Sell, pay down or save: newlyweds assess home options

I am recently married, and my husband and I are planning to buy a house together in the next two years. I already own a house that I bought before we were married. We are debating if we should hang on to my house when we buy together, or sell it.

My dilemma is this: I have a decent amount of savings built up. If I was still single, I would use this to pay off a chunk of my mortgage now (I have enough to pay off about a quarter). But in the context of our buying plans, I’m not sure what to do.

Is it better to keep this cash towards a future purchase, or use it to reduce my debt now? What difference does our decision whether to keep or sell the current house make?

Ms D.D., email

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We all like straight yes/no answers to our financial conundrums but the truth is that, in many cases, there is no absolute right or wrong decision. It very much depends on an individual’s circumstances, their attitude to risk or debt or savings and such like. This is precisely such a case.

There’s a lot of change in your life right now, having recently got married and also considering another house purchase.

It’s great that you have savings and it is certainly possible to pay down some of your current debt but it will limit your options.

First off, if you are buying another home, you’ll need a deposit, and because you already own a property, that will need to be 20 per cent of the purchase price. According to recent figures from MyHome.ie and Daft, you will need to save about €64,000 for a deposit on the average home nationally and €86,000 in Dublin.

And that’s the average. Where and what you buy will obviously affect the figure.

Using your savings to pay down the current mortgage may mean it will be paid off quicker or that you can reduce the monthly payments to give you more wriggle room as a couple for the payments on this new home. But it will also mean your savings will be exhausted and that deposit still needs to be sorted.

Selling the current property might well deliver that and more, reducing the amount you need to borrow for the new home but it does mean you are losing a significant personal asset.

If in doubt, in general it is better to give yourself the widest hand to play from. That would mean keeping the savings for now. When you do buy your new home, you can decide whether to put the money into that or the current mortgage ... or sell the property you currently own.

More importantly, right now is to make sure you take advantage of current fixed mortgage rates on the current home loan before they rise — almost certainly next month.

If selling the home is a real likelihood, check with your lender before you lock into a long-term fixed rate that it will allow you to “port” the loan — ie transfer it at the current interest rate — to your new home. Finance Ireland advertises that they allow this option but not all banks might be open to it. If you sell and have to redeem a long-term fixed-rate loan, you may face an early redemption charge unless you can port the mortgage.

• Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice