Is this right time to buy a house?

masterboy123

We are a married couple and have been saving up to pay 15-20% initial cost on our first home.

We have been looking at new developments in our area (Limerick) and noticed an increase of 20-30k euros on houses which were initially 230k euros (4 bed semi-detached) about 8 months ago. And I feel the prices are going to continue going up and an estate agent told us to invest ASAP.

But we are worried that next year prices may go down, back to the range of 220k euros which suits our budget. So we are in the dilemma whether to continue paying 1000e every month as rent or invest in our own home?

Agent also told us even if there is a crash coming up, Dublin is mostly effected and Limerick will be effected by only few grands. Is this true?

Could someone with similar picture can share their experience please?

tommythecat

masterboy123 wrote: »

We are a married couple and have been saving up to pay 15-20% initial cost on our first home.

We have been looking at new developments in our area (Limerick) and noticed an increase of 20-30k euros on houses which were initially 230k euros (4 bed semi-detached) about 8 months ago. And I feel the prices are going to continue going up and an estate agent told us to invest ASAP.

But we are worried that next year prices may go down, back to the range of 220k euros which suits our budget. So we are in the dilemma whether to continue paying 1000e every month as rent or invest in our own home?

Agent also told us even if there is a crash coming up, Dublin is mostly effected and Limerick will be effected by only few grands. Is this true?

Could someone with similar picture can share their experience please?

If it’s your forever home then just buy it now. Nothing else makes any sense.

eeguy

Estate agent wants to sell houses. Remember, he works for the seller, not you.

No one can tell you whether prices will keep going up, or come down.

SNNUS

If you need a home, now is the time to buy. Do not buy a house for an investment.

I would not trust an estate agent if I asked him what the weather is like outside.

masterboy123

Yea we looking for a home.

Another silly question : do builders provide new development with the furniture? We saw the demo house with the furniture but it's not mentioned in the brochure that furniture comes along.

SNNUS wrote: »

If you need a home, now is the time to buy. Do not buy a house for an investment.

I would not trust an estate agent if I asked him what the weather is like outside.

JDD

Okay so back of the envelope calculation here

I'm assuming you guys are 32 years old. I had to pick a number so that was it.

If you buy now, at €230,000, with a 33 year mortgage, your repayments are €849 per month (assuming you go 3% fixed with BOI).

If you buy in a years time, and the price drops to €220k, you'll be taking out a 32 year mortgage. This drops your monthly repayments, but not by much because you're taking the loan out over a shorter period. So your repayment drops to €827 per month, a difference of €22.

However, you are taking the risk that prices won't go up. If prices go up to €240k next year, your repayment will be €901 per month, a difference of €51.

I also wouldn't believe a word that comes out of an estate agents mouth. It's in his interests for you to buy. Having said that, I'm not sure that prices will stagnate or drop next year, unless there's a large amount of supply i.e. new houses about to be launched next year. Could you check with your local planning authority to see what planning applications have been approved over the past year and how many are in the process of being approved? That will give you an idea of whether supply will meet demand.

Overall, the advice is, if you can afford €230k and you're not looking to sell the house in the next ten years (for god's sake don't buy into this "property ladder" bull) then I'd say buy now rather than wait until next year. I can't say I know too much about prices in Limerick, but I wager they haven't "bubbled" as much as Dublin. So when the burst finally comes (and I think it'll be 2021, but what do I know?), it won't reduce prices in Limerick by a huge amount - at least not enough to offset the fact that you'll be taking out a 28 year mortgage rather than a 33 year one (if it does happen in 2021), and your mortgage payments will increase accordingly.

JDD

masterboy123 wrote: »

Yea we looking for a home.

Another silly question : do builders provide new development with the furniture? We saw the demo house with the furniture but it's not mentioned in the brochure that furniture comes along.

they'll sometimes put the showhouse up for sale at the very end of the process, i.e. when all the other houses are sold. Showhouses include furniture. All other houses come without furniture so factor that is as a cost. Most new build estates will have an incentive whereby if you sign your contracts within 28 days of your solicitor receiving them (usually pretty soon after you put down your booking deposit) they'll include the white goods, i.e. washing machine, dryer, dishwasher, fridge, freezer and cooker.

masterboy123

A huge thanks and a big shout out to JDD.

Your suggestion and opinion are very very helpful. Things are getting clearer now. We are new in this area, therefore so many questions on the mind.

We were hoping to go for 25 years mortgage but it looks like everyone is going for 30 or 35 years mortgage. Would 25 years mortgage save us couple of grands?

And you're dead right, we are in early thirties. Your guess is real close!

GingerLily

Flooring isn't included in new builds, you'll want 4-8k set aside for that.
Another 1-2k for blinds/curtains.
Maybe 500/1k for an alarm.
And then all your regular furniture, so about 10k starting out I would say for a new build.

GingerLily

masterboy123 wrote: »

A huge thanks and a big shout out to JDD.

Your suggestion and opinion are very very helpful. Things are getting clearer now. We are new in this area, therefore so many questions on the mind.

We were hoping to go for 25 years mortgage but it looks like everyone is going for 30 or 35 years mortgage. Would 25 years mortgage save us couple of grands?

And you're dead right, we are in early thirties. Your guess is real close!

If you can pay down lump sums then go for a longer term, it's very difficult to reduce your payments (you basically need to be reapproved for a mortgage, which might be more difficult if you want to pay less!) so a longer term is usually a smarter choice.

masterboy123

I think flooring and tiling are included in the new house. I am copying what's written in brochure:

"Entrance hall has a solid oak flooring.
All floor coverings standard as per show house i.e. wood flooring, tiles and carpets"

You're right we need to keep 15k for furniture, alarm system, and other small expenses to be in the safe side. Thanks for the heads up!

GingerLily wrote: »

Flooring isn't included in new builds, you'll want 4-8k set aside for that.
Another 1-2k for blinds/curtains.
Maybe 500/1k for an alarm.
And then all your regular furniture, so about 10k starting out I would say for a new build.

GingerLily

GingerLily wrote: »

If you can pay down lump sums then go for a longer term, it's very difficult to reduce your payments (you basically need to be reapproved for a mortgage, which might be more difficult if you want to pay less!) so a longer term is usually a smarter choice.

If you have a variable rate you can pay extra when you want. I pay around 700 a year extra to my mortgage and it has reduced my overall length by about 5 years, so far.


I sent a PM to you masterboy, but things in Limerick will not slow down as much, it is a city with solid infrastructure and not a commuter town Like Laois/Meath to Dublin.

The fact there are 4 colleges there, a prison, large hospital, massive state buildings etc will mean you should have "reasonable" protection from a downward trend.
I own a few houses there and the price have neither fallen massively nor skyrocketed outside of certain areas.

The_Conductor

GingerLily wrote: »

If you can pay down lump sums then go for a longer term, it's very difficult to reduce your payments (you basically need to be reapproved for a mortgage, which might be more difficult if you want to pay less!) so a longer term is usually a smarter choice.

What often works out well for some people- is to fix the majority of the mortage at the best possible rate- and then leave a lump of it floating at a variable rate- so you get the best of both worlds- a very good rate on most of your mortgage- and the ability to pay off a lumpsum, should the opportunity arise. You do really need to split it in two though.

masterboy123

I read several articles recently comparing fixed vs variable mortgages. Most of them recommend fixed rate for the following reason :

The Irish housing market has been through a remarkably volatile and unpredictable period, and many believe we're still years away from reliable stability. This could explain why more and more borrowers are opting for the certainty of fixed rate mortgages.

Skyrimaddict wrote: »

If you have a variable rate you can pay extra when you want. I pay around 700 a year extra to my mortgage and it has reduced my overall length by about 5 years, so far.


I sent a PM to you masterboy, but things in Limerick will not slow down as much, it is a city with solid infrastructure and not a commuter town Like Laois/Meath to Dublin.

The fact there are 4 colleges there, a prison, large hospital, massive state buildings etc will mean you should have "reasonable" protection from a downward trend.
I own a few houses there and the price have neither fallen massively nor skyrocketed outside of certain areas.

masterboy123

Like 5 years fixed and LTV variable?
Is that what you mean?

The_Conductor wrote: »

What often works out well for some people- is to fix the majority of the mortage at the best possible rate- and then leave a lump of it floating at a variable rate- so you get the best of both worlds- a very good rate on most of your mortgage- and the ability to pay off a lumpsum, should the opportunity arise. You do really need to split it in two though.

homerjay2005

masterboy123 wrote: »

We are a married couple and have been saving up to pay 15-20% initial cost on our first home.

We have been looking at new developments in our area (Limerick) and noticed an increase of 20-30k euros on houses which were initially 230k euros (4 bed semi-detached) about 8 months ago. And I feel the prices are going to continue going up and an estate agent told us to invest ASAP.

But we are worried that next year prices may go down, back to the range of 220k euros which suits our budget. So we are in the dilemma whether to continue paying 1000e every month as rent or invest in our own home?

Agent also told us even if there is a crash coming up, Dublin is mostly effected and Limerick will be effected by only few grands. Is this true?

Could someone with similar picture can share their experience please?

look at it this way though, in 1 year you will have paid 12,000 on rent and be 12,000 less paid on your mortgage, which you will inevitably have to pay anyway.

2 years is 24000, 3 years 36000 etc etc plus as i said another 36000 less you have not paid off your mortage, so a difference of 72000 if you want to look at it from a realistic point of view that somebody else mortgage is 36000 down and yours is too. people buyin a house as a home, shouldnt worry what the value of their house is in 3 or 4 years time, especially when you have rent to pay in the meantime.

SteM

masterboy123 wrote: »

I read several articles recently comparing fixed vs variable mortgages. Most of them recommend fixed rate for the following reason :

The Irish housing market has been through a remarkably volatile and unpredictable period, and many believe we're still years away from reliable stability. This could explain why more and more borrowers are opting for the certainty of fixed rate mortgages.

I would imagine more are going for fixed rather than variable because rates are expected to rise, so if you can fix at 3% for 3 or 5 years it provides some stability during that time.

The_Conductor

masterboy123 wrote: »

Like 5 years fixed and LTV variable?
Is that what you mean?

No- what I meant is two separate legal mortgages with the one lender- one fixed (e.g. for 80% of the mortgage) the other variable (for the remaining 20%). The 80% portion will be insulated against interest rate rises- while the remaining 20% will be floating freely- however, you'll have the possibility of paying down lumps off it if/when the opportunity arises.

masterboy123

I didn't know this was possible. Is 80% fixed and 20% variable a good acceptable ratio? I am sorry, I have no knowledge in this area.

The_Conductor wrote: »

No- what I meant is two separate legal mortgages with the one lender- one fixed (e.g. for 80% of the mortgage) the other variable (for the remaining 20%). The 80% portion will be insulated against interest rate rises- while the remaining 20% will be floating freely- however, you'll have the possibility of paying down lumps off it if/when the opportunity arises.

GingerLily

masterboy123 wrote: »

I didn't know this was possible. Is 80% fixed and 20% variable a good acceptable ratio? I am sorry, I have no knowledge in this area.

Whats the maximum amount you realistically think you could pay back over the fixed term? 10k/25k? Variable that amount, because you only want to pay the potentially higher interest rate on that sum of money.

The_Conductor

masterboy123 wrote: »

I didn't know this was possible. Is 80% fixed and 20% variable a good acceptable ratio? I am sorry, I have no knowledge in this area.

It depends on your particular circumstances- and how likely you imagine you'll be in a position to make lumpsum payments in future. I choose 80:20 at random- as its unlikely any particular couple would be in a position to lumpsum pay >20% You're in your early 30s, you have managed to save a lumpsum already- and while you don't have any kids just yet, your other half would like them in the next year or two. Regardless of how good you are at saving- your finances will be shattered once you have a kid or two- you have that on the horizon- however, between now and then- you could realistically knock a lump or two from the mortgage- after you've a child or two- forget it.

izzyflusky

If you go fixed rate they usually let you pay off a percentage on top. I'm going with KBC 10 years fixed rate and during that period I can pay off 10% of the mortgage without penalties.

The_Conductor

izzyflusky wrote: »

If you go fixed rate they usually let you pay off a percentage on top. I'm going with KBC 10 years fixed rate and during that period I can pay off 10% of the mortgage without penalties.

Depends on the lender- typically you have to pay a penalty equal or greater to the foregone interest if you repay additional, other than scheduled, principle on a fixed rate product.

Far as I'm concerned, if you're buying a home, the right time to buy is when you the buyer find a property you like with a willing seller. Waiting for something that may never happen just seems crazy to me.

Also, imo, the only people you should take advice from are your broker (if you use one) and your solicitor. Nobody else in this process is on your side. Certainly not the bank or the EA.

masterboy123

Say we want to pay lump sump of 10k every 4 year on top of monthly fixed rate. Will this be feasible? Or the variable rate is over a certain period of time only?

4ensic15

Chase Deep Pebble wrote: »

Far as I'm concerned, if you're buying a home, the right time to buy is when you the buyer find a property you like with a willing seller. Waiting for something that may never happen just seems crazy to me.

Also, imo, the only people you should take advice from are your broker (if you use one) and your solicitor. Nobody else in this process is on your side. Certainly not the bank or the EA.

The broker and solicitor want their commission or fees. They are not entirely impartial. A solicitor or broker has no role in offering economic advice. There are points in the economic cycle when it is a good time to buy a house and other points where it is a bad time. The o/p is simply asking if this is a good time!

The_Conductor

masterboy123 wrote: »

Say we want to pay lump sump of 10k every 4 year on top of monthly fixed rate. Will this be feasible? Or the variable rate is over a certain period of time only?

It depends on the lender- normally on the fixed rate products you cannot overpay the mortgage- without paying a penalty (which may be as much as the difference in interest rates between the fixed and variable rate products for the entire principle, not just the amount being overpaid.

Talk to a broker and decide on what is the best course of action for you. Ensure you fully understand the product you're buying- and what the implications of overpaying are- and don't rely on any verbal information you're given- get it in writing.

izzyflusky

masterboy123 wrote: »

Say we want to pay lump sump of 10k every 4 year on top of monthly fixed rate. Will this be feasible? Or the variable rate is over a certain period of time only?

Some are starting to allow a percentage before applying any penalties so it's worth getting in touch with the bank/broker. KBC allows 10% of the total value over 10 years (for a 10 year fixed). A colleague was given an allowance too when going fixed with another bank but can't remember the details.

uck51js9zml2yt

Dont forget that youre paying 1000 per month for rent which would go a long way towards a mortgage over the next 12 months.

eeguy

Ramiro Modern Chimp wrote: »

Dont forget that youre paying 1000 per month for rent which would go a long way towards a mortgage over the next 12 months.

I don't think people really give renting it's fair dues.

Personally I pay 500e a month in a shared house. I have zero responsibility for anything that breaks or needs fixing.
In the last year we've had plumbers, boiler repair, new furniture and new mattresses, which cost nothing extra and we don't lift a finger to fix it. We're not affected by the depreciation of everything inside the house. The garden is taken care of, plus we have the freedom to up sticks whenever.

No matter what way you go, a mortgage is a chain around your neck for 20-35 years. There are definitely a million benefits to owning a house, but it costs much more to run a house than the 1000-1500 euro a month to the bank.

I wouldn't even consider buying a house unless I had a child on the way and needed to put down roots.

JDD

I wouldn't even consider buying a house unless I had a child on the way and needed to put down roots.

I know what you mean, there are definitely benefits to renting, especially if you're in a job that might move around. And remember, banks front load the interest, so if you're in a fairly stagnant market and you look to sell in five years, you won't have paid much off the capital, and you'll probably have spent more fixing things in the house (if it's second hand).

That all being said, there's no getting away from the fact that in most cases, you'll have paid off your mortgage when you retire. Don't underestimate this. Even if you were in the civil service you'll only be on half pay when you retire, and for most of our generation who may not have a pension or who have a non-guaranteed pension, you'll be on a lot less than half pay. Rent will be much more of a burden at that stage, whereas you won't be paying a mortgage payment by then. That alone makes it worth buying a property at some stage, even if you aren't married or don't have kids.

masterboy123

Well the only issue which kept us from not buying the house until now is the fact that I don't have a permanent work contract. I usually get 2 year contracts. I am hoping that we don't have to move anymore now as my wife has a permanent job. And i can travel to nearby city if i don't get same job in same city after 2 years.
In worst case scenario if i get job really far away from Limerick then in that case we will have to give our house on rent and rental income will hopefully be 20% more than mortgage which can cover repair costs etc. Correct me if this assumption is wrong?

I am the major earning member of the family so we have been moving to different cities every often.

eeguy wrote: »

No matter what way you go, a mortgage is a chain around your neck for 20-35 years. There are definitely a million benefits to owning a house, but it costs much more to run a house than the 1000-1500 euro a month to the bank.

I wouldn't even consider buying a house unless I had a child on the way and needed to put down roots.

Graham

masterboy123 wrote: »

rental income will hopefully be 20% more than mortgage which can cover repair costs etc. Correct me if this assumption is wrong?

Have you allowed for tax on the rental income?

masterboy123

No i haven't. Is it 20% tax on rental income?

Graham wrote: »

Have you allowed for tax on the rental income?

Cuddlesworth

masterboy123 wrote: »

No i haven't. Is it 20% tax on rental income?

Its treated as income. So if your already in the higher tax band, then its taxed at that effective rate.

masterboy123

Ok, good that you mentioned it. Yes I pay 40% tax after a certain amount has reached in a tax year.

Cuddlesworth wrote: »

Its treated as income. So if your already in the higher tax band, then its taxed at that effective rate.

Pawwed Rig

masterboy123 wrote: »

The Irish housing market has been through a remarkably volatile and unpredictable period, and many believe we're still years away from reliable stability. This could explain why more and more borrowers are opting for the certainty of fixed rate mortgages.

I don't understand why this statement makes a fixed rate more desireable?

Cuddlesworth

masterboy123 wrote: »

Ok, good that you mentioned it. Yes I pay 40% tax after a certain amount has reached in a tax year.

Pretty sure its just over 50%.

Pawwed Rig wrote: »

I don't understand why this statement makes a fixed rate more desireable?

If we get hit with a financial crisis again, probably from external factors, then people will stop paying their mortgages and interest rates will rise quickly. Those on fixed rates will be shielded.

SteM

Cuddlesworth wrote: »

If we get hit with a financial crisis again, probably from external factors, then people will stop paying their mortgages and interest rates will rise quickly. Those on fixed rates will be shielded.

But that didn't happen during the last financial crisis?

Cuddlesworth

SteM wrote: »

But that didn't happen during the last financial crisis?

You would appear to be correct. Interest rates lowered. And god knows nothing got repossessed.

2005 3.65%
2006 4.86%
2007 5.46%
2008 5.86%
2009 4.16%
2010 4.02%
2011 4.42%
2012 4.33%
2013 4.38%
2014 4.2%
2015 4.14%
2016 3.63%
2017 3.41%

I guess the opposite is True then. You should fix if you fear that the market is spiralling out of control(but has a few years left in it).

masterboy123

We saw few lands on sale in the city area with planning permission approved.
Is building your own house going to cost considerably less? Say for 3 double bedroom house. I know it will take alot of time.
Any thoughts?

aido79

masterboy123 wrote: »

I didn't know this was possible. Is 80% fixed and 20% variable a good acceptable ratio? I am sorry, I have no knowledge in this area.

This will most likely be the biggest purchase of your life. Spend the time to do your own research and educate yourself. Don't rely on banks and estate agents for information. There is plenty of information on the internet and typing some figures into a mortgage calculator will open your eyes to how much extra you will pay in interest between a 25 and a 35 year mortgage. In your case you would probably pay an extra $50k in interest between and 25 and a 35 year mortgage.

bigpink

masterboy123 wrote: »

We saw few lands on sale in the city area with planning permission approved.
Is building your own house going to cost considerably less? Say for 3 double bedroom house. I know it will take alot of time.
Any thoughts?

Very hard to get a mortgage for a new build or doer upper I think

Lu Tze

aido79 wrote: »

This will most likely be the biggest purchase of your life. Spend the time to do your own research and educate yourself. Don't rely on banks and estate agents for information. There is plenty of information on the internet and typing some figures into a mortgage calculator will open your eyes to how much extra you will pay in interest between a 25 and a 35 year mortgage. In your case you would probably pay an extra $50k in interest between and 25 and a 35 year mortgage.

We are on a 32 year mortgage, but we over pay once a year with whatever we have spare. We alhave knocked 4-5 years off the mortgage length already. It gives flexibility in that when you have the extra you can pay it down, but if one of us losses a job or unexpected large expense comes up, we can continue to maintain the the lower monthly payment. On the shorter mortgage, we would be locked in at the higher monthly payment, and this would not be possible.

Edit: if we can maintain the additional payments, it will turn into a 15-16 year mortgage.

masterboy123

I am looking for 30 years mortgage.
Do you mind me asking how much is fixed and how % variable did you get?

Lu Tze wrote: »

We are on a 32 year mortgage, but we over pay once a year with whatever we have spare. We alhave knocked 4-5 years off the mortgage length already. It gives flexibility in that when you have the extra you can pay it down, but if one of us losses a job or unexpected large expense comes up, we can continue to maintain the the lower monthly payment. On the shorter mortgage, we would be locked in at the higher monthly payment, and this would not be possible.

Edit: if we can maintain the additional payments, it will turn into a 15-16 year mortgage.

Lu Tze

masterboy123 wrote: »

I am looking for 30 years mortgage.
Do you mind me asking how much is fixed and how % variable did you get?

Its all variable, the fixed rates were much higher at the time.

aido79

Lu Tze wrote: »

We are on a 32 year mortgage, but we over pay once a year with whatever we have spare. We alhave knocked 4-5 years off the mortgage length already. It gives flexibility in that when you have the extra you can pay it down, but if one of us losses a job or unexpected large expense comes up, we can continue to maintain the the lower monthly payment. On the shorter mortgage, we would be locked in at the higher monthly payment, and this would not be possible.

Edit: if we can maintain the additional payments, it will turn into a 15-16 year mortgage.

That's the best way to do it. I was just highlighting the difference in interest paid between different mortgage terms.

SteM

Cuddlesworth wrote: »

You would appear to be correct. Interest rates lowered. And god knows nothing got repossessed.

2005 3.65%
2006 4.86%
2007 5.46%
2008 5.86%
2009 4.16%
2010 4.02%
2011 4.42%
2012 4.33%
2013 4.38%
2014 4.2%
2015 4.14%
2016 3.63%
2017 3.41%

I guess the opposite is True then. You should fix if you fear that the market is spiralling out of control(but has a few years left in it).

They're average figures so not exact. KBC topped out at 4.25% during this period IIRC so it's not like everyone experienced huge mortgage interest rate hikes like back in the 80s/90s.

'nothing got repossessed', where did I say that? However very little property got repossessed during the last crisis compared to the amount of mortgages in arrears during that time. 8200 repossessions since 2009 despite 100000 borrowers being in arrears during the height according the Times.

Idbatterim

yes Op, I would absolutely buy, if it is a long term property and if you are currently renting! The prices are not near manic levels yet, the way they were in 2006,2007. The government here fully supports rising prices. I would absolutely buy! Pretty much everyone plans to buy long term anyway, this years of dithering is a waste of mental energy, will prices rise, will they fall... :rolleyes: Fair enough if the market is blatantly massively inflated, hold out, but I dont think it is at this point...

Idbatterim

But we are worried that next year prices may go down, back to the range of 220k euros which suits our budget. So we are in the dilemma whether to continue paying 1000e every month as rent or invest in our own home?

Agent also told us even if there is a crash coming up, Dublin is mostly effected and Limerick will be effected by only few grands. Is this true?

I am sorry, is this a wind up? I am sure prices will fall back again at some point. But they will likely rise for a few years before that. Lets take your current predicament. Say for arguments sake we are looking at 10% house price increase over the next 5 years, for a total of 50%. Then prices drop a very hefty 50%. You are simply back to where you are now, without 5 more years of renting!

The_Conductor

Cuddlesworth wrote: »

Pretty sure its just over 50%.

If we get hit with a financial crisis again, probably from external factors, then people will stop paying their mortgages and interest rates will rise quickly. Those on fixed rates will be shielded.

Depends on your employment status- however, you could be paying up to 52% inclusive of USC, PRSI etc.

Vis-à-vis fixed term rates- the whole concept of floating rates is unique to Ireland in the Eurozone- so if/when interest rates are increased by the ECB- the borrowers in Ireland are going to be slaughtered in a manner unique to Ireland. Rather staggeringly- the Irish government are keeping schmum about this inconvenient fact.