What (if anything) Should I Change about our financial situation?

fungie20 said:
I could do a 50/50 or 60/40 split between them, what do you think of that? The 2 funds are:

1) Irish Life Diversified High Growth Fund (ES35)
2) Zurich Life 5 Star 5 Global Fund
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That might be a reasonable approach.

To be honest, I wouldn't be crazy about either fund but I guess you have to work with what you've got.
fungie20 said:
Long term, I think we'll try max out pensions and then use any unrequired excess cash to pay off chunks of the mortgage, paying any break fees, once it makes sense or wait until end of fixed period, whichever is cheaper (i.e. pay off 10k each year extra rather than wait 5 years to pay 50k).
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That looks like a solid plan to me.
 
fungie20 said:
I recently enquired about moving from the 2.8% rate (4 years left) to their 2.3% 5 year fixed rate. I worked it out that the savings in interest would be approx 4.5k over the next 4 years and the break fee was about 4.6k. They did say that this rate wasn't available to existing customers but I haven't been able to find anywhere where it says this online, but that's a different story.... Either way, it doesn't make sense to do it currently.
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Are your numbers correct? The 4.5k looks more like the reduced monthly payment (not savings) while the interest saved would be closer to ~8.4k (420k x 0.5% x 4yrs). A bit less because of reducing principal over 4 years so roughly 8k.

Either way, I don't believe you can get that rate of 2.3% (I'm assuming the BOI Green rate), see here BOI Green T&C's
"The Green Mortgage fixed interest rate is not available (a) on a mortgage loan where it (or part of it) is used to repay an existing mortgage loan from a lender whether the lender is in the Bank of Ireland Group or not (for example, this means the discount is not available for mortgage loans where you switch a mortgage loan to us from one of our competitors)"

And I also don't think that it is worth your while switching to any competitor. The cost of switching to you is losing the 1% cashback at year 5, the break fee and whatever solicitors fees so roughly 9.8k (4.2k + 4.6k +1k). Your LTV is too high to to get any rates that will save you that on interest over 4 years. I would be heavily inclined to follow Brendan's advice and start overpaying your mortgage in chunks to get the LTV down so that you can avail of the best rates when you are ready to switch. Your only other alternative is to attempt the multiple switches that have been done by AAM posters but I'm not sure how straight forward that is anymore since Covid...

As for your cash reserves, they do seem a bit too high. You are saving at 3k per month and that probably doesn't include the irregular lump sums from bonus + shares so you don't really need to be holding cash for a honeymoon that could be a few years away and would only take you 3 months to save for. Lots of people don't like to deplete their savings all at once so ease yourself into it over a period of time by making quarterly lump sum payments. Get down to your own 25k reserve limit and once you are comfortably, you will realize you can go lower
 
When I looked at this originally, I thought you were in a great position.

But carrying such a huge mortgage debt, Im not so sure you really are.

For a combined income of what you have displayed, and having paid 12 months mortgage already, €420k is a savage amount to be in debt for years.
A property worth €500k now , was pretty much worth that 12 months ago, your down payment was shockingly low based on your earnings, is what Im saying.

For head-space and sanity, Id be plowing as much as possible to get that mortgage to a comfortable level. If kids come along, they're not cheap to bring up, and your talking another mortgage payment per child pretty much.

Yes, I know you cant wind back the clock with age/pension years availability, and yes, you are well covered insurance wise, but, as we dont know whats around the corner, Id rather get around the corner with less baggage weighting down on my shoulders.

You can make "out of course payments" to your mortgage balance, doing this will not alter your regular monthly payment amount, if done this way, just the term.

All going well financially, and with a comfortable mortgage balance to take care of, should any misfortune come your way, your are in a better position to steer your ship accordingly.
 
LS400 said:
For a combined income of what you have displayed, and having paid 12 months mortgage already, €420k is a savage amount to be in debt for years.
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Compared to what though? They have a high household income so an LTI below 3.

They are on track to have mortgage paid off at 61.

For a household of their age the OP really has a very healthy set of finances.
 
LS400 said:
When I looked at this originally, I thought you were in a great position.

But carrying such a huge mortgage debt, Im not so sure you really are.

For a combined income of what you have displayed, and having paid 12 months mortgage already, €420k is a savage amount to be in debt for years.
A property worth €500k now , was pretty much worth that 12 months ago, your down payment was shockingly low based on your earnings, is what Im saying.
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I think the Op mentioned they only started working 4 years ago, so probably wouldn't have had a huge downpayment saved and perhaps college loans to pay off. I suspect as well that the monthly payment isn't too dissimilar to rent they were paying before hand.

I do agree that I'd be looking to pay down the mortgage now. I think the happy medium is a 75/25 (mortgage / pension) or similar.
 
Just an update: I'm about to pull the trigger on paying down the lump sum off mortgage. I can reduce the term of the loan by x years, keeping my current payments the same or keep the term the same but monthly payments reduced by about 150-200 per month.

Which is generally the best way to go? I can see pros and cons for both. Keeping the term the same is more flexible and I could simply save the difference between current and future payments to pay off in another lump sum. The negative being that it might be more expensive in the long term not to reduce the loan term. I haven't ran the number so am unaware of the interest payment difference, over say the next 4 years.
 
Thanks for that. I would add, since I can only repay 10% of monthly repayments, I can't really do what is suggested here. I can't overpay to bring my payments back to what they originally were before lump sum.

Example:

Before lump sum:

standard payment: 2000
overpay: 200
total: 2200

After lump sum:

standard payment: 1500
overpay: 150
total: 1650

Is keeping term the same, still the best option if this is the case?
 
fungie20 said:
Thanks for that. I would add, since I can only repay 10% of monthly repayments, I can't really do what is suggested here. I can't overpay to bring my payments back to what they originally were before lump sum.
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You can still overpay more than the allowed 10%, there may be a small breakage fee on each over-payment above the 10% but it'll still be less than the interest savings.
 
Coldwarrior said:
You can still overpay more than the allowed 10%, there may be a small breakage fee on each over-payment above the 10% but it'll still be less than the interest savings.
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If this could be done as part of the monthly direct debit, I would for sure. On the other hand, If I've to do a transfer every month and then tell them to take it off the capital via phone, I'd probably give it a miss.
 
I thought I'd provide an update since I've some more questions:

Age: 32
Spouse’s/Partner's age: 33

Annual gross income from employment or profession: 170k (122k salary with rest from bonus and shares)
Annual gross income of spouse: 66k + overtime

Monthly take-home pay: Not sure exactly but cashflow isn't an issue

Type of employment: e.g. Civil Servant, self-employed: Private sector, partner public sector

In general are you:
saving: Saving on average 2-3k/month

Rough estimate of value of home: 572k (bought for 500k in 2019, price index suggests about 14-15% increase since, will need to get valued)
Amount outstanding on your mortgage: 353k with 28 years to go. We paid off lump sum upon suggestions here, thanks!
What interest rate are you paying: 2.8% (Just under 3 years left of 5 year fix)
We overpay the 10% allowed from bank of Ireland + extra money to bring monthly repayments to about 2000, the contract amount is about 1550.

In theory we are meant to pay a breakage fee on the extra repayments (taking into account the break fee has been about 0.8-1%) but the bank hasn't been charging us for it, nor do they recalculate the repayment amount every month, even though they probably should. It's probably due to incompetence and bad IT systems but either way we don't get charged on it.

Due to get 4300 eur in cashback if we stay the fixed term

Other borrowings – car loans/personal loans etc: None
I was planning on buying a car (with cash) but with another car and home working and shortage of second hand cars, I'm in no rush here.

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

Savings and investments: 65k in cash. About 25-30k was earmarked for car up until recently. About 15k was for maxing pension contributions for last year and like about 15k rainy day.

Do you have a pension scheme: Approx 90k, partner contributes to public service pension and maxes PRSA. Estimate fund at around 40k. Both max contributions


Do you own any investment or other property?
None

Ages of children: No children

Life insurance: Mortgage protection, 650k life policy (38 years left) and 4x salary life policy via work. 400k or so mortgage protection. My partner works in public sector so whatever they get.

Prob over insured, I'll prob stop letting my life policy increase.

Since I overpaid mortgage, can I reduce mortgage protection inline with it?


What specific question do you have or what issues are of concern to you?
I'm wondering if it makes sense to break fixed term, move to Avant or ICS? I try not to predict the future but I think in 3 years, mortgage rates will either be the same or higher than now. Therefore, it might make sense to fix at a low rate for a longer time.

We aren't far off the 60% LTV and could use some of the cash to get to it, if required after we get it valued.

I calculate if we were to move to avant today we would save approx 8500 in interest over the remaining fixed period. (353k x (0.028-0.0195) x 3, then allow for principal reduction over that time of 500 eur, bit of a guess).

We will have to forfeit the cash back (4300), the solicitor + valuation will cost about 1500 and the breakage fee I'll have to find out about. I'll be pessimistic and say 1% of loan (3500). So it looks the swap would be pretty cost neutral over the next 3 years, plus or minus a few hundred euro. If interest rates were to stay the same, there would be no point doing this.

My question, is it worthwhile to swap to Avant's low rate for 7/10 years as a hedge against interest rate rises in my case?
 
Have you considered cancelling the mortgage protection and using the life policy in its stead? Thats what i am going to do, as i pay down the mortgage the amount left over on the life policy should something happen to one of us gets larger and it has dual use.

Also do you intend on having kids, because if you do a lot of what you think might be the case in the future will change dramatically :D
 
Blackrock1 said:
Have you considered cancelling the mortgage protection and using the life policy in its stead? Thats what i am going to do, as i pay down the mortgage the amount left over on the life policy should something happen to one of us gets larger and it has dual use.

Also do you intend on having kids, because if you do a lot of what you think might be the case in the future will change dramatically :D
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It's a joint policy and my partner also needs it. I don't think I could cancel my half. Either way, it's 30 eur a month, while something perhaps to look at in future, the savings isn't that large relative to other things.

In terms of children, even if we had them, I'd still want to minimise cost of mortgage so I don't think it matters.
 
fungie20 said:
It's a joint policy and my partner also needs it. I don't think I could cancel my half. Either way, it's 30 eur a month, while something perhaps to look at in future, the savings isn't that large relative to other things.

In terms of children, even if we had them, I'd still want to minimise cost of mortgage so I don't think it matters.
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ok i assumed the life policy was joint as well, maybe not, if it was then you could cancel the mortgage cover.

Re the kids its more things like will you want to move house (maybe your own is already well set up for having kids), will you both continue to earn (in our case even though my wife was earning a large salary it made more 'life' sense for her to take a break from it, only issue now its hard to see her going back for a variety of reasons!)
 
Blackrock1 said:
ok i assumed the life policy was joint as well, maybe not, if it was then you could cancel the mortgage cover.

Re the kids its more things like will you want to move house (maybe your own is already well set up for having kids), will you both continue to earn (in our case even though my wife was earning a large salary it made more 'life' sense for her to take a break from it, only issue now its hard to see her going back for a variety of reasons!)
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We've 2 spare rooms so plenty of space in this house. May move but not for a while.

I'd be interested in hearing views on should I break and move to lower rate.
 
fungie20 said:
I'd be interested in hearing views on should I break and move to lower rate.
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You need to find out what, if any, early breakage fee/penalty applies, what lender/rate you can move to and what you might gain by switching in terms of lower ongoing interest costs and maybe also switching cashback.
 
I've laid it out that it would be very close to cost neutral. Question is, is it worth it.
 
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