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.

themole

The problem i see is that most irish people have it in their head that they need to own their home. All i'm saying is that more people should look at the other options and not think there is only one sensible option, which is to buy a house.
In my mind there is no point stretching your finances to buy a house because you don't want to throw money down a hole on rent as some people see it.

Sonnenblumen

themole wrote:

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.

I dont think its a cultural thing, more like silly science. I mean why would anyone believe that having a few pints whilst lining someone else's pocket is better than lining your own?

Poverty trapped countries aside, where personal spending power permits, most countries are in fact increasingly buying properties. The whole cultural thing is a myth.

I would agree that renting in other countries is much better and more stable than Ireland, here we're also catching up with tenant rights etc.

themole

Sonnenblumen wrote:

Poverty trapped countries aside, where personal spending power permits, most countries are in fact increasingly buying properties. The whole cultural thing is a myth.

Look at this.

Not everyone who does not own their home cannot afford to own it, while that is true in a lot of cases, there are also a lot of people who decide not to spend their money on owning their home.

humbert

Well I don't see myself buying a home any time soon, a) because I am not ready to settle down and, b) because I'd like to have money while I'm young.

I do think there is an attitude, both in terms of rushing straight into a career and buying a home early in life, here toward making the future secure(got absolutely no facts to back that up, just see a lot of people my age with that attitude).

jhegarty

themole wrote:

The same is true for interest rates.

Interest rate have less of an effect on you ever day that goes by.... stopping completly the day the house is paid off.... rental rate effect you every day until you stop renting (die/go to old folks home)....

themole

jhegarty wrote:

Interest rate have less of an effect on you ever day that goes by.... stopping completly the day the house is paid off.... rental rate effect you every day until you stop renting (die/go to old folks home)....

All i meant is that they can change, the same as rent.

A Random Walk

As someone else said here recently, I buy my food in the supermarket I don't grow it myself - is this dead money?

Currently for most places a renter should end up with more money in 25/30 years than the buyers, because of our not so little house price bubble. That's the reverse of the normal situation.

You may choose to buy because you prefer the stability etc, but you will take a financial loss - it's your choice or preference, but don't be fooled by those who trot out such cliches as "rent is dead money".

You could also take the advice of those people who believe that house price increases of 8/9% a year is "low" and will be "average" from now on. These financial numpties are going to be showed up this year.

Sonnenblumen

humbert wrote:

Well I don't see myself buying a home any time soon, a) because I am not ready to settle down and, b) because I'd like to have money while I'm young.

I do think there is an attitude, both in terms of rushing straight into a career and buying a home early in life, here toward making the future secure(got absolutely no facts to back that up, just see a lot of people my age with that attitude).

Buying a house isn't settling down! Anyways, having money when you're young is great but needing lots when you're older is most likely, irrespective of your status.

Just remember when your enjoying your pints on a nightout form rented accomodation, your landlord is enjoying better pints all thanks to your inputs.

Goodluck whatever you decide.:D

constitutionus

ah i love it when people try to defend the whole rent thing . fact is it is money down the drain and everyone knows it. ya wanna rent for life go ahead but tell me what your gonna do when your 65 retired and on the state pension? four words guys, "your on the street" because theres not a landlord in the country that'll take less than the going rate for his property and i very much doubt 200 a week will cover it (or whatever the equivilant amount will be in the future) . renting is strictly a short term solution in this country and hell what do you thinks gonna happen when you want a family? many landlords wont rent to families because the property then ranks as a family home and they cant evict you if you stop paying your rent, i know of at least 3 incidences of this so far. and as for someone who mentioned the nursing home. what do you thinks gonna pay for that? the government have gone to great lengths to get your house to pay for that recently, you think they'll give a toss about some homeless person?

wise up guys, irish people arent obsessed with buying property for nothing. its about security, loooooong term security, because we sure as hell know we cant depend on "the market" to look after us. you want to piss it all away now, fair enough, but just know you'll have nothing by the end of it. have fun

daveirl

This post has been deleted.

drdre

Gator wrote:

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

I will help you out, we might get caught robbing a bank but i have other ways to make afew million

robinph

constitutionus wrote:

you want to piss it all away now, fair enough, but just know you'll have nothing by the end of it. have fun

That is exactly my plan. I expect to have killed myself in some spectacular way before I'm 65 and need to worry about retirement, and anyway it will more than likely have risen to 75 by then so I'm not too worried about it and will just have fun in the mean time.

luckat

Buying a house doesn't have to mean 'settling down' - if you want, you can sell it at any point!

The ludicrous price rises of Irish houses mean that what middle-aged people are now paying on a fairly old mortgage in Dublin is about what people pay for an average Dublin bedsit. And when they have it paid off, they'll have a house 'worth' almost a million. Nonsense, to be honest.

If Irish houses were priced realistically, these houses would sell for four times the average wage; or, if they're in an area convenient to the city, schools, etc, perhaps four times the slightly-higher-than-average wage.

So the '€1m' house would be worth, say, €200,000.

I'm convinced that the current government is in the pockets of certain building and building supplies interests, and the bubble is an artificial one, created to keep the building industry going into more and more extreme levels of profit.

In Japan last year I was talking to people about house and flat prices, and unless you're in the centre of Tokyo, they seemed to be more or less level with Irish ones.

But anyway, yes, I think there's probably good sense in saving as much as you can - if possible, the whole price of the house - go and work in Dubai for four years and come back with your money saved - and if not, as much as you can to cut the mortgage.

humbert

humbert wrote:

Yea, renting is basically flushing money down the toilet.

A bank of ireland ad had details of repayments of a 100k mortgage over whatever specified time. I got a calculator and worked out that I'd be paying back 147k, approx.
No thanks. I'm not giving half the price of a house (not that there are too many 100k houses ) to a bank. You might have that money to spare.

And if this little site is correct:
http://quoteme.ie/mortgage-rates-calculator/index.html
a mortgage of 250k over 20 years pays back...
398,400.

jhegarty

How much do you think 20 years of rent adds up to ?

themole

jhegarty wrote:

How much do you think 20 years of rent adds up to ?

about 1/2 or max 2/3 of the equivalent morgage to buy the same house.

humbert

assuming rent stays fixed?

themole

humbert wrote:

assuming rent stays fixed?

In Ireland now rent is at those levels and there is no sign of it increaseing to any great degree. If house prices increase even more, which i don't think they will, rent will not increase at the same level.

So, right now and into the forceiable future rent will always be 1/2 to max 2/3 of the mortgage value, assuming a 100% mortgage on the house.

chump

humbert wrote:

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

hah, NICE response - are you an economics expert?

If you were capable of responding to my query the significance of the "interest only' mortgage would become apparent. It was the first step in my argument to dismiss the diarrhea you spout.
It is clear that you possess such a simplistic and unsophisticated understanding of economics that your input is akin to that of my grandmothers.

humbert

chump wrote:

hah, NICE response - are you an economics expert?

If you were capable of responding to my query the significance of the "interest only' mortgage would become apparent. It was the first step in my argument to dismiss the diarrhoea you spout.
It is clear that you possess such a simplistic and unsophisticated understanding of economics that your input is akin to that of my grandmothers.

That sort of charm and confidence will be a big hit with the ladies when puberty finally arrives

You talk to your grandmother about economics? You should get out more.