30 or 35 year mortgage?

0gac3yjefb5sv7

Hi there,

I am in my late 20s, single buyer and wondering if I should go for 30vs35 year mortgage. Over the course of both, I would pay approx 30k more interest if I go for the 35 year one.

Any thoughts?

Amirani

Really depends on a number of factors. What sort of property are you buying? Is it somewhere you intend to stay indefinitely? What's the affordability of each option for you?

c.p.w.g.w

Pheonix10 wrote: »

Hi there,

I am in my late 20s, single buyer and wondering if I should go for 30vs35 year mortgage. Over the course of both, I would pay approx 30k more interest if I go for the 35 year one.

Any thoughts?

You can always pay off chucks when your on a variable rate and shorten your term length, but you can't really extend your term lenght

Spook_ie

Pheonix10 wrote: »

Hi there,

I am in my late 20s, single buyer and wondering if I should go for 30vs35 year mortgage. Over the course of both, I would pay approx 30k more interest if I go for the 35 year one.

Any thoughts?

Go for the 30 years if you can afford it comfortably and put the extra interest saved into a pension account.

EDIT 30k/ 35 years = €71 per month, with current tax relief that would be nearly a €100 a month into a PRSA or similar

Jaster Rogue

It doesn't really make a difference at this stage. Go with the 35 year and if you have money left over each month, overpay. The interest will work out the same as a 30 year if you overpay and clear mortgage in same amount of time, most banks calculate it on a daily basis.

djan

Get the longest term possible. Bank have various limits on how much you can overpay if fixed but it is usually more than enough.

Remember that while you can overpay, you certainly cannot pay less than the agreed mortgage (unless you're in Ireland that is, given its attitude to bad moetgages).

The additional cost of interest is therefore optional so why not choose the more flexible option just in case your repayment capacity de creases.

Also gives you another 5 years of hassle free life/mortgage cover.

manonboard

Always better to pick the longer term if you have the discipline to pay the shorter term anyways. That way you get the flexibility without the cost.

If you think you are undisciplined at that budgeting but can afford the shorter term for the near future, get the shorter term.

BronsonTB

As stated, get the longest term possible. You can over pay on both fixed & variable mortgages but have the flexibility to pay the min when you have other financial commitments without having to renegotiate with the bank.

cruizer101

Yeah I'd be going for the 35, and then overpaying as though you were on the 30, or potentially even more.
It give more flexability if circumstances change

I'm on a 30 year but overpaying enough that if I kept it up it would be done in 20.
It means I get used to paying that amount but if needs be I can pay less e.g. have kids more expense, or if interest rates rise I can absorb without having to pay more (just end up overpaying by less).

Don't think of it as a 35 year mortgage rather a 30 year with option to extend

swarmberg

In a similar situation (late 20's) and never really thought about the 35 year mortgage.

Do you need to apply with your bank for this? Does it depend on the bank? Can you up your repayments above and to the min payment as it suits?

NinjaTruncs

Spook_ie wrote: »

Go for the 30 years if you can afford it comfortably and put the extra interest saved into a pension account.

EDIT 30k/ 35 years = €71 per month, with current tax relief that would be nearly a €100 a month into a PRSA or similar

But they won't get the saved money until their 30 year term is up. What would be interesting is the projected benefit of taking the 35 year term and investing the different between the cost of a 30 year term, seeing can you out perform the interest on the mortgate to ultimately pay off the mortgage quicker than 30 years.

drunkmonkey

If your doing it make sure it's a house you can see yourself in with a few kids in 30yrs time. The last bubble a lot of people got caught with starter homes. Hysteria has got hold again so thread carefully as you may have to hold this house for a good while, flipping in 10yrs for a profit might not be an option and you may need a bigger house by then and can't move without taking a big hit.
If you wait until 35 you can still get a 30yr Mortgage but it'll be a 25yr one by the time you hit 40.

Amirani

Everyone suggesting to just get the 35 year and overpay; this assumes that all fixed rate mortgages allow you to overpay, many do not, or only by a limited amount. Getting a fixed rate is a no-brainer at the moment because of the rates available, so it really depends on whether overpayment is possible. If you're limited to an overpayment of 10% and you can comfortably do this on the 30 year, then it makes sense to choose this over the 35 year.

If completely depends on affordability, you can't give a decent answer to this question without more details.

0gac3yjefb5sv7

So basically the best option is to go 35 generally and ensure I can overpay with my provider?

drunkmonkey

I think so keep the repayment as low as possible but be building up a bit on the side so you can possibly take a lump out if it in a few years, I wouldn't go for anything with less than 3 bedrooms. Think about what it's worth to rent out as well if things change, would it cover the mortgage or close?
Not sure where your buying but there's a lot to be said for being able to walk for some milk or a beer.

0gac3yjefb5sv7

drunkmonkey wrote: »

I think so keep the repayment as low as possible but be building up a bit on the side so you can possibly take a lump out if it in a few years, I wouldn't go for anything with less than 3 bedrooms. Think about what it's worth to rent out as well if things change, would it cover the mortgage or close?
Not sure where your buying but there's a lot to be said for being able to walk for some milk or a beer.

Looking at 2 bed house. I may need a 3 bed but not for 10/15 years. It's in an area I like, close to town and I can't afford a 3 bed.

Spook_ie

NinjaTruncs wrote: »

But they won't get the saved money until their 30 year term is up. What would be interesting is the projected benefit of taking the 35 year term and investing the different between the cost of a 30 year term, seeing can you out perform the interest on the mortgate to ultimately pay off the mortgage quicker than 30 years.

So many people, including myself, forget about pensions and the money you'll need when retired to maintain the house

drunkmonkey

Pheonix10 wrote: »

Looking at 2 bed house. I may need a 3 bed but not for 10/15 years. It's in an area I like, close to town and I can't afford a 3 bed.

This is what I was getting at, there's no way in 10/15yrs time a 2 bed will be worth what it is now as supply should have caught up with demand so now when you need a bigger house you won't have any colleteral in the 2 bed and could be forced to sell at a loss. Your repayments on a mortgage will be over 20/25yrs on a new house by then. So many people got caught the last time making the mistake of buying a starter house.
Considering you know this isn't suitable for more than 10/15yrs I'd be inclined to rent until the market normalises. I don't think you'll be any worse off when it's time to buy.
It's all crystal ball stuff but the 1 and 2 beds will take the biggest hit.

Amirani

drunkmonkey wrote: »

This is what I was getting at, there's no way in 10/15yrs time a 2 bed will be worth what it is now as supply should have caught up with demand so now when you need a bigger house you won't have any colleteral in the 2 bed and could be forced to sell at a loss.

This is complete speculation to be fair. You can't accurately predict what the market will be like in 10/15 years and whether or not supply is meeting demand at that point in time. You certainly can't predict it well enough to suggest that "there's no way in 10/15yrs time a 2 bed will be worth what it is now".

It could easily be worth less, it could easily be worth more. Property prices relative to income in Dublin at present are pretty comparable to European norms (if a little high), we're not in some extreme bubble as in the 2000s.

drunkmonkey

It's not really speculation we have a serious shortage of homes which is keeping prices high that's a fact, it won't be fixed quickly but in 10yrs time the problem should be resolved. I'll be looking at buying in Dublin over the next 10/15yrs but wouldn't consider it at the moment as I don't see any value and expect prices to drop a lot on that time scale. We know the price drop doesn't matter if your buying a house which your happy to live in for the length of your mortgage, op doesn't intend to stay there forever though and that's where the risk is for him with a 35yr mortgage and trying to move on in 10yrs time could be costly.

Amirani

drunkmonkey wrote: »

It's not really speculation we have a serious shortage of homes which is keeping prices high that's a fact, it won't be fixed quickly but in 10yrs time the problem should be resolved.

We do have a supply shortage that has driven price growth, agreed. Still, you don't know what is going to happen with supply over the next 10 years, there are many factors which will influence it. You also don't know what's going to happen with demand over the next 10 years, although most indications are that this is going to continue to increase with a growing population.

The overarching point is that you can't say that any problem "should be resolved" in 10 years, particularly one as fundamental as a supply/demand imbalance. These problems have existed forever, and they will exist in future. We're not going to reach a perfect state in 10 years where there's no more supply/demand imbalance. The problem could easily be "resolved" in 5 years, and then reappear in 10 years.

ted1

Is 35 years an actual thing. Go with the 30. 35 is to long. And while the option to over pay is there. Many don’t. So just force yourself to.

drunkmonkey

Amirani wrote: »

The overarching point is that you can't say that any problem "should be resolved" in 10 years, particularly one as fundamental as a supply/demand imbalance. These problems have existed forever, and they will exist in future. We're not going to reach a perfect state in 10 years where there's no more supply/demand imbalance. The problem could easily be "resolved" in 5 years, and then reappear in 10 years.

It not a case of it should be resolved, it has to be resolved or you won't have a teacher, nurse or Garda who can afford a family home in Dublin, the prices can't keep rising when supply increases prices have to retreat.
It's a massive investment and unless your a speculator you should only take one crack at it, put the 3/4 bed over 35yrs but not a 2bed unless it's in great location which this one sounds like it's not.
Or just rent, meet the person of your dreams and you both buy a house together which meets your long term needs when the time is right.

0gac3yjefb5sv7

drunkmonkey wrote: »

It not a case of it should be resolved, it has to be resolved or you won't have a teacher, nurse or Garda who can afford a family home in Dublin, the prices can't keep rising when supply increases prices have to retreat.
It's a massive investment and unless your a speculator you should only take one crack at it, put the 3/4 bed over 35yrs but not a 2bed unless it's in great location which this one sounds like it's not.
Or just rent, meet the person of your dreams and you both buy a house together which meets your long term needs when the time is right.

It is a nice location, near the dart line. Safe. Settled area. Definitely rentable. 10 years paying rent is an awful loss of money. The market may drop by 20 percent but in the long term it is always slowly rising.

Ray Palmer

Drunkmonkey> All possible but but also not probable. The time for supply to catch up needs to be clean without any other market shocks. The likelihood of that happening is very slim. Brexit is a huge threat and ECB rates are going to have to go up.
Location is a key issue as even if supply increases the locations aren't going to be in the best places as they are already built on. The scale of houses in good locations is very limited and they will sell at a premium more likely to be much more than a 2nd hand house in the same area. Look at the development on the Smurfitt building in Drumcondra to see.

OP> 35 years is best and reduce the term if and when you can. Do it sensibly so if getting a car don't overpay the mortgage but use the money to get a car to pay less interest.
Getting a house too small is fine if you can see extension possibilities. Generally cheaper than moving. Even things like wall beds can make massive improvements to space and worth the money

Amirani

drunkmonkey wrote: »

It not a case of it should be resolved, it has to be resolved or you won't have a teacher, nurse or Garda who can afford a family home in Dublin, the prices can't keep rising when supply increases prices have to retreat.

Do you not think there'll be any increases in pay for teachers, nurses or Gardaí over the next 10 years? Do you not think they'll at least keep pace with inflation? In the long-run, house prices generally rise. Same as wages, and the general cost living in society. Inflation erodes debt, this is a bit of a cornerstone of economic growth and development. You're suggesting a significant fall in house prices between now and 10 years from now, that's a wild enough projection.

I agree that purchasing now with a view to buying again in 10 years is a risk, and people need to acknowledge as such. You may be unlucky and prices at that time may be unfavourable to you. However, despite having the worst economic downturn in this country's history, only a relatively small proportion of the population were stuck in starter homes. The concept of a couple buying a 2 bedroom apartment in their 20s isn't foolish once the affordability is right and the risks are considered. Once these are considered it's just a question of your level of risk aversion.

iluvfatfrogs

Also, i'd imagine the proportion of mortgage holders switching providers will be rise every year in my opinion due to the withdrawal of restrictions.
So signing up for the 35 year term now may be purely theoretical.

You may switch in two years time to another provider onto a 30 year term, which would be 32 years in total and possibly switch multiple more times over the course of the mortgage.

So just because you are signing upto 35 years today, does not mean you are definitely tied in for 35 years. I've lost two years alone with one switch.

0gac3yjefb5sv7

Also I'm not buy to definitely flip it in 10 years. Also a 2 bed home may suit my needs and won't need 3 bed. So it's probably a safer bet to buy now than wait 10 years. Also rent etc and permanence of living location.

drunkmonkey

Amirani wrote: »

. You're suggesting a significant fall in house prices between now and 10 years from now, that's a wild enough projection.

Not in all areas but if supply can meet demand as intended by Government yes you'll see house prices fall that's the plan, it's not a wild projection. Wages can't keep rising just to keep up with Dublin house prices especially in the Public Service it's unsustainable.
Think about it anyone born this year if your think things will keep going as they are will mean the generation coming will not be able to rent or buy. A 2 bed apartment could be 500k asking by then with 500k in interest, that's a cool 1 million all in for a starter home. Prices have to stop and reverse there is no other option or we won't be getting a state pension.
Were not at peak bubble but were in one all the same.

Jaster Rogue

drunkmonkey wrote: »

Not in all areas but if supply can meet demand as intended by Government

You're giving current (and any successive government) waaaay too much credit there. When have they ever delivered on anything 'as intended' ? (health, education, housing, transport, justice, etc..) It's a neverending cycle of one crisis after another. If supply ever outnumbers demand by any significant margin, it will be completely accidental by some external force outside our government's remit.

jimmycrackcorm

The simple answer to the is question is if you can afford to debate paying 30 years instead of 35 years then go for the 35 year mortgage but overpay at the amount that can bring you down to 30.
Minimizing the account of interest you have to pay as well as giving flexibility in the event you need that

miezekatze

People on here always say go for the longest term possible and overpay to pay it off early. Realistically though, how many people actually do that and stick to overpaying regularly? I'd go for the shorter term if I could afford it comfortably and try and overpay that. If you'd be stretching yourself a bit by going with 30 years then the longer term is probably better though.

tommythecat

miezekatze wrote: »

People on here always say go for the longest term possible and overpay to pay it off early. Realistically though, how many people actually do that and stick to overpaying regularly? I'd go for the shorter term if I could afford it comfortably and try and overpay that. If you'd be stretching yourself a bit by going with 30 years then the longer term is probably better though.

Well the main thing is the bank will always allow you to shorten the term if you wish but it’s unlikely they will let you lengthen it if you got into trouble at some point so taking the longer term and just having a bit of disipline about overpaying to shorten should not be too much trouble. If you can’t manage that then your fiscal skills are fairly lacking so you’d probably be better off on the longer one anyway!

drunkmonkey

Jaster Rogue wrote: »

You're giving current (and any successive government) waaaay too much credit there. When have they ever delivered on anything 'as intended' ? (health, education, housing, transport, justice, etc..) It's a neverending cycle of one crisis after another. If supply ever outnumbers demand by any significant margin, it will be completely accidental by some external force outside our government's remit.

It's just feels like we're around 2000 sometime right now, the Taoiseach can do no wrong and will ride off into the sunset on winnings from Paddy Power. It's all too easy it spooks me when every politician is literally getting away with murder.
Those external shocks though we have Brexit and there's a Junk Corporate debt problem close to raising it's head in the states soon and that will have an effect like or worse than the last financial crisis. So I'd be betting on external forces.

handlemaster

drunkmonkey wrote: »

I think so keep the repayment as low as possible but be building up a bit on the side so you can possibly take a lump out if it in a few years, I wouldn't go for anything with less than 3 bedrooms. Think about what it's worth to rent out as well if things change, would it cover the mortgage or close?
Not sure where your buying but there's a lot to be said for being able to walk for some milk or a beer.

I would put school and work higher up the list than beer and milk

SteelyDanJalapeno

drunkmonkey wrote: »

It's not really speculation we have a serious shortage of homes which is keeping prices high that's a fact, it won't be fixed quickly but in 10yrs time the problem should be resolved. I'll be looking at buying in Dublin over the next 10/15yrs but wouldn't consider it at the moment as I don't see any value and expect prices to drop a lot on that time scale. We know the price drop doesn't matter if your buying a house which your happy to live in for the length of your mortgage, op doesn't intend to stay there forever though and that's where the risk is for him with a 35yr mortgage and trying to move on in 10yrs time could be costly.

What's the average 1 or 2 bed rent in Dublin these days? I'd guestimate 1500 PM probably lowballing, but that' 180k - 270k in rent over 10-15 years.

Would you expect these properties to fall in a greater value than this?

drunkmonkey

Well if your looking at a 35yr Mortgage your going to pay that in interest alone. Your effectively paying 500k for a 250k apartment. You've saved on rent but blown that saving on interest repayment. It's why I'd be only inclined to look at a forever home in the current market if going for a super mortgage. Pay what you'd pay in rent so get a 20yr mortgage.

SteelyDanJalapeno

drunkmonkey wrote: »

Well if your looking at a 35yr Mortgage your going to pay that in interest alone. Your effectively paying 500k for a 250k apartment. You've saved on rent but blown that saving on interest repayment. It's why I'd be only inclined to look at a forever home in the current market if going for a super mortgage. Pay what you'd pay in rent so get a 20yr mortgage.

Well that's assuming you pay the minimum per month, continue to pay whatever you're currently paying in rent and you'd be looking at closer to 25 years and a lot less interest, you just have that option if times ever got tough to moving back to minimum payments (probably under 1k) as other have mentioned.

I know I'd rather be putting my money into an asset over the next 15 years versus rent, if you're planning on purchasing anyway.

Yourmama

drunkmonkey wrote:

get a 20yr mortgage.

The worst possible advise. You never know what your situation will be in 10 years. You may be in very difficult financial situation and be hammered even more by high mortgage repayments. Always, always, go for the longest possible term and overpay if you can. If you can't, it means it was right decision to go for the long term.

drunkmonkey

It's not an asset it's a liability for the first 20yrs.

Jaster Rogue

drunkmonkey wrote: »

It's not an asset it's a liability for the first 20yrs.

Technically it's both, the difference between an asset and liability is called equity. With the cb deposit rules in place 5 years now, and rising prices, there is little to no negative equity. Interest can be viewed as the cost of servicing the loan, and comparable to rent (cost of service, use of property) , the difference being if you pay 1500 in rent, none of that is increasing your equity in the property (no asset gain/loss), whereas with a mortgage, say 750 of the 1500 goes towards interest, that leaves the other 750 increasing your equity (net asset gain) .

4ensic15

drunkmonkey wrote: »

Well if your looking at a 35yr Mortgage your going to pay that in interest alone. Your effectively paying 500k for a 250k apartment. You've saved on rent but blown that saving on interest repayment. It's why I'd be only inclined to look at a forever home in the current market if going for a super mortgage. Pay what you'd pay in rent so get a 20yr mortgage.

There will also be inflation on the price of the apartment, so the 250k apartment may be worth 750K after 35 years.

drunkmonkey

4ensic15 wrote: »

There will also be inflation on the price of the apartment, so the 250k apartment may be worth 750K after 35 years.

Back to my point earlier these price rises aren't sustainable, either supply improves or businesses will pull out of Dublin.

4ensic15

drunkmonkey wrote: »

Back to my point earlier these price rises aren't sustainable, either supply improves or businesses will pull out of Dublin.

Property always tracks inflation in the long term.

drunkmonkey

4ensic15 wrote: »

Property always tracks inflation in the long term.

It's gone 50yrs ahead of inflation at the moment. Were in a bubble right now everyone is aware of that and nobody is denying it, when the market normalises it may start tracking inflation.

Amirani

drunkmonkey wrote: »

It's gone 50yrs ahead of inflation at the moment.

This doesn't really make any sense.

drunkmonkey wrote: »

Were in a bubble right now everyone is aware of that and nobody is denying it, when the market normalises it may start tracking inflation.

What criteria are you using to determine that we're currently in a property bubble? I'm not sure that current economic indicators are necessarily consistent with an undeniable asset bubble. Are you aware of what exactly constitutes an asset bubble?

David McWilliams for example doesn't think there's a clear bubble in house prices: http://www.davidmcwilliams.ie/dublins-housing-market-not-yet-ripe-for-a-crash/

drunkmonkey

Ask David McWilliams this year. He's well aware there's a land bubble. He's warned that it's OPs age group are the most exposed 20/35yr olds in any recession. Dublin property prices are already in a recession they've had 3mts of continual declines. If phoenix bought in January he'd already be in negative equity nursing a 7k loss only after 3mts.

Why do I think we're in a bubble.
Cheap Finance
Super Mortgages
Extreme land prices. (It's cheaper buy than build)
Shortage of property
Euphoria feeling in the market (blindingly obvious in this thread nobody besides me saying OP should be vigilant in the current market)
Property is overvalued in Dublin.

Even if you think we're not in a bubble the economy is heavily reliant on foreign investment (a lot of it pushing up prices will the clammer for houses in the BTL market), any wobble in the Global economy and we'll feel it), America will go into recession in the next couple of years, so will we it's a cycle. I reckon we've got 5 more years thinking this is all fine.

You've also Brexit.

I don't think we have a nationwide problem there's some good value out there but Dublin is the major problem.

Amirani

drunkmonkey wrote: »

Ask David McWilliams this year. He's well aware there's a land bubble. He's warned that it's OPs age group are the most exposed 20/35yr olds in any recession. Dublin property prices are already in a recession they've had 3mts of continual declines. If phoenix bought in January he'd already be in negative equity nursing a 7k loss only after 3mts.

This isn't what negative equity is. You know there's no 100% mortgages anymore? If prices had dropped 7k since he bought, his mortgage would still be less than the value of his property at this stage.

drunkmonkey wrote: »

Why do I think we're in a bubble.
Cheap Finance
Super Mortgages
Extreme land prices. (It's cheaper buy than build)
Shortage of property
Euphoria feeling in the market (blindingly obvious in this thread nobody besides me saying OP should be vigilant in the current market)
Property is overvalued in Dublin.

The central bank rules are clearly having a constraining effect on large mortgages, and cheap finance isn't that prevalent, certainly not at unaffordable levels. I think you're overestimating the euphoria in the market and indeed misreading the sentiment of the thread. I (and many other posters) do believe Dublin prices are overvalued at the moment, possibly leading to a price fall/correction and the OP should be cognizant of that as well as other risks. This doesn't fit the economic definition of market euphoria.

However, Dublin rents are much more overvalued than property prices, and this needs to be a factor in decision making. You are obviously quite risk averse and thus your opinion that you should continue to pay these high rents for a number of years before buying property makes sense for you. This isn't the right decision or the wrong decision, it just suits your risk profile. Same goes for buying (providing you've adequately assessed the risks, particularly under a stressed financial projection).

drunkmonkey

I'm not risk averse just believe in buying low and selling high and buying right the first time. We know he won't be there forever and prices have risen 100% and beyond in the last 6yrs. I think he's missed the boat on this round and it'd be prudent to wait 5 or 6yrs or even 6mts until we see how brexit plays out. He's at that age when everything can change rapidly in the next few years especially work and family commitments and that's when the 2 bed could become a liability if the economy isn't still roaring.
Rent prices will come down once all these new rental homes come online.
I'm not saying don't buy just buy the right place in the right location, can you walk to shops, schools, how easy it it get a buggy up the stairs. None of those things matter to OP now but they should all be playing a factor in where you buy as you should be thinking about selling it the same day if it's not a forever home.

Paul_Mc1988

Quick question. I'm 30 picking 25 years for my term going fixed for 5 years. After the 5 years with 20 years left with my current bank could I just switch to another bank and take out a 25 year mortgage for my remaining capital ?

4ensic15

drunkmonkey wrote: »

Rent prices will come down once all these new rental homes come online.

The new rentals won't cause a drop in rental prices. The new building is not sufficient to match the household formation rate. There are more and more people entering the rental market and the new builds are not sufficient to take all of them. Rents won't fall until building exceeds the required number required to match demand. AT the moment the rate of new builds is less than half or the required rate. There is no prospect of that changing for years yet. The only possible way in which rents will fall is if there is a drop in population and a consequent drop in the household formation rate.