Advice: Rent or buy?

random10

Our situation is that we are thinking about the future, we had been all set to buy have viewed thirty houses and nothing appealing, we were looking at a country property around 240k. Now I'm having second thoughts, the problem is that we will inherit my OH parents house, his parents are 70ish and obviously I don't want to think about them passing but who knows when the house will be available. My fear is we buy a house and get a mortgage for 200k then the home place is ours in 5/10 years and we won't have the money to renovate. It could also be twenty years and we plan on starting a family soon so would we rent for 20 years. If we got a mortgage for 200k the repayments including life insurance etc approx 1,300 per month. alternatively if we rent we could rent for 700/750 a month and save the difference, we also wouldn't have to worry about furnishing and upkeep etc. we estimate that in 5 years we could have 100k saved and then we would be mortgage free or a very small loan when we inherit the house. Was telling our friends and getting mixed reviews, what are your opinions, i hope i explained the situation clearly,

djimi

If you think that you can save €100k in 5 years then I would be looking at doing that tbh. The more money you have in the bank the smaller your mortgage will be, and if you are looking on it a short term investment (relatively speaking) then being able to sell and know that you will have a decent lump sum left over has got to be worth a lot.

Just my opinion.

murphaph

You may not inherit for another 20 years. You say you wouldn't have to worry about furnishings but you will grow tired of the landlord's taste in furniture so IMO if you go down the rental route then you should do so unfurnished if possible and start buying quality furniture that you can live with for decades. That furniture then comes with you to your purchased/inherited home and you don't have to splurge on furnishings in one go. If it was me I'd buy in your shoes. You may never inherit anyway...people do strange things and you have no idea at the end of the day that the house will be willed to your OH at all. It might be willed to the cats and dogs home so I wouldn't be relying on it either way.

sawdoubters

I would buy,rents are only going to go up



https://www.propertypriceregister.ie/website/npsra/pprweb.nsf/PPR?OpenForm

djimi

murphaph wrote: »

If it was me I'd buy in your shoes. You may never inherit anyway...people do strange things and you have no idea at the end of the day that the house will be willed to your OH at all. It might be willed to the cats and dogs home so I wouldn't be relying on it either way.

The way I see it, even if they never inherited the house, if they reckon they can save €600 a month by renting over buying and have a larger deposit when the time comes then I would want to keep on renting and saving. The smaller the mortgage the better, and there is never an immediate rush to buy a house.

djimi

sawdoubters wrote: »

I would buy,rents are only going to go up



https://www.propertypriceregister.ie/website/npsra/pprweb.nsf/PPR?OpenForm

And in 5 years house prices could crash through the floor again. Rents arent going to rise that dramatically in most areas; certainly not enough to force my hand into buying.

Cuddlesworth

Doesn't 250k buy you a mansion in the country?

murphaph

djimi wrote: »

The way I see it, even if they never inherited the house, if they reckon they can save €600 a month by renting over buying and have a larger deposit when the time comes then I would want to keep on renting and saving. The smaller the mortgage the better, and there is never an immediate rush to buy a house.

Fair point if the figures are really like that. I am not really familiar with the market outside Dublin but the differential seems too huge to me.

random10

http://www.daft.ie/searchrental.daft?id=1418342

we would rent a house similar to this above, but if buying we were going to buy a bigger country house similar to this below

http://www.daft.ie/searchsale.daft?id=745522

murphaph

So not the same thing really. Your quality of life would be better in the house you'd buy (presumably), the that's where the large differential comes from.

random10

yes true the rental wouldn't be as nice but it wouldn't be our forever home!! and we haven't started our family yet

spaceHopper

I'd buy for now then if you inherit sell or rent out and do up your forever house. There are to many what ifs to wait for your oh's parents to die. What if one gets sick and needs to sell to ho into a home.

ted1

Of his patents end up on a home there is every chance that THEIR home may have to be sold to pay for it.

Maximus_1

I really don't like that kind of waiting for his parents to die kinda tactic even though of course you don't want them to but in ways are looking at them kind of wondering when it will happen because you'll get their house. Karma is a b**ch and they may well live healthily into their 90's visiting you in your rented house to see the grandchildren! I would base my decision on whether you want to rent and save for the time being or buy and own your own independent of OH's parents. If the worst happens in say 5 years and those parents die well then you can always sell again if you want. People do it all the time.

D3PO

regardless of the equation of weather renting or buying is most appropriate for you assuming your OH will inherit a house is a ludacris thing to put into your considerations.

You dont know what will happen, for all you know the house may well need to be sold to pay for a nusring home for one or both of your OH's parents at some stage or some other such financial event.

Financial planning is about being prudent assuming inheritance of a house is not prudent. Get that our of your head and then look at weather renting or buying is most appropriate for you.

marathonic

I agree with others. I wouldn't want to be looking at people wondering when they were going to die so that I could get on with my life.

From another perspective, if you buy now and live in the house, it'll be free from Capital Gains Tax as your PPR if/when you ever decide to sell. Any inherited house is going to be subject to inheritence tax if it's over the thresholds regardless of whether you buy or not now. Therefore, why not buy now and benefit from CGT-free growth between now and the time you inherit the house - if you inherit it.

Balmed Out

I wouldnt make any assumptions about the in laws finances either, for instance what happens if they get sick ? I think under the fair deal if they require long term nursing care 22% of the estate could go to the government (no idea if both had to).

Would always think your better off planing for your own financial future without relying on any inheritances, you just dont know what will happen.

Akrasia

One other thing to note, House prices are still falling in many areas.

In Clare for example, they fell by 11% last year. A 10% fall in house prices on a house circa 250k is 25 grand. If your annual rent is only 8400 (700pm) you could be financially better off waiting if house prices fall by anything more than 3.5% in the area you want to live in.

D3PO

Akrasia wrote: »

One other thing to note, House prices are still falling in many areas.

In Clare for example, they fell by 11% last year. A 10% fall in house prices on a house circa 250k is 25 grand. If your annual rent is only 8400 (700pm) you could be financially better off waiting if house prices fall by anything more than 3.5% in the area you want to live in.

that is a very simplistic view and doesnt account for opportunity cost amonst other things.

random10

Thanks everyone for the advice it's great to hear from others. On another note would anyone advise waiting for 5 years and then making a decision. I know that we would be renting but we plan to rent a small place as even if we have one or two babies they would only be small and not have started school. At the current rate we would have 100k saved in 5 years and could decide then where we are at, if we got a mortgage now we'd have little or no savings in 5 years.

djimi

random10 wrote: »

Thanks everyone for the advice it's great to hear from others. On another note would anyone advise waiting for 5 years and then making a decision. I know that we would be renting but we plan to rent a small place as even if we have one or two babies they would only be small and not have started school. At the current rate we would have 100k saved in 5 years and could decide then where we are at, if we got a mortgage now we'd have little or no savings in 5 years.

As I said above, if it were me and I thought that I could rent and accumulate €100k in savings over the next 5 years then that is exactly what I would do. You want as small a mortgage as you can get.

lukesmom

Hope your in laws live until they are a hundred years old

random10

I do too, and beyond.

MouseTail

djimi wrote: »

As I said above, if it were me and I thought that I could rent and accumulate €100k in savings over the next 5 years then that is exactly what I would do. You want as small a mortgage as you can get.

If it were me, and I was at your stage in life, I would prefer to buy now and pay down a mortgage. There is still value in Wexford. Put the inheritance (or not) out of your head, that really is an unhealthy thing to factor into your plans.

djimi

MouseTail wrote: »

If it were me, and I was at your stage in life, I would prefer to buy now and pay down a mortgage. There is still value in Wexford. Put the inheritance (or not) out of your head, that really is an unhealthy thing to factor into your plans.

Inheritance aside, why would it make more sense to buy now rather than rent for half the price and continue saving for a few more years, when they dont seem overly bothered either way?

Villa05

MouseTail wrote: »

There is still value in Wexford. Put the inheritance (or not) out of your head, that really is an unhealthy thing to factor into your plans

This decision should have nothibg to do, with the inherit ance. If you can save 100k while renting, the decision is a no brainer. Rent, keeping an eye on price changes in your local area. Review options when you have kids at school going age. Should be plenty of supply with very little upward pressure on prices in wexford.

Family before property, always. Best of luck,

okiss

At the moment you expect in time that you will inherit your oh home but the reality is that you don't if this will happen. They may not make a will or could leave the house to another family member. Also the house could have to be sold to pay for care in there old age or to pay off a lifetime mortgage.

From what you have told us if you get a mortgage at the moment you will be looking at paying back apox €1300 a month but renting will cost you €700 /€750 a month rent.

My advice to you is to stay renting for the next 3 to 5 years and live as if you are paying €1300 plus a month of a mortgage. This will ensure that you have a further €60k to €100k in savings. If you want to save this amount of money in 3 to 5 years I would not have a family during this time. Once you have children you will have less pay for 6 months, have to buy baby things and have the cost of childcare when you go back to work.
Also when you look for a mortgage the banks will take into consideration if the cost of bring up a child/children and the child care costs.

I know couples in your situation who did this and they waited a while before having children. With a lower mortgage and savings the mother could take more than 6 months maternity leave. Some of my friends give up work or worked part time once they had a family.

I would look on this time as a chance to save a lot of money ( short term pain) for a long term gain.

D3PO

okiss wrote: »

At the moment you expect in time that you will inherit your oh home but the reality is that you don't if this will happen. They may not make a will or could leave the house to another family member. Also the house could have to be sold to pay for care in there old age or to pay off a lifetime mortgage.

From what you have told us if you get a mortgage at the moment you will be looking at paying back apox €1300 a month but renting will cost you €700 /€750 a month rent.

My advice to you is to stay renting for the next 3 to 5 years and live as if you are paying €1300 plus a month of a mortgage. This will ensure that you have a further €60k to €100k in savings. If you want to save this amount of money in 3 to 5 years I would not have a family during this time. Once you have children you will have less pay for 6 months, have to buy baby things and have the cost of childcare when you go back to work.
Also when you look for a mortgage the banks will take into consideration if the cost of bring up a child/children and the child care costs.

I know couples in your situation who did this and they waited a while before having children. With a lower mortgage and savings the mother could take more than 6 months maternity leave. Some of my friends give up work or worked part time once they had a family.

I would look on this time as a chance to save a lot of money ( short term pain) for a long term gain.

theres three reasons why its not that straight forward in my opinion

1) Rent for 5 more years reduces the mortgage term you will be able to apply for by 5 years

- result incresed monthly payments and decrease in the amount of a mortgage you will be offered

2) Yes the mortgage may be more than rent by twice but remember the mortgage is capital and interest. Once house prices arent falling the money paid off the capital is just as valuable as the 100k you would save outside of it.

3) The OP mentions they are looking to have 1 or 2 children in the next 5 years. Having 2 children will have a large impact to what banks will lend you when its time to apply for a mortgage.

Thats without the considerations of the hassle of renting, possible rises in house prices, possible rises in the cost of renting in the intervening 5 years, and how your life could be impacted if god forbid the OP or their partner got seriously sick.

Im not saying renting and saving 100k to put towards a mortgage in 5 years time isnt a good idea Im just saying theres more to consider than people are letting on in this thread.

RedPandaDan

D3PO wrote: »

3) The OP mentions they are looking to have 1 or 2 children in the next 5 years. Having 2 children will have a large impact to what banks will lend you when its time to apply for a mortgage.

I'm not sure this should be seen as a negative. While you would get a bigger mortgage by borrowing before having kids, the bank would be offering a smaller mortgage for a reason. Kids are expensive!

djimi

Dont banks factor in the possibility of couples of a certain age having kids anyway? I could be wrong, but Im sure I was told that before.

marathonic

djimi wrote: »

Dont banks factor in the possibility of couples of a certain age having kids anyway? I could be wrong, but Im sure I was told that before.

No. They don't do this. I have heard of them pulling a mortgage offer at the final stages after an applicant visited their branch during the late stages of pregnancy though.