Too young to be mortgage free?

[Blackrock1]

It's truly been a bit of an eye opener since we started looking, to be honest. For example, we recently went to view a 4-bed place 1600 or so sqm priced at 1.075, which on paper looked decent enough, needed windows, kitchen and bathrooms replaced but on a tiny plot and a garden with barely space for a shed, very tight to neighbours and overlooked on all sides etc. Last I heard, bidding on it was up to 1.375..
**Apologies, I understand discussion of property prices is not allowed, and above is for illustrative purposes only.**

you need to temper your expectations a little, if you want a house in a prime area for your budget there will be a compromise somewhere, normally its plot size, proximity of neighbours etc

 

[DublinHead54]

i think thats a little optimistic price wise, this is what i imagine is the kind of the thing the OP is referring to,

12 Grove Lawn, Blackrock, County Dublin - Mason Estates Dundrum - 4637125 - MyHome.ie Residential

12 Grove Lawn, Blackrock, County Dublin, 5 Bed, asking price €975,000, brought to market by Mason Estates Dundrum, Residential - 4637125 (rated C3)

www.myhome.ie

needs plenty of work, not sure you would have this refurbished for 1.2m

That house is 900k though which was not my point. I was indicating that the majority of houses that are 1.2m in a standard estate will have had work done, and not a complete reno required in my experience. I would be very surprised to find a standard house on a small plot in an estate (4bed 150-175m) for 1.2m in a poor state. At least in Blackrock anyway, although there are probably a few exceptions.

I wasn't commenting on the cost to renovate, and I agree that with present costs renovation can cost more than the market value of the home post renovation.

My point of reference is a house beside Blackrock rugby club (5bed 200sqm) renovated a few years ago, sold in the last few months for 1.2m.

 

[PGF2016]

That house is 900k though which was not my point. I was indicating that the majority of houses that are 1.2m in a standard estate will have had work done, and not a complete reno required in my experience. I would be very surprised to find a standard house on a small plot in an estate (4bed 150-175m) for 1.2m in a poor state. At least in Blackrock anyway, although there are probably a few exceptions.

I wasn't commenting on the cost to renovate, and I agree that with present costs renovation can cost more than the market value of the home post renovation.

My point of reference is a house beside Blackrock rugby club (5bed 200sqm) renovated a few years ago, sold in the last few months for 1.2m.

Both of the houses mentioned are 5 beds and more than 170m2. I know they are only being used as examples but what about something like this:

Corner House,1A Rowanbyrn,Blackrock,Co. Dublin,A94AT56 - Sherry FitzGerald Dun Laoghaire - 4605169 - MyHome.ie Residential

Corner House,1A Rowanbyrn,Blackrock,Co. Dublin,A94AT56, 3 Bed, asking price €795,000, brought to market by Sherry FitzGerald Dun Laoghaire, Residential - 4605169 (rated B2)

www.myhome.ie

3 bed 140m2. Detached. Modern. More than enough for a family of 3 in my opinion.

 

[NoRegretsCoyote]

hanks to some carefully considered and cost-effective home improvements (plus heat in the market obvs) have managed to add a lot of value to our current PPR, though sadly not enough to close the price differential gap between the two locations.

I very much doubt this. Home renovations rarely add more market value than what you put in as you are doing things to your own taste and needs, not to those of a potential purchaser!

given its obvious desirability, seems like a 'safe' place as any to put our savings and to be during a recessionary period,

You shouldn't think primarily of your PPR as an asset but as a place to live. In any case a house is a depreciating asset that requires constant maintenance and spend just to stand still. It's nice to have a comfortable house, but there is a big opportunity cost to having a house bigger than you need. That wealth could be sitting quietly growing in a pension fund.

 

[Steven Barrett]

That house is 900k though which was not my point. I was indicating that the majority of houses that are 1.2m in a standard estate will have had work done, and not a complete reno required in my experience. I would be very surprised to find a standard house on a small plot in an estate (4bed 150-175m) for 1.2m in a poor state. At least in Blackrock anyway, although there are probably a few exceptions.

I wasn't commenting on the cost to renovate, and I agree that with present costs renovation can cost more than the market value of the home post renovation.

My point of reference is a house beside Blackrock rugby club (5bed 200sqm) renovated a few years ago, sold in the last few months for 1.2m.

That's because it's more Monkstown than Blackrock

 

[LLB123]

I very much doubt this. Home renovations rarely add more market value than what you put in as you are doing things to your own taste and needs, not to those of a potential purchaser!

Bought 7 years ago for 275k, added extra sqm via attic conversion and extension; open plan living area & additional bedrooms/study/ensuites and upgraded to a B3 energy rating at a cost of just over 120k. Now valued in excess of 800k so happy enough with that in any case.

 

[NoRegretsCoyote]

Now valued in excess of 800k so happy enough with that in any case.

That's a 102% increase on your €395k which is great.

But CSO suggests houses outside Dublin are on average up 104% since the start of 2015.

The market has done the heavy lifting here

 

[LLB123]

That's a 102% increase on your €395k which is great.

But CSO suggests houses outside Dublin are on average up 104% since the start of 2015.

The market has done the heavy lifting here

Ah and here's me thinking I did great! Well with luck it'll have increased saleability if nothing else - agent certainly seems to think so, but who knows...

 

[ClubMan]

Sorry, just remembered something else in this regard. Our accountant has it set up that we can wind down the company in our fifties and take large tax-free lump sum payment (500k or so?) from it, which was another reason we de-priortised the pension.

I'm fairly sure that this sort of thing has been the subject of a post or two here on Askaboutmoney, maybe even a key post, in the past?

 

[DublinHead54]

Bought 7 years ago for 275k, added extra sqm via attic conversion and extension; open plan living area & additional bedrooms/study/ensuites and upgraded to a B3 energy rating at a cost of just over 120k. Now valued in excess of 800k so happy enough with that in any case.

You might get a new bathroom and half a bedroom for 120k these days

 

[Brendan Burgess]

Income and expenditure
Annual gross income from employment or profession: 90k
Annual gross income of spouse: 35k

Monthly take-home pay We pay ourselves expenses as required as opposed to a monthly salary, and save the remainder.

Type of employment: Both self-employed directors of limited company. 50k of my yearly income is tax exempt (this goes straight into savings)

Our accountant has it set up that we can wind down the company in our fifties and take large tax-free lump sum payment (500k or so?)

OK, let's take your income first of all.

A lot of people get confused when they have a limited company. They say something like "I earn €80k a year" when the company is generating profits before directors fees of €120k or €40k.

So your income, which determines your affordability, is the profit of the company before directors' fees.

So you say your income is €125k, but in reality it's far higher.

And given that €50k of your income from the company is tax-free, (patent income?) it's effectively higher again.

Brendan

 

[Brendan Burgess]

Family home worth approx €800k with a €250k mortgage
Savings of €800k cash
Defined Contribution pension fund: €100k x 2
Shares : 15k approx invested in stock market

not at all what you'd hope for on a 1.2mish budget.

So you have €1.36m cash after you sell your house.

You also seem to have a lump of cash in the company.

You are starting off with the wrong question: "mortgage-free?"

Why do you want to be mortgage-free?

We don't know your true income, but it's probably about €250k a year.
You can comfortably borrow € 500k.

You can well afford the type of house you want in the location you want. But you can't buy your current house on an acre in the sticks in a seaside commuter belt for €1.2m.

Make some compromises but buy a house you like for about €1.7m.

Then, start maxing your pension contributions from the company.

Our accountant has it set up that we can wind down the company in our fifties and take large tax-free lump sum payment (500k or so?)

You can be too clever with tax planning. This might work but you are forgoing the use of this money for another 10 years or so when you could use it now. Probably not as tax-efficient to take it out now, but you will get 10 years use of this money.

And there is a huge risk, that the tax rules will change and this brilliant tax plan may no longer be effective.

I would say that if you are planning to definitely wind up a company in about 3 years, maybe even up to 5, you could leave profits in it to avail of tax planning. But more than 5 seems to risky to me.

Brendan

 

[mustang01]

So you have €1.36m cash after you sell your house.

You also seem to have a lump of cash in the company.

You are starting off with the wrong question: "mortgage-free?"

Why do you want to be mortgage-free?

We don't know your true income, but it's probably about €250k a year.
You can comfortably borrow € 500k.

You can well afford the type of house you want in the location you want. But you can't buy your current house on an acre in the sticks in a seaside commuter belt for €1.2m.

Make some compromises but buy a house you like for about €1.7m.

Then, start maxing your pension contributions from the company.





You can be too clever with tax planning. This might work but you are forgoing the use of this money for another 10 years or so when you could use it now. Probably not as tax-efficient to take it out now, but you will get 10 years use of this money.

And there is a huge risk, that the tax rules will change and this brilliant tax plan may no longer be effective.

I would say that if you are planning to definitely wind up a company in about 3 years, maybe even up to 5, you could leave profits in it to avail of tax planning. But more than 5 seems to risky to me.

Brendan

This is why this forum is so great, a completely different and thought provoking take to what others are offering.

 

[LLB123]

A lot of people get confused when they have a limited company. They say something like "I earn €80k a year" when the company is generating profits before directors fees of €120k or €40k.

Brendan

Yes you are correct - I used income as stated on our Form 11 returns, but we have set salaries up to minimise exposure to the higher tax bracket (another reason we've been lazy on the pension front).
And have been accumulating company cash with the wind-up in mind but you are right, the tax situation could well change. And I suppose I treat this money as the company's and not ours to spend - especially when taking it out attracts so much tax.

You can well afford the type of house you want in the location you want. But you can't buy your current house on an acre in the sticks in a seaside commuter belt for €1.2m.

Make some compromises but buy a house you like for about €1.7m.

Then, start maxing your pension contributions from the company.


Brendan

Here's one in the higher-end bracket you mentioned and while lovely, is prob the very definition of @NoRegretsCoyote point about 'too much house'!

The Portland, Sillan, Church lane, Greystones, Wicklow - Savills (New Homes) - 4573653 - MyHome.ie Residential

The Portland, Sillan, Church lane, Greystones, Wicklow, 4 Bed, asking price €1,750,000, brought to market by Savills (New Homes), Residential - 4573653 (rated A2)

www.myhome.ie

It's (painfully!) apparent that the area we want is commanding a major premium whether we like it or not. Still think I'd balk at throwing everything (equity, savings, company cash and small mortgage) at a single house purchase though. Or were you suggesting using the company cash instead of a mortgage?

We obviously need to make some compromises on the house plus prioritise our pension contributions too. Being honest, I'd far prefer to buy a smaller doer-upper altogether and stay where we are until it's done, but impossible to put a price on additional reno costs and timelines at the moment, and now that we realise keeping our own is a bad idea, I'd be petrified at holding 2 houses amid all the current uncertainty.

Plenty food for thought, thanks all!

 

[Brendan Burgess]

You are very well off.
But that does not mean that you can have everything.
You must make choices.

First focus on where you want to live and in what sort of house.
If you choose to live in Greystones with a sea view instead of in the sticks, you are going to get "less house"

 

[mustang01]

OK I think I get now what you’re saying about the location OP, only you can decide if it’s worth the premium. ‍ Best of luck.

 

[MelF]

I have a similar problem, can afford to buy with my cash in hand but the banks are making it very hard to borrow for something bigger. Agree the stock out there for 1m + houses is woeful!