Saving up for a house

luckat

Getting to hate those greedy banks.

Theoretically, if you were to save up for a €300,000 apartment at €500 a week, how long would it take?

humbert

Just under 12 years.

Dub13

Or get a mortgage and pay it off early,that way you have the Apt while saving up.

humbert

Yea, renting is basically flushing money down the toilet.

jhegarty

luckat wrote:

Theoretically, if you were to save up for a €300,000 apartment at €500 a week, how long would it take?

Forever , as the price will keep have gone up by time you have the 300k saved...


plus in 12 years time €500 will be alot less than it is now (in buying power)....

luckat

If you got a mortgage, though, you mightn't be able to save as well.

Prices are not necessarily going to keep climbing. And even if the price had risen, the amount you'd saved would get you something.

If you got a 20-year mortgage for a €300,000 flat and paid it off after 12 years, how much would you have paid?

daveirl

This post has been deleted.

markk06

Because of the time value of money 300,000 today wont be worth the same as 300,000 in 12 years for example. Inflation @ on average of 3-4%pa would mean you are losing year on year. and besides its all well and good saving for 12 years but you need somewhere to live in the mean time

luckat wrote:

If you got a 20-year mortgage for a €300,000 flat and paid it off after 12 years, how much would you have paid?

That will obviously depend on the rate, the repayment and the number of repayments per annum. Also it depends on whether your mortgage is fixed or variable, and the compounding rate

mikemac

humbert wrote:

Yea, renting is basically flushing money down the toilet.

You'd be hung, drawn and quartered if you posted that in the monster thread in the Accomadation forum :eek:

jhegarty

daveirl wrote:

This post has been deleted.

If you can show my any time in the last 100 years when houses were not worth more after 12 years I will eat my hat....



I am not say it will be worth more next year, or the year after , but I will after 12....


and yes, prices do keep going up forever (in the long term)....

humbert

micmclo wrote:

You'd be hung, drawn and quartered if you posted that in the monster thread in the Accomadation forum :eek:

Well I do it because I can't afford to get a mortgage, also I don't intend to take on that sort of responsibility just yet but I do end up with nothing to show for the money. *strolls over to Accommodation forum

markk06

jhegarty wrote:

If you can show my any time in the last 100 years when houses were not worth more after 12 years I will eat my hat....

http://www.iht.com/articles/2005/05/01/bloomberg/sxasia.php

Average commercial land prices in central Tokyo rose in 2004 for the first time in 14 years,


I know its not ireland but MMMM hat

jhegarty

markk06 wrote:

http://www.iht.com/articles/2005/05/01/bloomberg/sxasia.php

Average commercial land prices in central Tokyo rose in 2004 for the first time in 14 years,


I know its not ireland but MMMM hat

I assume the op is talking about ireland.... I am sure if we are looking world wide propery in russia took a dip for a while when tzar was overthrown.... or in two radioactive japanese cities after 1945.....


(i should note I am wearing a pizza as a hat , just in case)

markk06

jhegarty wrote:

I assume the op is talking about ireland.... I am sure if we are looking world wide propery in russia took a dip for a while when tzar was overthrown.... or in two radioactive japanese cities after 1945.....


(i should note I am wearing a pizza as a hat , just in case)

True... but surely both of those instances would have caused hyper inflation and as such house prices would have sky rocketed??

jhegarty

markk06 wrote:

True... but surely both of those instances would have caused hyper inflation and as such house prices would have sky rocketed??

Well the state was due to take everyone houses in the russia example ,so can't imange anyone buying... i don't think anyone would pay one yen for a radioactive......

chump

humbert wrote:

Yea, renting is basically flushing money down the toilet.

Please explain this one to me.
Also while you're at it could you please explain to me how paying an "interest only" mortgage is superior to renting with emphasis on risk versus reward.

humbert

If you're unclear go look it up and who said anything about an interest only mortgage.

Gator

Never gona happen for me, too much drinking.

Anyone in the same predicament as me want to share details for plans to rob a bank:D

themole

chump wrote:

Please explain this one to me.
Also while you're at it could you please explain to me how paying an "interest only" mortgage is superior to renting with emphasis on risk versus reward.

I would also like to know.

Renting is not always bad. Here is a simple example. If you borrow 300,000 over 30 years at 5% apr, the you pay back monthly 1,610.46, which is a total of 579,765.5.

So, not taking into account the rent you are saving, the house has to about double in value for you to break even.

Whether or not it makes financial sense for you to buy depends on the rent you are paying in comparison to the cost of a house. It does not always add up.

The main reason which makes people buy a house though is the sense of ownership and the ability to do with it what you like, rather any real sense of saving money.

Taken on a large scale the prices of property normally tends to rise, but the scale may be beyond your lifetime and you may go bankrupt in the meantime. There have been lots of cases of property crashes, caused mainly by rampant speculation which itself is caused by unrealistic expectations of neverending returns.

In my mind the housing market in Ireland is spent. I wouldn't consider buying a house here for a least 10 years, or right after a huge crash, whichever comes first.

humbert

Not taking rent into account is a fairly hefty omission. Renting at a 1000 a month over the same 30 years would be 360000 and you have nothing to show for it.

jhegarty

humbert wrote:

Not taking rent into account is a fairly hefty omission. Renting at a 1000 a month over the same 30 years would be 360000 and you have nothing to show for it.

but here is thing everyone always forgets doing the rent/mortgage calcuations...


what sort of house will you be able to rent in 25 years time for 1000 a month ?

robinph

humbert wrote:

Not taking rent into account is a fairly hefty omission. Renting at a 1000 a month over the same 30 years would be 360000 and you have nothing to show for it.

Yes you do, you have the 610.46 a month that you were not paying on top of that for your mortgage.

jhegarty

robinph wrote:

Yes you do, you have the 610.46 a month that you were not paying on top of that for your mortgage.

Again that assumes rent does not go up 1cent in 30 years...

Conar

If you always rent you will also need to have a good pension to keep you in a decent place when you retire too.

Black Swan

Well, there are better investiment vehicles for your future house than stuffing your hard earned cash into a bank. Equities, bonds, commodities, all with risk, but also with a potential larger return than a savings account that does not keep up wth inflation or rising real estate prices. For example, if you timed Microsoft (MSFT) right, you could have grossed about 4.00 USD per share by buying it late January 2007 (official public release of VISTA), and selling it late April 2007 (as I did). Of course, there was a small online broker fee, and capital gains taxes, but considerably more moola than you could have made in a bank savings account.

And if you are not a speculator and more conservative regarding equity risk, you might want to look at a NYSE Blue Chip stock that has historically appreciated 11 percent per year over the last 100 years (Johnson & Johnson, symbol JNJ)? If you can leave it there for several years, and add to it over time, like the 500 euro periodic contribution (offered as an example earlier), then check out a JNJ DRIP (dividend reinvestment plan), where all the dividends and stock splits are compounded over the years.

Of course, you have to make your own investment decisions and not rely on Bad B!ue for advice (disclaimer... Ha!).

themole

You need to decide whats best for your situation.

I will use the house i am currently renting a room in in Dublin as an example.

The hosue is worth around €1,000,000, its a 4 bedroom house and recenlty a 3 bedroom house in the same estate sold for around 750-800.

The rent for the entire house is 1750 a month.

on a 30 year mortgage @ 5% the payback is 5,368.22 a month, total of 1932559.2.

Total rent, if it stays the same would be 630,000.

My point is that to see if you are saving money you need to make the calculation.

Give me an example of a place in the country where you would be able to rent a house worth 300,000 for 1000.

themole

Blue_Lagoon wrote:

Well, there are better investiment vehicles for your future house than stuffing your hard earned cash into a bank.

True, i would say with house prices the way they are in ireland right now you would probably be better of renting and investing the money you would other wise have spent on a mortgage.

themole

jhegarty wrote:

Again that assumes rent does not go up 1cent in 30 years...

The same is true for interest rates.

In Ireland at least the increase in rent has in no way matched the increase in house prices. When my parents bought a second house around 1990 it was possible to have the rent pay the mortgage. That is no longer the case.

Sonnenblumen

Paying rent is a losers game like em flushing down the toilet. You're bankrolling a landlord who has allegiance not much beyond the lease agreement and most are being slowly pulled screaming into line.

Renting only works on an interim basis otherwise capital appreciation aside and higher repayments (initially) you are running the risk of being very vunerable with a lease/tenacy agreement.

I know many landlords and most are really only interested in the easy life and will do the minimum to keep a tenant happy. Meanwhile they'll sit back and let the tenant shoulder as much of the investment cost by stealthyily adjusting rent at renewal date.

With a mortgage the only inflationary cost will be interest rate adjustments and sometimes they do fall.

Don't get caught with the dosh in the pocket, in the long run you'll pay big time. Better pay for your own place than someone else's.

humbert

themole wrote:

You need to decide whats best for your situation.

I will use the house i am currently renting a room in in Dublin as an example.

The hosue is worth around €1,000,000, its a 4 bedroom house and recenlty a 3 bedroom house in the same estate sold for around 750-800.

The rent for the entire house is 1750 a month.

on a 30 year mortgage @ 5% the payback is 5,368.22 a month, total of 1932559.2.

Total rent, if it stays the same would be 630,000.

My point is that to see if you are saving money you need to make the calculation.

Give me an example of a place in the country where you would be able to rent a house worth 300,000 for 1000.

If there was any significant increase in the rent or the value of the house the money saved on rent would cover money lost on interest though. I'm not saying buying a house is something everyone should do as soon as they can at all but renting long term is, as far as I can see, not very practical.

themole

humbert wrote:

I'm not saying buying a house is something everyone should do as soon as they can at all but renting long term is, as far as I can see, not very practical.

I hear ya. In ireland most people don't like to rent. Its a cultural thing.
In lots of other countries people have no problem with renting and in some cases can't understand why you would want to "own" your house.