How much should I spend on a house (Dublin)?

mcm4882

I'm a 30 year old professional female. I am single. I have mortgage approval for 200k. Between my own savings and my parents I would have another 200k. My parents also have an investment property which they could sell for another 200k. I'm not sure where I should buy a property for 400k (mortgage free), a property for 400k (half mortgage and half savings) or buy a property for 600k.

jimmycrackcorm

Buy for 400k cash. Enjoy life.
Edit: not paying for a mortgage means you would have spare earning capacity to pay the maximum AVC on a pension for your age. Free money on 20% of your income, tax free growth.

Water John

Not sure why you would tie up an extra €200K in your own house?
That's the first question you have to answer.

Then if you conclude that isn't a great idea, you have the second question. Do you go mortgage free and use your parents investment property?

Their needs and views are primary in that decision, not your choice between being mortgage free or not.

How the repayments on a 200K mortgage are to you, is also a consideration, but secondary.

KenjiOdo

Only a suggestion;

Do you have to live in Dublin?? You could get a pretty cool place for way less in a more rural locale & live mortgage free and your loving parents could keep their retirement fund?

I recently became a homeowner of 2000 sq ft bungalow incl. garage, with just over two acres in a rural location for 100k, something I could never afford anywhere close to the capital, although I was born & raised there I don't think I'll miss it one bit.

Good luck with the house hunting!!!

aristotle25

Consider your parents financial position. If they are loaded and their investment property is pittance to them then buying for 400k cash is a great option to have. Or 400k plus some small mortgage.

But if their investment property gives them cash which is important to them then don't sell it. Think about their retirement and what money they will need in the future.

mcm4882

Thanks guys, yes I think I was being selfish and using all my parents money. I think I will go for the 400k option.

whatnext

mcm4882 wrote: »

Thanks guys, yes I think I was being selfish and using all my parents money. I think I will go for the 400k option.

Before doing anything have a quick chat with an account or solicitor. There are tax implications all over your situation. Spending €150 to €500 on the right professional advice might turn out to be the best money you ever blow. It won't make you any money, but could save you €10's of thousands in CAT, gift or inheritance tax.

mcm4882

Thanks 'whatnext'. Yes I will be under the threshold for gift tax. My parents reckon if they give me the money now (which is under the gift tax threshold) it is a tax saving because later i would have to pay inheritance tax on it.

whatnext

mcm4882 wrote: »

Thanks 'whatnext'. Yes I will be under the threshold for gift tax. My parents reckon if they give me the money now (which is under the gift tax threshold) it is a tax saving because later i would have to pay inheritance tax on it.

You need to look at the long game on this. As far as I know these things are cumulative, NB I'm not an expert. I.e. I believe any gift would eat into inheritance tax thresholds.

Getting a mortgage for the max you can, then getting 3k pa as a gift from each parent until the difference was made up "could" be a smarter move. But there are so many variables that only a proper experienced professional can give the right advice.

What you believe to be true may not entirely so and once you put the ball in play there is no reverse gear. Talk to someone ( a professional) first. That's the only advice you need to take from this thread.

4ensic15

Each parent can give 3k a year tax- free and it is not cumulative. The sensible thing to do would be to borrow money and get the parents to give 6k a year towards the repayments. The question is not how much to spend but to look at what is available at particular prices. After that, it is about location and flexibility. Buying a trendy apartment may be nice but it may lack flexibility if you started a family or wanted more space. Buying in a remote suburb may leave you isolated if you don't start a family.

Mooooo

Parent to child life limit is somewhere around 300k and is cumulative and include inheritance so before or after won't make a difference as far as I know, as said above talk to a good accountant to have all info to hand. To be honest look for what you want and see them personally I wouldn't get parents to sell somewhere for me to use esp if they are already offering cash as well so if you can find somewhere you like in the 400k bracket work go with that. Perhaps look a bit below that as well as keeping some savings to hand would be helpful for yourself as well

Feckofff

It depends what you need. Bigger/more expensive houses come with a lot of extra costs eg property tax, insurance, decoration, maintenance, heating and if you don't need it will just drain cash.

Btw you sound like quiet the catch
I have a lovely place in dublin if your interested......in the house I mean!

Lumen

There is no way to answer this question, it's a personal decision based on personal factors (particularly possible future children).

400k will buy a perfectly nice, warm, big enough family house in Dublin that needs nothing doing to it.

The difference between 400k and 600k in Dublin is some combination of commute time, access to schools, garden size and size/niceness pf property. TBH unless you have particular love of gardening, the bigger garden is probably the most painless thing to lose.

FWIW I would not choose the mortgage-free option. A small mortgage is no great hardship on a 60k salary, which is presumably what you're earning if you got approval for 200k.

4ensic15

Mooooo wrote: »

Parent to child life limit is somewhere around 300k and is cumulative and include inheritance so before or after won't make a difference as far as I know, as said above talk to a good accountant to have all info to hand. To be honest look for what you want and see them personally I wouldn't get parents to sell somewhere for me to use esp if they are already offering cash as well so if you can find somewhere you like in the 400k bracket work go with that. Perhaps look a bit below that as well as keeping some savings to hand would be helpful for yourself as well

Up to 3k per year from each parent does not go into the cumulative total. The O/p could get 6k a year from the parents while both are alive and still inherit the full allowance.

Samuel T. Cogley

400K in as a deposit, mortgage what you need to get the 'foreverhome' - don't go mad on the bidding just because you can.

Over pay on the mortgage heavily until it's gone. If you're not sitting on boxes for the first 6 months you've not had the proper experience IMO! so break the back of the mortgage in the first couple of years.

thierry14

I would go mortgage free

Don't see the point in giving the bank your hard earned money when you don't need to.

4% a year for doing nothing, no thanks

aristotle25

Samuel T. Cogley wrote: »

Over pay on the mortgage heavily until it's gone. If you're not sitting on boxes for the first 6 months you've not had the proper experience IMO! so break the back of the mortgage in the first couple of years.

This advice may not suit everyone. At least one alternative is to put spare cash in a pension and max out your AVCs doing that.

Samuel T. Cogley

aristotle25 wrote: »

This advice may not suit everyone. At least one alternative is to put spare cash in a pension and max out your AVCs doing that.

My concern is interest rates etc. But different strokes for different folks. I've no doubt your better informed here than I, I just have become debt adverse as I get older.

The reason I suggest a mortgage at all in the 300-400K space seems to be hitting up and I think there's better properties around 500K. Perfectly good gaffes for 400 though.

HiGlo

From my understanding, your parents can each gift you up to €3k per year and that has no implications on future inheritance or tax implications.

Separately you can receive up to around €300,000 from your parents and there's no immediate tax implications, however on their death anything further above that amount you inherit will be taxed.
So it will mean a heftier tax bill when they pass.

I think you're right to dismiss the idea of spending €600k on a property now. As you mentioned you're only 30 and single and that's a whole lot of house for 1 person to be rattling around in... You don't know where life is going to take you.

I'm in a slightly similar position at the moment, but on a smaller scale and I'm choosing to get a small mortgage rather than use money from my parents. I just feel a little bit more like I'm putting the money and effort into the place and it's that little bit more "mine" than if I was handed it at little/no cost to me...

Best of luck with your search. Enjoy.