Right timing / motivation to buy my first property?

tropple

Hi,

I've read quite a few threads / links posted here that have been really useful for helping me find my feet when it comes to renting / buying.

I've been renting a room in Dublin for the last 2.5 years, paying about e900 per month in rent (about e25k total rent) I really like the area I'm living in (Docklands), and I see myself being here for the foreseeable future.

A bit of background on me:
- I'm 26 (almost 27)
- I have about e65k in savings, and another e60k or so in shares etc
- Earning e70k per year
- I have a girlfriend, but she wouldn't be buying with me (or moving in for now anyway)
- On average, I've been saving e2k per month for the last year. Including e250 in a pension

I'm looking at 1br apartments in the area. Prices range from e300k-350k. I've got a couple of viewings lined up this week, and meeting with a few banks for mortgage approval.

The prices are high, but if I were to take out a e285k mortgage for example, repayments would be about e1270 per month which I could comfortably afford. Further down the line, if I was ever to move, I think I would easily get e1800+ rent, and I imagine there isn't a huge risk of property losing a significant amount of value in that area (famous last words?!)

Overall, I feel like I'm in a pretty strong position to take my first step on the ladder. But I'm really not very savvy when it comes to managing my money, buying property etc. So if anybody thinks this is a terrible idea, please do say so.

I have a couple of questions, and would be grateful for any comments:
- Is it best to only pay the minimum deposit required, or should I pay as much as possible? eg if it's a e330k property, I would only need a e45k deposit - would it be better to pay e70k up front and take on a smaller mortgage?
- Are there generally any advantages to taking out a mortgage with my regular bank as opposed to any other?
- Should I consult an independent advisor on my situation?
- Mortgage term - to me, it seems like 35yrs is the best option purely for lower repayments alone. Obviously the total amount will be more, but which would you recommend I go for?

myshirt

You can go get some financial advice with someone to run through the detail with you. Think it is definitely worth it.

Anyway.. moving on. .

The more of a deposit you put up, the cheaper the mortgage interest rate. And you want as low an interest rate as possible. I would say to you in terms of what you pay back don't go more than 30% of your takehome. If that means a 25 year mortgage, then excellent. Go for that instead of 35 years. You will save up to 70k+ in interest payments over the term. Also you give yourself that flexibility to push it out to a longer term if needs be.

You are in a good position at 27. A good idea to consider might be to take 6 months living expenses out of your deposit and put it to the side. Use of the rest of the deposit towards the apartment.

Whatever you do, sit down and get some advice for your own unique situation as all anyone will do here on boards is throw some ideas out there for information purposes only.

tropple

myshirt wrote: »

You can go get some financial advice with someone to run through the detail with you. Think it is definitely worth it.

Anyway.. moving on. .

The more of a deposit you put up, the cheaper the mortgage interest rate. And you want as low an interest rate as possible. I would say to you in terms of what you pay back don't go more than 30% of your takehome. If that means a 25 year mortgage, then excellent. Go for that instead of 35 years. You will save up to 70k+ in interest payments over the term. Also you give yourself that flexibility to push it out to a longer term if needs be.

You are in a good position at 27. A good idea to consider might be to take 6 months living expenses out of your deposit and put it to the side. Use of the rest of the deposit towards the apartment.

Whatever you do, sit down and get some advice for your own unique situation as all anyone will do here on boards is throw some ideas out there for information purposes only.

Thank you! I will definitely get some advice, but your points were really helpful. I'm equally terrified and excited about the possibility of buying somewhere, but hopefully they'll keep me on the right path!

rsynnott

Note that some banks may have special rules about 1 beds (usually a higher deposit requirement).

If you’re taking a variable rate, then you could take the max term, and overpay as practical to bring it down; this gives you some more flexibility.

I would not bet on prices not falling; don’t buy somewhere that you wouldn’t be happy living long-term. Even more, I wouldn’t bet on the current absurdly high rents being sustained. Supply will be sorted out sooner or later, and then 1800 for a 1 bed will look ridiculous (actually, even now it sounds optimistic).

285 on an income of 70k is 4x, so you’d need an exemption.

grilledcheese

tropple wrote: »

Hi,

I've read quite a few threads / links posted here that have been really useful for helping me find my feet when it comes to renting / buying.

I've been renting a room in Dublin for the last 2.5 years, paying about e900 per month in rent (about e25k total rent) I really like the area I'm living in (Docklands), and I see myself being here for the foreseeable future.

A bit of background on me:
- I'm 26 (almost 27)
- I have about e65k in savings, and another e60k or so in shares etc
- Earning e70k per year
- I have a girlfriend, but she wouldn't be buying with me (or moving in for now anyway)
- On average, I've been saving e2k per month for the last year. Including e250 in a pension

I'm looking at 1br apartments in the area. Prices range from e300k-350k. I've got a couple of viewings lined up this week, and meeting with a few banks for mortgage approval.

The prices are high, but if I were to take out a e285k mortgage for example, repayments would be about e1270 per month which I could comfortably afford. Further down the line, if I was ever to move, I think I would easily get e1800+ rent, and I imagine there isn't a huge risk of property losing a significant amount of value in that area (famous last words?!)

Overall, I feel like I'm in a pretty strong position to take my first step on the ladder. But I'm really not very savvy when it comes to managing my money, buying property etc. So if anybody thinks this is a terrible idea, please do say so.

I have a couple of questions, and would be grateful for any comments:
- Is it best to only pay the minimum deposit required, or should I pay as much as possible? eg if it's a e330k property, I would only need a e45k deposit - would it be better to pay e70k up front and take on a smaller mortgage?
- Are there generally any advantages to taking out a mortgage with my regular bank as opposed to any other?
- Should I consult an independent advisor on my situation?
- Mortgage term - to me, it seems like 35yrs is the best option purely for lower repayments alone. Obviously the total amount will be more, but which would you recommend I go for?

As someone who works in mortgages you sound like the ideal candidate!
To answer your questions:
It's up to you if you want a smaller mortgage at this point or not. If you you only use what you have to deposit wise then you have the extra money for furnishing the house, legal fees, stamp duty, etc.
I would definitely go with a mortgage brokers as there is generally no real advantages with getting a mortgage with your own bank. The brokers will be able to maybe get you lower rates with certain banks if you open a salary mandated current account though.
The 35 year term is generally what I would recommend but again, this is individual choice.

myshirt

^^^^^^^^^^^^^^

On what basis would you recommend a 35 year mortgage to this young buyer?

grilledcheese

myshirt wrote: »

^^^^^^^^^^^^^^

On what basis would you recommend a 35 year mortgage to this young buyer?

It's generally what is recommended as the repayments are less (which is what is most important to a lot of people) but if someone's wants to pay off their mortgage in less time then it's up to them.

Achasanai

grilledcheese wrote: »

It's generally what is recommended as the repayments are less (which is what is most important to a lot of people) but if someone's wants to pay off their mortgage in less time then it's up to them.

Would the situation described above be one where you would give an exception to somebody on the 3.5 salary rule?

I also thought 1 beds required a significant increase on 10% in the deposit.

davo10

myshirt wrote: »

^^^^^^^^^^^^^^

On what basis would you recommend a 35 year mortgage to this young buyer?

Most people who buy one bed apartments are not planning to hold on to them for the full duration of the mortgage. If repayments are low for a couple of years, then you are not putting yourself under financial pressure to make repayments. Eventually the apartment will be sold.

This is the opposite for a family home you plan to stay in for the full term, in that case, the longer the term the more interest you pay on the capital.

Lumen

"Ladder" + late 20s + 70k salary + 35 year mortgage on 1 bed apartment does not compute.

What likely circumstances would enable a trade up?

davo10

Lumen wrote: »

"Ladder" + late 20s + 70k salary + 35 year mortgage on 1 bed apartment does not compute.

What likely circumstances would enable a trade up?

What does this mean?

Lumen

davo10 wrote: »

What does this mean?

Ladder implies future trade-up.
35 year mortgage means slow principal repayment, less equity build up.
70k salary at 27 means less likely to see a massive step change in net income.
If prices go up you're screwed because the gap to the trade-up is bigger.
If prices go down you're screwed because you're in negative equity.

For it to work you need to be paying off the mortgage like crazy, steady-ish prices, no economic shocks, and preferably a future partner who isn't poor, and no kids for some time.

A lot has to go right.

Even the legendary Alison O'Riordan managed to avoid buying a 1 bed.

The current Dublin squeeze may mostly be down to inflows of working immigrants, which in turn are driven by flows of incredibly fickle international capital. That was also a primary driver of the last boom.

tldr: don't make a 35 year commitment to a property unless you don't mind living it for 35 years.

budhabob

Lumen wrote: »

Ladder implies future trade-up.
35 year mortgage means slow principal repayment, less equity build up.
70k salary at 27 means less likely to see a massive step change in net income.
If prices go up you're screwed because the gap to the trade-up is bigger.
If prices go down you're screwed because you're in negative equity.

For it to work you need to be paying off the mortgage like crazy, steady-ish prices, no economic shocks, and preferably a future partner who isn't poor, and no kids for some time.

A lot has to go right.

Even the legendary Alison O'Riordan managed to avoid buying a 1 bed.

The current Dublin squeeze may mostly be down to inflows of working immigrants, which in turn are driven by flows of incredibly fickle international capital. That was also a primary driver of the last boom.

tldr: don't make a 35 year commitment to a property unless you don't mind living it for 35 years.

There is some good food for thought in this. Financially you are in a great position, but at 27 you will likely outgrow a 1 bed apartment in 5-6 years, at which stage the above points become a serious consideration.

LuckyLloyd

Alternative viewpoint: keep saving, keep chucking the money away like you are (or even at half the rate) and stay flexible. €300 - €350k for a one bed apartment is a sign of a market at the high end. The way you are going, you could be in an excellent position in five year's time to take advantage of a slow down in the market. You would also have excellent options in the event of Ireland being hit very hard by Brexit or other external factors in that you would have a decent chunk of money to set yourself up anywhere that became more advantageous in terms of career opportunity.

At present you can easily afford your rent, you like where you live, you're earning good money and managing to chuck loads of it away. I'm not seeing 'the property ladder' as a draw for your specific situation, when the option is a bad deal on a one bed apartment. Keep patient and better opportunities will come up in due course.

rsynnott

I won’t comment on the whole 1 bed thing, but I took out a 35 year mortgage and overpay every month. I could have taken a smaller term, but this way I have more flexibility. This only works if you’re using a variable rate, obviously, and if you do actually plan to make the overpayments.

One downside of this approach is that you need to take mortgage protection insurance for the full term, which may be slightly more expensive than mortgage protection for a shorter term.

EDIT: Though, on the one bed thing, I haven’t really been keeping track for the last year or so, but I think you’d probably still get a 2 bed for 350k in the immediate area, if not in the docklands proper.

BarryD2

LuckyLloyd wrote: »

Keep patient and better opportunities will come up in due course.

This should work in theory but I guess it depends on how many people take out unsustainable mortgages in the next couple of years. If enough people do and get into trouble, there'll be the usual political pressure to help them out. There's a degree of safety in numbers it seems in the Ireland we live in.

Re OP, I'd be inclined to put in as big a deposit as you are comfortable with - reduce the amount you're borrowing and take it over as short a sustainable period as you can. As someone else noted, you should be able to renegotiate if things are turning out differently.

tropple

Thanks for the input everyone. I've got in touch with an advisor and planning to meet this week.

I probably should have mentioned that the lease on my current apartment is running out and the landlord wants to sell. I think I got pretty lucky with where I am, and really struggling to find a room I like even half as much.

I'm at a stage where I really want a place of my own - I don't want to share long term, and renting one really isn't feasible. 1br apartments similar to the one I'm looking at are renting for e3k+ per month right now.

PhoenixParker

If you're serious about your girlfriend you should also sit down and talk to her about rough future hopes/dreams and time lines. If you're not serious about your girlfriend then you should do the same exercise solo before meeting your advisor.

If living with a partner is part of those hopes and dreams then I would tend away from a one bed unless it's huge with copious storage. If children form any part of your future plans, even in the hazy long distant future, then I would completely rule out a one bed.

LirW

OP, if you're thinking of buying, you're able to do so and your landlord is selling - is the area affordable for you and you can actually buy the property off your LL? You being a reliable tenant could stand for you.

Otherwise really take input about future commitments into account like partner, marriage and children. If you aren't planning any of these commitments, 1bed could suit you. If not, you maybe want to consider a 2bed option.

Tusky

I was under the impression that banks generally require 30% deposit for one beds? That's what I was told when I went for a mortgage meeting with AIB.

LincolnHawk

I say don't do it.
Enjoy the rest of your twenties renting in the city and keep saving.
You'll want a house in your thirties, especially if you have kids. Life changes quickly.
Best of luck either way

theboringfox

tropple wrote: »

Hi,

I've read quite a few threads / links posted here that have been really useful for helping me find my feet when it comes to renting / buying.

I've been renting a room in Dublin for the last 2.5 years, paying about e900 per month in rent (about e25k total rent) I really like the area I'm living in (Docklands), and I see myself being here for the foreseeable future.

A bit of background on me:
- I'm 26 (almost 27)
- I have about e65k in savings, and another e60k or so in shares etc
- Earning e70k per year
- I have a girlfriend, but she wouldn't be buying with me (or moving in for now anyway)
- On average, I've been saving e2k per month for the last year. Including e250 in a pension

I'm looking at 1br apartments in the area. Prices range from e300k-350k. I've got a couple of viewings lined up this week, and meeting with a few banks for mortgage approval.

The prices are high, but if I were to take out a e285k mortgage for example, repayments would be about e1270 per month which I could comfortably afford. Further down the line, if I was ever to move, I think I would easily get e1800+ rent, and I imagine there isn't a huge risk of property losing a significant amount of value in that area (famous last words?!)

Overall, I feel like I'm in a pretty strong position to take my first step on the ladder. But I'm really not very savvy when it comes to managing my money, buying property etc. So if anybody thinks this is a terrible idea, please do say so.

I have a couple of questions, and would be grateful for any comments:
- Is it best to only pay the minimum deposit required, or should I pay as much as possible? eg if it's a e330k property, I would only need a e45k deposit - would it be better to pay e70k up front and take on a smaller mortgage?
- Are there generally any advantages to taking out a mortgage with my regular bank as opposed to any other?
- Should I consult an independent advisor on my situation?
- Mortgage term - to me, it seems like 35yrs is the best option purely for lower repayments alone. Obviously the total amount will be more, but which would you recommend I go for?

Don't be too harsh on yourself with the phrase not savvy with managing my money. You are 26 and on 70k with very big savings and shares as well as that you are saving at 2k pm about half your net salary every month. That's incredible and well done to you.

If the interest element of loan is affordable to you and cheaper than renting then I don't see an issue with your plans to buy so long as you would be happy there for a few years.