What to do - need advice on mortgages and pensions.

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DTM2904

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Personal details

Age:42
Spouse’s/Partner's age:39

Number and age of children:2 (3&1) & one on the way


Income and expenditure
Annual gross income from employment or profession: approx €99k (€88,400 plus 12% bonus)
Annual gross income of spouse: €59k

Monthly take-home pay Approx €6,800 combined

Type of employment: Both private

In general are you:
(a) spending more than you earn, or
(b) saving? Saving approx 2,500


Summary of Assets and Liabilities
Family home worth €500k with mortgage of €315k
Cash of €35k
Defined Contribution pension fund: €140k split across 3 pensions & wife approx. 50k
Company shares : €25k
Buy to Let Property worth €175k with mortgage of €25k


Family home mortgage information
Lender AIB 2.25% fixed (Green Energy mortgage) until Mar 2026
Remaining term: 25 years
Monthly repayment:€1373

Other borrowings – car loans/personal loans etc

Do you pay off your full credit card balance each month? yes
If not, what is the balance on your credit card? 0
No Car loans


Buy to let properties
Value: €179k
Rental income per year: 10,400 (Approx 3-4k under market value)
Rough annual expenses other than mortgage interest : 2500
Lender -Aib
Interest rate 2.75%
If fixed, what is the term remaining of the fixed rate? 5-6 years

Other savings and investments:

Do you have a pension scheme?
yes paying max 25% plus company 7.5%. (started maxing out pension contributions in the last year)
Wife paying 10% plus company 5%

Do you own any investment or other property? No

Other information which might be relevant

Life insurance: Cover on rental property worth €150k
Mortgage protection on PPR
4 x Salary with work, wife 2 x salary at work.
Creche fees approx €800p.m.


What specific question do you have or what issues are of concern to you?
1) Should we be paying down mortgage at this point rather maxing out pension?
2) I have 3 pensions from previous employers. Is it best to merge these or keep as standalone.
3) Does it make sense to keep the rental property or sell and pay down PPR mortgage? House was bought in hometown with a romanticized feeling of moving home one day. That feeling has since passed. Lovely family have been in the house for 8 years with young family and in fairness i couldn't ask for better tenants. I have a brother who lives nearby so when issues arise he is there to support. If i decide to sell it, i would need to give the tenants a minimum of 6months notice.
4) We don't have family nearby to support with childcare(when kids are sick and home from creche). With this in mind, we are considering my wife moving to a part time role after maternity leave circa 2025. I want to ensure we can afford to do this.
5) If we target being mortgage free and and maxing out pensions, we would be in a great position but what next with additional savings? The obvious answer is enjoy life which is what i want for our family but i also want to ensure that I'm sowing the financial seeds now for the next generation!

Appreciate any guidance.
 
First look at the buy to let on its own merits

Buy to let properties
Value: €179k
Mortgage €25k
Equity : €150k
Rental income per year: 10,400 (Approx 3-4k under market value)
Rough annual expenses other than mortgage interest : 2500
Lender -Aib
Interest rate 2.75%
If fixed, what is the term remaining of the fixed rate? 5-6 years

Rent: €10,000
Interest : €1,000
Expenses€2500

Profit before tax: €6,000
Profit after tax: €3,000
on an investment of €150k

If you pay the €150k off your mortgage, you will save €4,000

So it's really close.
When the fixed rate on your home is up, the interest cost will rise, so this will tilt the decision even more towards selling.

Maybe have a chat with the tenants. Don't give them official notice or anything. But tell them that it's something you are thinking about. Are they in a position to buy if given a year to get their funds together?

Definitely sell if they leave. It's not worth the hassle.

Brendan
 
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Your mortgage is at a comfortable level and you have a low interest rate at the moment anyway, so max your pension contributions.

If interest rates are higher when your fixed rate ends, you might prioritise paying down the mortgage.

Sell your shares especially if they are in one company and/or in your employer.

It's not a huge amount in the context of things, but selling is technically the correct thing to do.

Brendan
 
Thanks Brendan,

I really appreciate the advice.
Would you recommend consolidating the 3 pensions into one? Pension 1 90K, Pension 2 16K, Pension 3 (current) 34k.

The tenants are currently on social welfare so they are not in a position to buy. They are on social housing waiting list which they have been open about. I'll contact the county council to assess if they would be open to buying the property. It's in a rural town so may not be an option. I would like to sell the rental property by 2026 so will discuss this possibility with the tenants.

Also wanted to add that I've been following the site for a number of years and your advice on €0 fee Fixed interest break (in certain circumstances) which allowed me to save 0.25% on my PPR fixed rate and saved us a couple of thousand on our mortgage interest over the 5 year period so thank you for that.

With interest rate rises, is it still possible to get a €0 break fee if for example i was to sell shares and pay off 30k now off mortgage. AIB recently sent out a letter saying that overpayment of 5k was allowed per year. Wondering would i be penalised in the current landscape.
 
DTM2904 said:
Would you recommend consolidating the 3 pensions into one? Pension 1 90K, Pension 2 16K, Pension 3 (current) 34k.
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In general, it's a good idea to keep them separate as you retain the flexibility to "retire" the pensions at different times, which can be advantageous from a tax perspective in some circumstances.

So, unless there is a compelling reason to do so (e.g. the fees are particularly high or you don't like the fund choice), I would leave well enough alone.
DTM2904 said:
With interest rate rises, is it still possible to get a €0 break fee if for example i was to sell shares and pay off 30k now off mortgage.
Click to expand...
When interest rates are rising, there should be no break fee.
 
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