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 Post subject: Mortgage free at 40?
PostPosted: Wed Jul 25, 2018 10:21 am 
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Old Time Landlord

Joined: Jun 23, 2011
Posts: 386
Scenario

PPR is in a nice estate in an ok suburb of Dublin, bought in 2013 with a modest enough mortgage. Don't see moving as an option until kids finish school, youngest just finished junior infants.

"Investment Property" 2 bed apartment in a large development, in "" because it's a former PPR which we outgrew with 3 kids. Selling 5 years ago would have crystallised a huge loss. It's rented at a modest rent by current standards, same tenants since 2013 but they're moving on. On a tracker at +0.85 and after tax is just about washing its face.

The outstanding balance of both mortgages is ~2.3x income, not including rental income. Combined monthly mortgage payments are less than 25% of take home pay taken after pension contributions and again excluding rental income. Savings stand at about 30% of the outstanding balances on the combined mortgages.

All the indicators would suggest a very manageable level of debt but running the figures on selling the apartment now and using the proceeds along with savings to clear the balance on the PPR would leave us mortgage free before I turn 41, it's very tempting.


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 Post subject: Re: Mortgage free at 40?
PostPosted: Wed Jul 25, 2018 11:02 am 
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Under CAB Investigation

Joined: Feb 27, 2007
Posts: 1840
Oh that sounds nice.

A few questions, not to answer publicly but to consider.

How much rent will a new tenant pay?
You may be surprised, and many are willing to sign long leases so they don't have to look around again next year.

What might be the plan for the spare cash flow?
E.g. Will you be looking for another investment, increase pension contribution, cut back working hours, increase quality of life, college fund?


Personally only a few years younger but still renting.
Although I could cash out all investments and buy a modest house I'll wait till either dream house or circumstances dictate.


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 Post subject: Re: Mortgage free at 40?
PostPosted: Wed Jul 25, 2018 12:46 pm 
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Old Time Landlord

Joined: Jun 23, 2011
Posts: 386
You’re spot on about the cashflow, it needs to be used productively, it’s all too easy for it to disappear into the ether and have no real benefit either short or long term. Having come through negative equity (still shy of purchase price but thems the breaks) and without any major cashflow issues or any nightmare tenant scenarios, the urge to cut and run, counting my blessings as I go, is strong. It’s an emotional response, maybe somewhat rational in the context of learning from experience but not what you would call data driven.

I’d like to think the nightmare tenant scenario was avoided due to good selection of the tenants but in reality it’s more of a lottery than that. It’s not necessarily the tenants you pick today but the market conditions the next time you need to get tenants in. Looking at the hard figures on the mortgage on the apartment however, approximately €700 is being paid down off the capital each month, in this context, it would take a big investment to match that. With a decision to sell, can I do something more productive with the money… the answer to this is almost certainly no, no matter how warm and fuzzy a feeling I would get from having the PPR mortgage paid down, I’m not even sure what I would do with the money I wouldn’t be spending on the PPR mortgage payments, we’re net monthly savers as it stands and have no real track record of making investments.


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 Post subject: Re: Mortgage free at 40?
PostPosted: Sun Jul 29, 2018 8:53 am 
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Homeless

Joined: Jun 16, 2015
Posts: 14
I understand your point about lack of alternative investment. Well, one comes to mind and that 's pension contribution. You could max out your pension contributions, it s very tax efficient, I think you can pay 25% of income after 40 tax free. Hard to get better return than that. better better tha


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 Post subject: Re: Mortgage free at 40?
PostPosted: Sun Jul 29, 2018 9:09 am 
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Homeless

Joined: Jun 16, 2015
Posts: 14
Sorry for end of previous message... With pension,
you can cash in from the age of 50. No mortgage means you don't have to work and earn as much ( personally I would love working part time), or you can retire early.


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