering if we should seriously consider the site development as a way to improve our living situ. Plus look at it as a future investment for which we could also avail of the capital loss on any future development. If we sell our current PPR, we'll also be liable to some capital gains from the time it was rented so could utilise on this also, but wouldn't be much.

As you can prob tell, we're really not great with weighing financial pros and cons over emotional ones and would love someone to throw a cold eye over it...
Thank you.
 

NoRegretsCoyote

Registered User
Messages
3,013
Do you have a pension scheme? No, 50k of above income is tax-exempt due to husband's artist's exemption and we're focused entirely on rebuilding saving. Will consider this once we've sorted our property situ.

I won't give advice on the house because I think that's more of an emotional question than a financial one.

A bigger (and I would say more urgent) issue is that you're both hitting 50 with zero pension fund and 500k in cash. You'll want to keep a cash buffer of course with irregular incomes but there is no way you need that much. Do you want to be sitting in a palace on the state pension down the line?

I would immediately set up a pension fund and try to get each one to €200k within 3 years, and then contribute at least €20k pa after that. I wouldn't go 100% equities, but still a big majority equities.

PS: why do you hold gold?
 

Aladdin

Registered User
Messages
34
Thanks, yes we're keenly aware of that pension time bomb also, and were planning to turn to that next once we've made a final decision/plan of action on the house situation. We moved some of our cash into gold last year purely for inflation-safety (read someone giving advice on here about it actually!) and thought we might as well hang on to it as it was hard enough to get a hold of at short notice at the time.
 

niceoneted

Registered User
Messages
1,996
do you like the area you are living in? What value home would you be considering if you were to move?
 

Brendan Burgess

Founder
Messages
44,626
This is a very interesting and complex problem which will require a lot of unpicking.

If you sell your home , you will have equity of €500k + €500k savings, so that is plenty to buy a house.

But as ted asks - how much do you want to spend on a house?

That really is a key question.

Brendan
 

NoRegretsCoyote

Registered User
Messages
3,013
We moved some of our cash into gold last year purely for inflation-safety (read someone giving advice on here about it actually!) and thought we might as well hang on to it as it was hard enough to get a hold of at short notice at the time.

Property is also a good hedge against inflation, and you have plenty of that:)

Time is really against you on the pension issue. If you could prioritise buying gold I'm sure you can prioritise at least setting up a PRSA and putting a few thousand into it.
 

Brendan Burgess

Founder
Messages
44,626
A wildcard is that there's a big site adjoining ours that's on the market for 200k (no planning). Due to rights of way/access issues we are well-positioned to add value to the land by changing entrances/access etc and could likely get planning to extend our current place onto it to make it work better for us, position living areas away from neighbouring noise etc. And could in time carve up the rest for another site to sell-on.

This sounds like too good an opportunity to miss as you are in the driving seat and you have the cash to exploit it.

Get an architect around to have a look at what is possible. A local architect is best as they will know best what the local authority would allow.

Then, if it works, buy the site.
Get planning permission for a new house or houses.
Then sell the lot.

Let someone else do the work and take the risk of developing it.

Brendan
 

Brendan Burgess

Founder
Messages
44,626
You have plenty of money to enable you to move, so you should move.

You don't really like the area, and extending the house onto the site won't change that.

With your money, you should be able to buy in the location you want , within reason.

Brendan
 

Brendan Burgess

Founder
Messages
44,626
While the tracker is good value, don't let it dominate your thinking.

At the moment you have a tracker of €250k @0.5% while you have €500k cash on deposit.

So the tracker is costing you €1,250 a year.

If you buy a new house and keep your existing property as an investment, you will probably need a mortgage.

If you sell your existing house, you won't need a mortgage.

You can probably borrow at 2.5%, so losing the tracker would cost you €5k a year for 8 years. €40k. Which is not huge in the overall context of things. So forget about the fact that you have a tracker, when you are deciding what you want.

Forget about the 2029 date as well. If it suits you to sell the house and repay the tracker in 2 years, do so.

Brendan
 

Brendan Burgess

Founder
Messages
44,626
Age: 47
Spouse’s/Partner's age: 50

Annual gross income from employment or profession: 65k
Annual gross income of spouse: 100k (50k artists exempt)

So you have €65k of income and your spouse has €50k of taxable income.

This screams start a pension.

Contribute in the years during which you have income taxable at 40%.

Your spouse has €15k of income taxed at 40% and you have €30k of income taxed at 40%.

You can put in 25% of your income which is €16k and you should do so.
Your spouse can put in €15k and they should do so.

I don't think you need to wait to sort out the property to do this.

And, I think you can contribute for last year as well.

Don't forget that this combined €31k will result in a reduced tax bill of €12, so the net cost to you is €19k.

Brendan
 

Aladdin

Registered User
Messages
34
Ideally we'd like to move 'sideways', pay about the same or a little over what we'd get for our own (750 - 800k?) on a place in a slightly better location away from noisy neighbours etc, but everything in this price bracket seems to need a lot of renovation - so would need to set aside 200k or so for that plus buying/selling costs for both...
 

Aladdin

Registered User
Messages
34
Sorry, can only post every 20 mins or so for some reason. Basically it's coming down to a choice between spending 200k or so for better neighbours, or the same amount on a site/development for more investment potential.
A true case of heart v head!

Good take also on the tracker Brendan - but given the irregularities in my husband's income (last year's was decimated by covid restrictions), the banks are leery and borrowing is nigh on impossible. Hence our reluctance to part with that and ongoing obsession of keeping a cash cushion. And reluctance to commit full-on to a pension until we - literally - know the lay of the land.
 

Brendan Burgess

Founder
Messages
44,626
You have enough money to focus on living in the house and the area you want.

Everything else is secondary.

So start with that objective.

Take it in the following order

1) Call an architect and get his ideas for the development.
2) Ideally get planning permission for the site which should make it worth more than the €200k you pay for it.
3) Sell the site - you will then have €600k or €700k
4) Buy your new house and fix it up.
5) Sell you existing house

There is an annual limit on what you can contribute to your pension. If you don't use it, you lose it.

So, really you do need to contribute for last year by the deadline, which I think is October of this year.

Brendan
 

Aladdin

Registered User
Messages
34
You have enough money to focus on living in the house and the area you want.

Everything else is secondary.

So start with that objective.

Take it in the following order

1) Call an architect and get his ideas for the development.
2) Ideally get planning permission for the site which should make it worth more than the €200k you pay for it.
3) Sell the site - you will then have €600k or €700k
4) Buy your new house and fix it up.
5) Sell you existing house

There is an annual limit on what you can contribute to your pension. If you don't use it, you lose it.

So, really you do need to contribute for last year by the deadline, which I think is October of this year.

Brendan
I get you. So use the cash as an investment first and foremost, add value and then use the proceeds of the investment to move after that? Its a longer term strategy than we'd considered but def feels like a sound one. Assuming it works out!
OK will get on the pension thing right away. Any recommendations for an idiots guide to getting started?
 

Brendan Burgess

Founder
Messages
44,626
I don't think that it's a very long-term strategy.
Get an architect out to look at it.

Buy the site.
Apply for planning permission.
Sell the site.

When the planning permission is well advanced, you can start looking for a new house.

By the time you find the house you like and go sale agreed on it, you should have the planning permission and should be able to borrow on the strength of it or get a quick sale.

Brendan
 

mustang01

Registered User
Messages
29
OP I hear you re being risk averse after paying too much for a property. We did the same but held on to it, even though the place never really suited our needs. Important to get it right so take your time.
 
Top