Buying property, need advice.

simply_beaut

Hi all,
I need some advice, we are looking to buy property.
Option 1: I have enough saving to buy 2 bed apartment without mortgage.
Option 2: Take mortgage for bigger house and tie for 30 years.

What do you suggest, should we just spend all and buy mortgage free and start saving again or take a mortgage and keep our savings ( but pay lots of interest to bank)

2 bed apartment is big enough for us but if we take mortgage then will probably buy 4 bed.

What will you do?

donalg1

How much Rent would you get for the 2 bed and how much would your mortgage repayments be on the four bed (approx) if you took it out.

You could use your savings to pay a large portion of the 4 bed and only have a small mortgage left that you could over pay on if you liked with a view to reducing the terms that way. I suppose though it depends on your future plans, are you planning on having children at any stage, would you like a garden one day?

Also job security would have to be considered if going the mortgage route you wouldnt want to find yourself out of work in 3 years with no savings and a mortgage you cant afford. You would spend all your time thinking about how you could be mortgage free in the apartment.

simply_beaut

donalg1 wrote: »

How much Rent would you get for the 2 bed and how much would your mortgage repayments be on the four bed (approx) if you took it out.

You could use your savings to pay a large portion of the 4 bed and only have a small mortgage left that you could over pay on if you liked with a view to reducing the terms that way. I suppose though it depends on your future plans, are you planning on having children at any stage, would you like a garden one day?

Also job security would have to be considered if going the mortgage route you wouldnt want to find yourself out of work in 3 years with no savings and a mortgage you cant afford. You would spend all your time thinking about how you could be mortgage free in the apartment.

Thanks a lot for reply.
Mortgage is higher than i could get from rent and according to my math, Will pay approx 140000 interest on top of that.
Yeah i could use my savings to pay large portion but to be honest don't like idea of 20 + year , we could save that amount each month what our mortgage would be and will be better off.
Job security is not an issue ( but you never know), that's the prob 1 of other reason was thinking to go mortgage free option and if need bigger house down the line and can always get mortgage then.

donalg1

simply_beaut wrote: »

Thanks a lot for reply.
Mortgage is higher than i could get from rent and according to my math, Will pay approx 140000 interest on top of that.
Yeah i could use my savings to pay large portion but to be honest don't like idea of 20 + year , we could save that amount each month what our mortgage would be and will be better off.
Job security is not an issue ( but you never know), that's the prob 1 of other reason was thinking to go mortgage free option and if need bigger house down the line and can always get mortgage then.

Sounds to me like you have made your mind up about the apartment, no harm in being mortgage free thats for sure!! Plus you will be buying at a good time and chances are if you did decide to sell in 5 or 10 years you would be selling for more than what you would pay today.

Marcusm

Only buy the apartment if it meets all of your foreseeable needs or if it's in an area with an stablished market for apartments. Otherwise, if you need to sell (whether to move Or to accOmmodate an expanding family) you may have problems. "Property ladder" as a concept will be difficult in a market such as exists in Ireland today and such as will exist across much of the country for the next 10 years or so.

padraig_f

Option 1 should work out cheaper, I'd try and work out exactly how much cheaper, and whether it's worth it to you, the most significant factor will be how long the apartment will be sufficient for your needs.

e.g.
estimate apartment cost, say €150,000, which you can buy outright.
estimate 4-bed house cost, say €350,000.
estimate how long apartment will be sufficient for your needs, say 8 years.
estimate savings ability, say €1000/month.

Scenario 1. Buy apartment, then sell it and buy house after 8 years (assume you get the same price as you paid for your apartment):

Save €12,000/year at 2.5% savings interest.
Total savings after 8 years: €107,000

Net worth: €257,000
Mortgage required: €93,000

Term required to pay at €1000/month: 10 years
Interest payment: €24,000 (using mortgage calculator at myhome.ie/calculators/mortgage: 93,000, 4.7%, 10 years, 1000/month)

Total outlay in 18 years: €374,000


Scenario 2. Buy house now.

Net worth: €150,000
Mortgage required: €200,000

Term required to pay at €1000/month: 32 years
Interest payment: €187,000 (200,000, 4.7%, 32 years, 1000/month)

Total outlay in 32 years: €537,000



So in scenario 2, you pay €163,000 more, and it takes you 32 years to pay off instead of 18.

There are significant savings in scenario 1, the cost of that is that you live in an apartment for 8 years (but that may not be much of a cost, if the apartment suits your needs as well as a house for that period).

If an apartment will only suit you for a shorter term, then the cost for scenario 1 will rise. I'd say if it will only suit you for 3 or 4 years, you may be better just going for the house from the start, as there will be a certain cost associated with changing.

But if longer than that, there can be significant savings in getting the apartment first. Bottom line, it's pretty expensive to pay long-term interest on a house that is more than your current requirements. You need to estimate how much that is, and decide if it's worth that amount to you.

p.s. Let me know if theare are any significant factors I'm missing in my calculations.
Some factors I didn't include:
- Apartment management fees (they should be partly offset by costs associated with maintaining a house).
- Potential house-price rises over the 8 years. Hard to predict these, and if they rise, apartment price should rise roughly
in tandem (although not as much, they should partly offset it).

These should be considered but, the long-term interest is the major factor, and they won't come close to outweighing the €163,000 difference in interest of a longer term mortgage.

Kosseegan

Apartments never retain value as well as houses. There are apartments in Milltown Dublin which sold for twice the price of neighbouring houses when they were new 30 years ago. Now the aprtments are worth half the price of the houses. Go figure!

riclad

HOW much are you buying apartment for,?In dublin 2bed apartment ,average price 120k, you could buy a nice house in cabra 3bed for 140k.SO it depends on where you wanna live,apartments have service charges 2k plus,
When you buy a house you,ll maybe get a driveway, or on street parking.
MOST apartments parking is limited, unless you buy outside city centre.
i,d prefer to borrow 30, 40k buy house ,then pay 120 for apartment.
Certainly in dublin,in ten years time if economy recovers house ,s will be worth more than apartments.
IN the city,most areas not many sites left for building houses.eg within 5 miles city centre.
in apartments you have no control ,whose living beside, above you.
IF you have to buy one ,go for unit, top floor, corner.
Small block,,20 units, stairs, eg lifts cost more to maintain=high service charge.

simply_beaut

riclad wrote: »

HOW much are you buying apartment for,?In dublin 2bed apartment ,average price 120k, you could buy a nice house in cabra 3bed for 140k.SO it depends on where you wanna live,apartments have service charges 2k plus,
When you buy a house you,ll maybe get a driveway, or on street parking.
MOST apartments parking is limited, unless you buy outside city centre.
i,d prefer to borrow 30, 40k buy house ,then pay 120 for apartment.
Certainly in dublin,in ten years time if economy recovers house ,s will be worth more than apartments.
IN the city,most areas not many sites left for building houses.eg within 5 miles city centre.
in apartments you have no control ,whose living beside, above you.
IF you have to buy one ,go for unit, top floor, corner.
Small block,,20 units, stairs, eg lifts cost more to maintain=high service charge.

Thanks all for very valuable input, sorry for not being very clear.
we are looking to buy 2 bed house outside of dublin city center, dublin 15 area, some have garden, some don't, but parking is not an issue and some even have attic storage.

@padraig_f: thanks a lot for very your time to do math, much appreciated.

If we buy 2 bed house now and buy bigger house later on, we have no intention to sell but will try to rent it and buy bigger.

PS: Can't thank you all because of low post count.

uberalles

If apt choose to face outward if it's a block. Reason is an apt facing into a block is live a sound chamber. All noises from drunken neigh ours Comming home is echoed and amplified even if on the far side.

Living in an apt is like being part of a rubix cube. If one cube joining you get a gane console or big speaker you are fcuked. Worst case you will have 5 neighbours if the apt is back to back planned.

A house = less neighbours and better chance of sleeping at night IMHO

riclad

Theres 2bed apartments going for 120 in dublin 15, i think you can probably get a house in a private estate 150k approx or maybe less for house thats empty .Needs redecorating ,or probate sale.
ID, Srongly advise you go for house if you can afford extra 20,30k.

engineermike

Hi OP,
The apartment / house pro's and con's aside.
Being mortgage free in these uncertain times is a breath of fresh air - it offers security, peace of mind and flexibility.
I choose this route, and boy am I glad I did. A buzz word atm is : Austerity
And there is a hell of lot to be said to living with in your means.
Another poster has given a good layout of the figures (with certain given factors) - and the maths adds up.
You can buy property (outside Dublin ) for the same price as your car loan 6 years ago ???
I'd spend the cash on the bricks and mortar in a heartbeat.
mike F

christmas2012

get the apartment... do you really want to be stuck with a 30 year mortgage?

StillWaters

So you are not looking to buy an apartment, but are trying to choose between a 2 or 4 bedroom house?

What's the 5 year plan in terms of family formation?

If you are looking to have children, some outdoor space, a second reception room downstairs and proximity to schools is important, and worth borrowing for imo.

If the above is not in the equation, the 2 bed mortgage free house wins.

emclau

Great post! I'm in the same situation...

Given the fact that family houses are likely to be in greater demand in the medium term, prices will be more stable than those of apartments... An extra 50k for a house will be a safer long term investment...

riclad

ten years service charges on apartment is at least 12k.House,s have no service charges,better chance of rise in value vs apartments.
Most house s in dn15 have front,back garden.

RoverZT

You should be making your cash work for you OP, not blowing it on an apartment/house that could cost you a fortune.

Better to keep money in a high interest savings account.

If I had 140k in savings I would get a plane to Berlin and open a high interest deposit account there with one of there banks.

4% of 140k is 5600 euro a year - dirt of 30% brings it to 3920 euro.

You will make 326 euro a month from your savings.

That would cover a good chunk of a mortgage if you took one or a good bit of your rent.

You still have 140k savings to your name.

Keep your savings.



You would have to be stupid to put all your savings down on an apartment in these crazy times.