What to do next

Discussion in 'Money makeover' started by SCOTTPLASMA, 9 May 2018.


    SCOTTPLASMA Registered User

    Last edited: 9 May 2018
    I have been a longtime lurker and have found the forum invaluable over the years. I need some advice

    Age: 40
    Spouse’s/Partner's age: 35

    Annual gross income from employment or profession: 55000
    Annual gross income of spouse: 52000

    Monthly take-home pay 5400

    Type of employment: e.g. both public sector

    In general are you:
    (a) breaking even
    (b) not saving

    Rough estimate of value of home
    House 1- PPR - 350000

    Amount outstanding on your mortgage:

    House 1 - PPR - 200000

    What interest rate are you paying?

    House 1 - 3.2

    Other borrowings – car loans/personal loans etc

    No car loans and 2 x 3/4 year old cars

    Do you pay off your full credit card balance each month?

    If not, what is the balance on your credit card?


    Savings and investments:

    Some shares in credit union 2.5 k

    Do you have a pension scheme?

    public pensions schemes

    Do you own any investment or other property?

    House 2 - Rental -Paid 220000 - Value 120000 mortgage - 130000 (750 pm mortgage) rental income 680 pm. PRTB registered and tax up to date
    House 3- Rental - Paid 300000 - Value 205000 mortgage -170000 (1100 pm mortgage) rental income 900 pm - This is a joint mortgage with a third party.
    House 4- Just inherited and going through probate will be sold and our share should be roughly 130000-140000k

    House 2 - Tracker (0.6%) roughly 18 years remaining
    House 3 - Tracker (0.8 %) roughly 12 years remaining
    House 4- NA

    Ages of children:

    7 & 9

    Life insurance:

    Mortgage protection on PPR and some union and credit union cover. widows and orphans through work

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

    Do you think we are over stretched with our finances?

    What should I do regarding property 3 ?
    The third party has offered to buy me out of our 2006 agreement. The signed agreement is that either one of us purchases the property from the other party or we sell the property on the open market. The third party still wants out if I do not sell. Therefore I will have to take over the full mortgage. The bank will allow a joint to joint or joint to sole with no change on the terms mortgage product if I can satisfy there terms. I have invested roughly 60 k in 2006 in this property. The property is on a very good tracker mortgage and not in negative equity. I will soon inherit 130/140 k which would potentially allow me take over the full investment or would I be better of getting out and selling to the third party. I was hoping to recoup some of my initial investment as the market is rising and the house is in a good location, easy to rent and taking a longer term view to recoup my investment

    What do you think are my best options ?
    Last edited: 9 May 2018
  2. goingforgold

    goingforgold Frequent Poster

    I think you are in a decent position financially overall, ie in the region of 320k net worth (inc. inheritance).
    However to answer your question, yes you are probably unnecessarily overstretching your finances because of the rental properties and have all your eggs in one basket, ie Irish property. Use the inheritance to rid yourself of one of the properties and live more comfortably with your young family.

    Others here will run through figures to work out which rental property is best to hold onto, if any. It may well be worth your while offloading property 2 and holding onto property 3, especially if you feel there is greater potential for this property
  3. Sarenco

    Sarenco Frequent Poster


    If I was in in your shoes, I would be inclined to accept the offer to buy out your interest in Property 3 (assuming you are happy with the price offered), notwithstanding the low tracker rate.

    I would then use the net proceeds, together with the bulk of your anticipated inheritance, to pay down the mortgage on your PPR for the following reasons:-
    • The gross rental income on Property 3 is pretty low relative to the current value of the property;
    • You are already very exposed to house price and interest rate movements;
    • In my opinion, you don't have a sufficient liquid cash reserve - one big repair bill and you could be in trouble; and
    • As public sector workers you can presumably look forward to pretty generous pensions (i.e. you don't need to take excessive risks to adequately fund your retirements).
    A few smaller points:-
    1. If you do pay down the mortgage on your PPR, I would suggest you look to move yourself to a mortgage rate that reflects a lower LTV (switch provider if necessary);
    2. I would suggest you maintain a cash reserve equivalent to around €7,500 to deal with unexpected expenses related to Property 2; and
    3. You really should clear your credit card balance every month.
    Hope that helps.

    SCOTTPLASMA Registered User

    Thanks for the advice. I was thinking along the same lines based on the principal that my PPR is my most expensive debt. If you were in my shoes and inclined to accept the offer. What type of offer would you expect to receive or what type of offer would be acceptable? The mortgage would be very attractive to the third party as he would be taking over a tracker and I presume changing the status of the house to a PPR. Thanks in advance.
  5. Sarenco

    Sarenco Frequent Poster

    Personally, I would be happy enough to walk away with my share of the property value (I would take the average of at least two proper valuations), less my share of the o/s mortgage obligation, with all legal and other costs of the deal to be paid by the purchaser.

    So, if it's a 50/50 arrangement, I guess I would be happy enough to walk away with €17,500 on the basis of your figures above.