What to do with a windfall?

The Duke of Moral Hazard

Hi all,

I was lucky enough to have sold an inherited property. After solicitors fees and paying off debts I have about 180,000k to plan for the future. Unfortunately the property was not in Dublin but myself and my partner are, so we needed to sell it to help us get onto the property ladder in Dublin.

My situation is that I am currently renting in Dublin and have one dependent in creche. Rent and child-care take up nearly 70% of my net salary.

I'm looking to buy in Dublin this year so am seeking advise regarding whether it's better to sink most of the windfall into the price of a new house, or keep some of the money and invest it. I don't have a pension to speak of so I would like to use some of the money to plan ahead if possible.

I'd imagine our budget for buying a house is ball park 360k.

Any insights would be most welcome.

Thanks in advance.

newacc2015

The Duke of Moral Hazard wrote: »

Hi all,

I was lucky enough to have sold an inherited property. After solicitors fees and paying off debts I have about 180,000k to plan for the future. Unfortunately the property was not in Dublin but myself and my partner are, so we needed to sell it to help us get onto the property ladder in Dublin.

My situation is that I am currently renting in Dublin and have one dependent in creche. Rent and child-care take up nearly 70% of my net salary.

I'm looking to buy in Dublin this year so am seeking advise regarding whether it's better to sink most of the windfall into the price of a new house, or keep some of the money and invest it. I don't have a pension to speak of so I would like to use some of the money to plan ahead if possible.

I'd imagine our budget for buying a house is ball park 360k.

Any insights would be most welcome.

Thanks in advance.

I would put a majority of the money into a house and aim to have LTV ratio of less than 60%. You can get rates that are a lot cheaper at below 60%.

You would probably be better ensuring your mortgage repayment is as low as possible putting a higher percentage of your wage into a private pension. You will be allowed a certain amount tax free to put into your pension if it is deducted from your pay cheque.

The Duke of Moral Hazard

Thanks so much for the reply.

I had thought that this was the best way forward.

If there is anything left over once I clear the 60% LTV, would State Savings be a good idea to bank the rest?

The_Pretender

The Duke of Moral Hazard wrote: »

Thanks so much for the reply.

I had thought that this was the best way forward.

If there is anything left over once I clear the 60% LTV, would State Savings be a good idea to bank the rest?

It depends what you're after. If you're looking for a safe place where you know your money will be in 10 years time, then you can't get much safer that State Savings. But risk is directly related to return, and in the case of State Savings their best interest is on the 10 Year, which offers 25% interest. Sounds good, but you're locking your money away for 10 years while it's only earning 2.26% AER. I myself would rather have access to the money in a savings account, even if if was only earning 1.5-2%.

If I was in your position I'd invest in ETF's through a stockbroker. These are funds that track index's such as the S&P500, and your risk of losing everything is tiny, as if you're invested in 3 or 4 different ETF's you can easily own a part of 1500+ different companies. You can easily expect a 5% return. Of course this is only suitable if the money is not needed right now, as the value of the investment could well fall in the short term, so you need to be willing to wait it out.

Nody

The_Pretender wrote: »

If I was in your position I'd invest in ETF's through a stockbroker. These are funds that track index's such as the S&P500, and your risk of losing everything is tiny, as if you're invested in 3 or 4 different ETF's you can easily own a part of 1500+ different companies. You can easily expect a 5% return. Of course this is only suitable if the money is not needed right now, as the value of the investment could well fall in the short term, so you need to be willing to wait it out.

With the current high levels of valuation I'd not be so sure to put money on that; I'd expect shares to lie flat/go down while their valuation come to a more historical and normal level as the free money (Fed & ECB) dries up over the next few years.

desertcircus

Depending on your age and financial situation, it may make sense to pump as much as you can into the house and minimise the mortgage, and then use the freed-up funds to make regular contributions to a pension plan. The tax breaks involved make it a hugely attractive option.

1hnr79jr65

Also i would keep 3k away in current account as "emergency fund" incase boiler breakdowns and such.

Shop around for insurance also, good deal can be gotten if you look and talk to right people.