Advice: buying a house

Frezzin

Hi all,

Ok, first off I'm not asking financial advice and nothing herein will be taken as such Also I'm not thinking of buying right now, I'm sort of thinking in the next few years.

I'm just wondering how people go about buying a house now? With banks only offering a max of 92% of value, where is the other 8% coming from? Savings? On a 250k house you could only theoretically borrow 230k. Do people actually have 20k they're just sitting on? I'd be lucky if I could put 100 a month into savings after expenses with two kids, let alone the 1000 a month it would take to get close to that figure in two years.

Are banks still doing piggy-back loans for the 8%? Or maybe this whole thing works differently to the way I'm thinking of it. Can anyone offer advice/tips on how you go about buying this way without having oodles of cash stuffed away in a savings account?

Gra!

mrgaa1

credit union could loan you that amount. Otherwise its savings

Mitch Connor

I'm looking to buy a 250k house now. Only have 20k in savings though which still isn't enough - need more cash for floors, fees and furniture. Don't reckon i'll be getting a place any time soon, probably 2 years away.

Oh for the days of 100% mortgages - i'd be moving into my new place before christmas!!

nouveau_4.0

Not meaning to sound smart, but if you cant save €1000 a month how do you expect to pay the mortgage repayments when they start.

For a couple of years before buying my house I was saving the amount I thought I could afford as mortgage repayments. Saved the deposit that way, and when the mortgage repayments started there was no difference to my finances, except instead of saving, my savings were now mortgage repayments.

The money I used to pay on rent, went towards house setup costs, furniture ect.


Totally agree with Mitch too, there's alot of costs on top of just paying for the house, I'd budget for 10-20k on top of your deposit to comfortably sort out the house.

Don't move too prematurely.

McTigs

Mitch Connor wrote: »

Oh for the days of 100% mortgages - i'd be moving into my new place before christmas!!

You'll be delighted in two years you were forced to wait and save yourself 75 - 100 odd grand

warrenaldo

nouveau_4.0 wrote: »

Not meaning to sound smart, but if you cant save €1000 a month how do you expect to pay the mortgage repayments when they start.

Maybe he is paying rent of equivalent value!

godtabh

nouveau_4.0 wrote: »

Not meaning to sound smart, but if you cant save €1000 a month how do you expect to pay the mortgage repayments when they start.

For a couple of years before buying my house I was saving the amount I thought I could afford as mortgage repayments. Saved the deposit that way, and when the mortgage repayments started there was no difference to my finances, except instead of saving, my savings were now mortgage repayments.

The money I used to pay on rent, went towards house setup costs, furniture ect.


Totally agree with Mitch too, there's alot of costs on top of just paying for the house, I'd budget for 10-20k on top of your deposit to comfortably sort out the house.

Don't move too prematurely.

this is all assuming he is a first time buyer

Frezzin

warrenaldo wrote: »

Maybe he is paying rent of equivalent value!

This is it.

And I'm sorry, but it's not fair to tell someone that if they can't stuff away a grand a month into savings that they shouldn't have a mortgage in the first place. I've got 300 euro a WEEK childcare expenses on top of our rent. That's the cheapest we could find in this area for two kids. That alone is 1200 a month.

It's ludicrous for me to throw away money renting when I could be gaining equity with a mortgage.

quozl

Frezzin wrote: »

It's ludicrous for me to throw away money renting when I could be gaining equity with a mortgage.

Unless house prices are falling.

Which they currently are. And how could that change with the harshest austerity budget in the states history coming in under a month, >13% unemployment predicted for next year, growing national debt forcing pay-cuts for the public sector...

Instead of gaining equity you would likely be losing tens of thousands over the next couple of years.

If me and my wife had bought the average (an intellectual conceit, I accept there is no actual average) house at the start of this year, we worked it out that we would have lost enough equity to totally cancel out one of our salaries! IE our post-tax take home pay from either of our salaries is about equivalent to the amount we'd have lost. Do you feel like working a full-time job for nothing more than keeping up with your depreciating asset? Plenty of people are doing just that, or worse, right now.

That's based on the PTSB/ERSI figures, poor though they are.

Do think the down-sides through. I also want to buy a house now, I don't want to rent but the sensible thing imo is not to buy yet. There, for me anyway, is also added value in not being tied down to here by an unsellable asset if me and my wife felt that emmigration turns out to be the better option.

galah

savings and gifts, mainly. I don't think you'd get away with credit union loans anymore, the bank was very adamant that we provide up to date CU statements.

We're looking into buying a house now, and have the largest chunk of the deposit saved. A tiny bit of that portion is a gift from hubby's brother, just to tide us over so we can make a move now rather than later (had a big wedding this year on top of things, and I needed a new car about a month ago. That all ate into our savings (since I would never take out loans for those things...)).

Mortgage repayments and current rent are pretty much the same, so no real changes for us.

Frezzin

quozl wrote: »

Unless house prices are falling.

Yeah, it would definitely be a poor decision to buy now unless the house was realistically priced. But I mean, that's sort of subjective too really.

Still I don't see the savings method as a viable solution. Saving that kind of money with the kind of expenses we're expected to carry is unrealistic at best =/

Orlaithc9

We bought a house this time last year. We got a 92% mortgage but luckily had inheritance on my partners side with made up the 8%. Without that we would not have been able to do it so quickly and could see ourselves trying to save for the next number of years.
There was alot of additional expenses we did not really think about, solitors fees, valuations, deeds, house insurance, life insurance...and on and on and on. So it was a very finacially hard year. We also got suckered into a fixed 3 yr rate at 5.9% unaware that the rates would drop so drastically this year. We also had a baby in December so to say it was a big change isnt joking.

Gurgle

Frezzin wrote: »

where is the other 8% coming from? Savings? On a 250k house you could only theoretically borrow 230k. Do people actually have 20k they're just sitting on?

Same way it was 10 years ago - beg, borrow, save or steal the 8%.

If nothing else, this limits property purchase to people who are at least organized enough to raise the deposit.

Giving 100% mortgages to credit-card surfers was nuts.

geem

Frezzin wrote: »

This is it.

And I'm sorry, but it's not fair to tell someone that if they can't stuff away a grand a month into savings that they shouldn't have a mortgage in the first place. I've got 300 euro a WEEK childcare expenses on top of our rent. That's the cheapest we could find in this area for two kids. That alone is 1200 a month.

It's ludicrous for me to throw away money renting when I could be gaining equity with a mortgage.

I very much doubt that you would be gaining equity. House prices are going down. Think of it this way, every month you rent you are saving money.
I don't think it was smart for the poster to point out to you that if you can't save 1,000 per month you can't afford a mortgage. I think that was both kind and good advice.

jmayo

Frezzin wrote: »

Hi all,

I'm just wondering how people go about buying a house now? With banks only offering a max of 92% of value, where is the other 8% coming from? Savings? On a 250k house you could only theoretically borrow 230k.

Are banks still doing piggy-back loans for the 8%? Or maybe this whole thing works differently to the way I'm thinking of it. Can anyone offer advice/tips on how you go about buying this way without having oodles of cash stuffed away in a savings account?

Gra!

First off I think it owuld be interesting if the posters put down their ages because I think some of those who think 100% mortgages were good, that they can't buy because they can't save, that they need 10/20 grand to sort out the hosue once they get it definetly must have grown up post mid 1990s.

To those above I would say welcome to reality, where you actually save in order to buy things.
It is a reality where you don't fit out your hosue with all new furniture and things the week after you move in.
I can see it will be a major culture shock for some.

Mitch Connor wrote: »

...
Oh for the days of 100% mortgages - i'd be moving into my new place before christmas!!

Ah the days when idiots lent to idiots.

Frezzin wrote: »

This is it.

And I'm sorry, but it's not fair to tell someone that if they can't stuff away a grand a month into savings that they shouldn't have a mortgage in the first place. I've got 300 euro a WEEK childcare expenses on top of our rent. That's the cheapest we could find in this area for two kids. That alone is 1200 a month.

It's ludicrous for me to throw away money renting when I could be gaining equity with a mortgage.

No it is ludicrous to still believe that rent is dead money when you would actually be buying an asset decreasing in value.
I am surprised you aren't already on the great property ladder with that attitude.

jobless

Orlaithc9 wrote: »

We bought a house this time last year. We got a 92% mortgage but luckily had inheritance on my partners side with made up the 8%. Without that we would not have been able to do it so quickly and could see ourselves trying to save for the next number of years.
There was alot of additional expenses we did not really think about, solitors fees, valuations, deeds, house insurance, life insurance...and on and on and on. So it was a very finacially hard year. We also got suckered into a fixed 3 yr rate at 5.9% unaware that the rates would drop so drastically this year. We also had a baby in December so to say it was a big change isnt joking.

fair play to you for buying... but not expecting the additional expenses around buying the house was naive in the least. Also even the smallest bit of research would have told you that rates were on a downward curve...

personally i think saving the deposit teaches the people the actual value of the money instead of having credit thrown at them....

to the person above who wished 100% mortgages were still around...i really do despair!

Orlaithc9

Just in quick response to "jobless" I said we didnt really think about the additional costs not that I we were not aware of them...bit of a difference.
Also we had massive hassles getting a mortgage as it was due to the fact of the downward curve so we werent totally naive in that respect. We wanted to know how much we had to pay each month and make sure we could meet that commitment and therefore agreed to a fixed rate (which suited us better) but I guess Im a bit peed it was so high at the time. Maybe I should have explained myself better.
In response to people not knowing the value of money, I know it all too well. I have quite an expensive car which I worked for, saved and paid for myself. Anything we want or need is saved and saved and saved for. Myself and my partner are lucky enough to have pretty good jobs but work very hard to keep our house and family going.
We get nothing for nothing and it has always been this way.

To the other poster that enquired about ages Im 25 and my other half is 31. And this is our first house.

gurramok

Spending 1200 on childcare is crazy, would the partner be better off minding the kids at home for a bit to free up that money?

How will that work in your case Frezzin?

ZYX

jobless wrote: »

Also even the smallest bit of research would have told you that rates were on a downward curve...

!

Oh the benefits of hindsight. The smallest bit of research done on this site or that vast site of knowledge the property pin would have told you interest rates had nowhere to go but up. Indeed our esteemed ecconomists even did not see rates falling anywhere near as much as they did just 15 months ago.
"a cut in 2009 cannot be ruled out"
http://www.finfacts.ie/irishfinancenews/article_1014414.shtml

Moonbeam

gurramok wrote: »

Spending 1200 on childcare is crazy, would the partner be better off minding the kids at home for a bit to free up that money?

How will that work in your case Frezzin?

I was thinking wow thats really cheap for 2 kids,they obviously don't live in Dublin. You pay near that for 1 here and my mortgage is an awful lot less then that!

That makes no sense ,if she is staying at home grand it is 1200 euro less to pay out but what about all the money she earns?How does it free up money if she is not earning it any more?

gurramok

Moonbeam wrote: »

I was thinking wow thats really cheap for 2 kids,they obviously don't live in Dublin. You pay near that for 1 here and my mortgage is an awful lot less then that!

That makes no sense ,if she is staying at home grand it is 1200 euro less to pay out but what about all the money she earns?How does it free up money if she is not earning it any more?

Good question Maybe don't have kids before buying a house?

Its a catch 22 situation as a result of modern times. Maybe part time evening work as a workaround?

How did our parents cope?

Moonbeam

You make so little sense!!:)

Same way that we do

Frezzin

gurramok wrote: »

Spending 1200 on childcare is crazy, would the partner be better off minding the kids at home for a bit to free up that money?

How will that work in your case Frezzin?

Nah, she makes more than 1200 a month so we get a little extra income and she's not really a housewife type. Maybe if she could find good part-time work, but then it probably wouldn't cover childcare costs again.

First off I think it owuld be interesting if the posters put down their ages because I think some of those who think 100% mortgages were good, that they can't buy because they can't save, that they need 10/20 grand to sort out the hosue once they get it definetly must have grown up post mid 1990s.

To those above I would say welcome to reality, where you actually save in order to buy things.
It is a reality where you don't fit out your hosue with all new furniture and things the week after you move in.
I can see it will be a major culture shock for some.

You need a serious wakeup call if you think talking to people like that is acceptable in any form, regardless of medium. I don't care how old you are.

It's not only stupid to rent, it's damaging. Owning, regardless of current prices, is an investment against inflation. If people were able to hang on through the life of their mortgage they'd probably end up having a house worth more than they spent. But they can't for numerous reasons. Others might have bought houses that weren't made properly and will never be worth more than they paid because they won't last that long.

100% mortgages aren't stupid. Where stupidity came into the equation was when banks lent to people unable to handle the repayments. We could easily handle 800 EUR a month repayments even with childcare. That's a 230k house with a 35 year mortgage. The amount you borrow has nothing to do with it. Stupidity is people borrowing more than they can handle repaying and banks allowing them to do it.

quozl

Frezzin wrote: »

It's not only stupid to rent, it's damaging. Owning, regardless of current prices, is an investment against inflation.

We need more citizens like yourself, Frezzin! If there were only more people to buy the empties maybe we could keep the developers solvent and their ridiculous debts off our tax-payers.

Bravo! Your desire to shoulder more than your fair share of the people of Ireland's burden is an inspiration

stepbar

gurramok wrote: »

Good question Maybe don't have kids before buying a house?

Its a catch 22 situation as a result of modern times. Maybe part time evening work as a workaround?

How did our parents cope?

I wonder sometimes..... my parents borrowed 12k to build their first house (in 1982) when interest rates were around the 20% mark. One of the county council type mortgages. Nearly 20 years later they had just about paid 2k off the balance :rolleyes: They were very foolish not to have refinanced earlier when the boom was taking off. In the end they did and have it paid off (I think). My mother was working at the time but eventually quit shortly after to raise the family. Whilst Da was a PAYE worker at the time but eventually got laid off a few years later and went out on his own. Now they were tough times indeed.

Frezzin

quozl wrote: »

We need more citizens like yourself, Frezzin! If there were only more people to buy the empties maybe we could keep the developers solvent and their ridiculous debts off our tax-payers.

Bravo! Your desire to shoulder more than your fair share of the people of Ireland's burden is an inspiration

lol

Well if you think about it, most developers are putting them houses on the market for rent. So really, everyone renting is paying thier debts. I"d rather buy right now, see house prices drop another 10-15%, come back up again in 10 years, and be laughing as I've 10 years on my mortgage and the rest of those renters wasted 5-10 years paying for developers debts through rentals and only just getting into equity.

Stheno

Frezzin wrote: »

We could easily handle 800 EUR a month repayments even with childcare. That's a 230k house with a 35 year mortgage. .

That's a 230k house with a 35 year mortgage at the current historically low interest rates!

Given that interest rates are expected to rise as the recovery in the Eurozone increases, you'd want to be factoring in an ability imo to be able to pay a mortgage in that scenario and fairly quickly too.

E.g. if rates went up to 6% then your mortgage repayment would be €1,286.98 a month which is €486 more than you have mentioned above.

You can play around with different rates and see what the outcome is at
http://www.itsyourmoney.ie/index.jsp?1nID=93&2nID=94&3nID=103&pID=118&nID=298

Frezzin

That's a fair point but you're assuming I'd get a tracker/variable rate, which I wouldn't. You couldn't pay me to touch anything less than a 5 year fixed to be honest. And after 5 years both of my kids will be in school, I won't be paying 1200 a month in childcare and please God my wife and I will be making more than we currently are.

And fair enough, a 5 year fixed at current rates for 230k would be 1017 a month. Sorry, I was pulling the 800 from a variable =/

colsku

Oh Frezzin, some of your posts are so ill advised. You haven't got a clue. Go buy your over-valued house, spend 30 odd years stuck living there in negative equity with no flexibility to do anything with your life.

I was renting, got a 10% paycut and moved back in with Mammy. I then got an excellent job offer abroad and can now easily accept it without the worry of a mortgage, or the hassle of trying to sell a house in a drastically falling market.

You're obviously set in your ways, but I would implore you to take an honest look at the advantages of renting. Dead money my arse!

Frezzin

colsku wrote: »

Oh Frezzin, some of your posts are so ill advised. You haven't got a clue. Go buy your over-valued house, spend 30 odd years stuck living there in negative equity with no flexibility to do anything with your life.

I was renting, got a 10% paycut and moved back in with Mammy. I then got an excellent job offer abroad and can now easily accept it without the worry of a mortgage, or the hassle of trying to sell a house in a drastically falling market.

You're obviously set in your ways, but I would implore you to take an honest look at the advantages of renting. Dead money my arse!

'Em...this ain't gonna last for 30 years ya know...

I've rented for 12 years now. I've had a lot of time to think about the advantages and disadvantages to both. And I've done my travelings. I have a wife and two kids. Settling down is sort of the idea.

Grats on your new job. Hope you enjoy living abroad.

Senna

Frezzin wrote: »

lol

Well if you think about it, most developers are putting them houses on the market for rent. So really, everyone renting is paying thier debts. I"d rather buy right now, see house prices drop another 10-15%, come back up again in 10 years, and be laughing as I've 10 years on my mortgage and the rest of those renters wasted 5-10 years paying for developers debts through rentals and only just getting into equity.

Lets just (conservatively) say that the house price drops by 10% in the next two years, do you think that you will have 10% of your current mortgage paid in those two years?? Dont think so, smaller mortgage means paid off in less time or MORE OFTEN THE CASE same time frame with LESS monthly payments.

Buying a house is a great thing, everyone whats to own their own piece of land and who can blame them. But there has to be some financial awareness about the transaction. Saying "i'll be laughing in 10 years" is simply burying your head in the sand, especially when the market will bottom out at sometime in the not to distance future (2-4years max)

As for saving for a deposit, when i left college i asked my parents about buying, they said i should save £10k before i even consider buying, at that time a 4 bed semi in a good area cost £45k. they had the right idea and that advice saved me thousands.

beeno67

Senna wrote: »

Lets just (conservatively) say that the house price drops by 10% in the next two years, do you think that you will have 10% of your current mortgage paid in those two years?? Dont think so, smaller mortgage means paid off in less time or MORE OFTEN THE CASE same time frame with LESS monthly payments.

.

It all depends really on how much current rent is, how much mortgage repayments are and over what period loan is repaid as well as performance of property market over next 10 years.

JuliusCaesar

How did our parents buy their houses? Same way I did. Saved like mad - put every spare penny in - less nights out, less alcohol, less everything (no holidays for 6 years, in my case) - found any way possible to make more money - any overtime, any extra jobs - saved any cash gifts for birthday/Christmas. Worked out the finances as closely as possible - stamp duty, solicitor, surveyor, furnishings etc. Lived with only the essential furniture/repairs done until recuperated and ended up buying things slowly, doing the house up slowly....
I stared by keeping a little notebook where I wrote down every cent I spent and was really surprised to see how much was flying out on little things. Put a max on presents for others which was ok as most of them knew I was saving. Only got the minimum out of the cashpoint each time. It's amazing how much I was able to save - ok I was amazed.