What Are Our Options? - Money Makeover

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NotMyRealName72

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Personal details

Your age: 53
Your spouse's age: 63

Number and age of children: one young adult daughter still living at home

Income and expenditure
Annual gross income from employment or profession: €62,400 - Civil Service plus have small occupational pension of €133pm
Annual gross income of spouse/partner: €38,400 - on Social Welfare (invalidity pension) plus rental income from property solely in their name

Monthly take-home pay:
Me: €3600 approx
Spouse: €2,200 approx

Summary of Assets and Liabilities
My home value: €480,000 BER B3
Mortgage on home: €200,000
Net equity: €280,000

Spouse home value: €300,000
Mortgage on home: none
Net equity: €300,000 - sale of this house would be subject to CGT as rented out for past 3 years.

Cash savings: €15,000
Defined Contribution pension fund: n/a

Total net assets: >€500k

Family home mortgage information
Lender: AIB
Interest rate: 2.95% 10 year fixed - 7 years remaining

Remaining term: (Original term is not relevant) 15 years
Monthly repayment: €1,330

Other borrowings – car loans/personal loans etc

Personal Loan (Avant): €392pm

Car loans: me: €455 Spouse: €250

Do you pay off your full credit card balance each month? No
If not, what is the balance on your credit card? €10,500

Pension information

Value of pension fund: Civil Service pension (13 years contributions) & PRSA (€30k) spouse has no pension

Buy to let properties
Value: €300k
Rental income per year: €24,000
Rough annual expenses other than mortgage interest : €12-14k in tax and expenses

No mortgage on this

Other savings and investments:

Gave €13k interest free Loan to daughter to purchase car and car insurance - she's paying it back at €400pm

Other information which might be relevant

Life insurance: only have decreasing life insurance for myself

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

Looking for advice on our situation. We got married 5 years ago, and kept our respective taxes separate based on advice given at the time. Spouse rents out their property, fully declared with RTB, taxes paid etc. I have made a lot of improvements on my house, new windows, solar panels, upgraded gas boiler etc. My house went from an D1 to B3.

The past 12 months my partner's health has declined, they have acquired a disability that now necessitates changes, including an accessible downstairs bedroom & bathroom etc.

The Tenant has just moved out, there is more space to extend at this property. Cost to upgrade and extend is about €150k approx. net of grants. I could extend my house, but there's limitations, for around €70-100k

But we are unable to get a mortgage due to my partners age and situation; we've been told that our only option would be to sell my house, clear mortgage and use funds to fix up the other house. This is causing a rift between partner (in favour) and daughter (not in favour)...

Are there any other options available to us to keep both houses? Open to advice and suggestions.
 
I am sorry to say, but you have a pretty big outstanding personal loan (how much is the interest rate on the Avant loan? Is it a different loan than the credit card debt or is the same?) that I would look to close before thinking of 150k upgrades to the rental property.
I understand that due to your partner's health you are in a bind, but maybe you can try doing the absolute minimum required so your partner can live comfortably (such as converting the living room downstairs in a bed room at least temporarily) and rent out the other house.

I don't think you can afford to have two houses AND perform 150k worth of upgrades in your current situation.
 
What is the daughter’s objection? Is it that she is a student, or unemployed, or she has an attachment to her current home? Does she feel abandoned? It is hard to tell from what you have written but it is probably important for you (not us) to know, and help her as an adult understand that life does not remain the same forever and that you and your spouse need to do best for you as a unit. She has obviously negotiated one change when you married your current husband and he moved into your house, but maybe she has held a lot of resentment since then.

So what I am saying is that as a young adult there would always have been an expectation she would move out to live her own life, with her own independence and responsibilities, and maybe she felt she could decide when that was going to happen but she as an adult needs to negotiate that it may not happen to her time frame but it will still happen.

The clearest option financially is for you to sell your current home, move to your spouses home and do the upgrade with any profit you make from sale.

Assets
House 1 €480K
House 2 €300K
Savings €15K

Debts
Mortgage €280K
Car loan 1 €?
Car loan 2 €?
Personal loan €?
Credit card €10K

Assuming your loans are all €10K each this leaves you with net assets of €425K which would mean you would have €125K to do up house 2 if you sold your current house and cleared your debts. So maybe €100K to spend on the house leaving you needing a €50K loan.

I would think it is doable if you can take a 10 year loan for the €50K. Would you be able to live in the rental house as the upgrades are being done as I would think you cannot progress until you sell your current house. But what about your daughter?
 
Eh....can't help with your query, but your screen name is pretty close to mine. Are we related? Or is imitation the sincerest form of flattery??
Why didn't you try Brendan Burgess72 or Clubman72 or S Class 72 or leper72 or a host of other giants72 . I'm just like Gatsby.......great name but not much else.
 
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The price of building/upgrades is astronomical at the moment. I would worry that 150k may not go as far as you want.
The daughter may see selling your house as losing her home or future inheritance.
 
NotMyRealName72 said:
Net equity: €300,000 - sale of this house would be subject to CGT as rented out for past 3 years.
Click to expand...
When was the house purchased? And for how much? Your spouse is almost certainly building up an increasing capital gains liability on eventual sale as long as the house remains let. This could be a large chunk of the net rental income on an annual basis.

With apologies for being morbid but any capital gains liability disappears when your spouse passes away. So your spouse is probably better off selling soon or planning to hold on to the rental for life.

Otherwise you need to look across your needs and resources jointly. At the level of the married couple I don't think it makes sense to be carrying such a large mortgage of over 3x income in your mid-50s while having expensive credit card debt. The rental is great until it isn't - this website is full of stories of rogue tenants causing damage and not paying rent. A lot of risk would be reduced by selling one property or the other and investing the proceeds into renovations that improve quality of life for everyone.
 
NotMyRealName72 said:
Are there any other options available to us to keep both houses? Open to advice and suggestions.
Click to expand...
The simple answer is no. You can't afford to keep both if you need access to €100k+ for retrofitting either property

If you try to keep both properties, you will have total debt of €200k mortgage, €10k CC, €30-40k personal and car loans. You are unlikely to get another mortgage so your best chance is another personal loan. Most providers seem to have a limit of €75k but your chances of getting this are low because you are already carrying a lot of debt for your age.

To put it in perspective, if you could get an additional €100k and roll all your short term debt into a single mortgage of €350k, that is very high for your age and income. €350k @3.5% for 12 years (unitl you are 65) is almost €3500/m in mortgage payments. You can't afford it

Selling one property is your only option. But be aware that once you do, the rental income dissappears so from here on your monthly take home will be reduced. You need to factor this in to the use of funds and clear the personal debt and credit cards.

Option 1 - Keeping your house: Sell his for €300k, after CGT, EA's, solicitors etc, maybe left with €270-280k cash. You need to clear all personal debt and then complete the retrofit on your property. You need to be very careful here with how much you spend. Just because you have access to €200k plus cash does not mean you should spend it. I would be concerned that your estimates of €70-100k are too low for any significant amount of work. All excess cash should go to reducing your existing mortgage so that it is comfortable on your reduced income

Option 2 - Keeping his house: After mortgage, EA, solictor and clearing debt, you are probably left with €210k. You can do the renovations that you want and need, still have some cash left over and then be comfortable on your reduced income.

On a purely financial perspective, option 2 gives you the best chance of achieving what you need and being comfortable on your income afterwards. But maybe there are other factors like size, location etc that would be a worth considering

Is there any possibilty of a 3rd option to sell both properties and buy somewhere suitable that does not require retrofitting? Probably a slim chance and would get difficult trying to line up all the sales as you have no option of a mortgage

As for your daughter, it is important for you to understand her concerns. If they are for selfish reasons (e.g. her future inheritance) then you need to set her straight. But maybe it is of genuine concern for your financial wellbeing, e.g. what happens if your partner passed after you have sank €200k into the property.

What is super clear here is that you both need wills updated, simple and clear before you do anything. I'm assuming that one or both of you remarried so your wills should be very clear and up to date so that you are both protected financially in the future.
 
Thank you for your replies. Can't reply individually.

LOL - no offence to copying Sir NotMyRealName - you should have trademarked it.

I appreciate having a large credit card bill is not financially sound, we had to pay medical expenses not covered by health insurance, and will prioritise clearing this over the next few months. My daughter just started working, her wages aren't the best, we gave our other children interest free loans in the past so could hardly refuse her one. We had both good and not-so-good tenants in the property and are familiar with all the pitfalls.

Selling and downsizing to a smaller (modernised and accessible) property with no mortgage or loans or landlord-bashing is very appealing right now.

Thank you _OkGo_ that really is a sobering picture, we were told our "best and only option" was to sell my house. I didn't want to jump without considering other aspects.
 
I wouldn't be too quick to off load the mortgage free property..

My advice is going to sound pretty cold as, I have no attachment in your circumstances, so, forgive the reality of what I gather.

First, Your Daughter.. I see exactly where she is coming from. There is a real and certain amount of anxiety/scariness for her in leaving the comfort of the security she has known her whole life, this being your partners house, it will always feel like she is being accommodated.

If, god forbid something happens to you first, although no doubt your daughter is loved by your partner, she is still in his house. There may come a time when, and only going on the difficulty you mention with your partner that he find himself in, then its back to yourself or possibly your daughter also getting on with life in a large extended house...I'm just thinking down the road.

You have a monthly take home of Approx. €7k including the rental, this is a a nice income if channeled wisely, and you can do a lot with it.. The €13k loan to your daughter is cancelled out in 3 years. Your home at the moment seems a smaller foot print, yet is more valuable, I surmising, its a better location etc.

@ age 53, I would want to keep the rental if its washing its face for another 7 years, and then to off-load, it will be a comfortable retirement for you all going well, that's a great addition to your pension. My preference would be to modify your home to accommodate the situation if you can manage it on the finances available.
 
Just wondering if you have explored any grants for altering your house?

I don’t know if such grants exist or if they are means tested. Even stuff like getting VAT back on certain items can help, I know my parents were able to get a vat refund on a ramp installed outside their house and on some bathroom amendments that had to be made. I can’t recall if they got grants though.
 
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