Am I mad stretching the finances?

Hi Guys
Just looking for some advice. I’m 35 and my partner is 49. We have 64k saved and are looking to buy a house. We’ve spotted a 2 bed house in a new development. The house will be very high spec and will be a A2 rated house. The focus of the new development is all about energy saving. Its located in a popular town with access to motorways etc. Its 250k to buy. I earn 25,100 per year and my partner earns 67,196. If we borrow 190k the mortgage term we can get is 15 years due to my partners retirement age of 65. I don’t want us to borrow anymore than 190k. Tried the 19 years mortgage term which is available but in his line of work its compulsory to retire at 65. So basically the mortgage repayments are looking like E1252 per month. Are we mad doing this.I’m very reluctant as I feel it will be very tight on my wage when all other bills are paid. I know that it will be nice having the mortgage paid when I’m 50 but I’m worried that I will have to be very careful for the first 15 years. There is going to a lot of goings like food, phone, internet, car insurance, motor tax, electricity, home insurance, life insurance and so on.
We’ve looked at other properties and they are either too expensive or bad BER ratings or in less desirable areas
Thoughts?

Smee_Again

The mortgage is just over 2 x combined income so that's quite reasonable, why are you just focusing on your wage when it's only a small part of the total income?

You will also need additional cash for solicitors fees etc, have you factored those in?

Xterminator

what are your combined rent payments at the moment. Add to that how much you both set aside in savings each month.

if that is less than €1252 then you are increasing your outgoings. If it is more than the mortgage figure, then surely you will be better off, with the mortgage barring serious life changing circumstance?

Thoie

Lots of things to consider, but they're all very personal. Don't feel you need to answer here, just think about them with your partner.

Is 2 bedrooms enough long term? What about homeworking/visitors/people getting added to your household over time?
Is there much scope for your salaries to rise over the coming years? For example, are you currently in a "beginner" role, and you'd expect big salary jumps over the next few years, or would you only expect salary rises in line with inflation?

€1252 a month for a mortgage doesn't sound terrible, but if you stress test that number, would you be comfortable if interest rates rose and it become €1500 a month?

Do you have pensions/savings in place?

Uncle Pierre

My wife and I pay our mortgage proportionately to monthly income - i.e. one of us has roughly 60% of net monthly income, and the other has 40%, so we pay the mortgage on a 60/40 basis.

The gap might be bigger with you and your partner, but is that something you could consider?

Warning, if necessary: it could be a test of any relationship......

Smee_Again

Smee_Again wrote: »

The mortgage is just over 2 x combined income so that's quite reasonable, why are you just focusing on your wage when it's only a small part of the total income?

You will also need additional cash for solicitors fees etc, have you factored those in?

Yes we have some extra set aside for that but it pretty much wipes us out then. I guess Im worried that I will be left with less than 200 per month after everything gets paid

The_Honeybadger

Do you have any prospect of progressing and increasing your own salary over time? If so that should make a big difference over time.

The mortgage and repayments sound very reasonable when balanced against your income to be honest. I don’t think it’s a mad idea at all. You are going to have a lot of the other costs that you listed regardless of whether you rent or buy presumably?

maneno

OP Have you requested the bank to reconsider the length of the mortgage to reflect your age and not your partners?

Xterminator

Xterminator wrote: »

what are your combined rent payments at the moment. Add to that how much you both set aside in savings each month.

if that is less than €1252 then you are increasing your outgoings. If it is more than the mortgage figure, then surely you will be better off, with the mortgage barring serious life changing circumstance?

We are very lucky at the moment in that the rent we pay for a 1 bed apt is 639 a month. We are saving €1000 a month but this is by being careful. I'm driving a very old car which needs replacing once we draw down a mortgage. Our outgoings right now are very minimal and we have no dependents or loans of any kind.

mojesius

Could you get married so you can get jointly assessed for tax? More money right there that your partner is currently paying out in higher tax. Is there scope for either of you to get a higher paying job/career progression in the next few years? That will cushion the blow.

How much would a similar house cost you to rent in the area? Not much cheaper than the 1.2k mortgage based on current rental market I'd imagine. If both your jobs are secure, it seems like a great investment. Being mortgage free at 50 is a dream for many!

I guess it all depends on how much you want the house, and that you can afford stress-tested repayments.

Smee_Again

offalyandroid wrote: »

Yes we have some extra set aside for that but it pretty much wipes us out then. I guess Im worried that I will be left with less than 200 per month after everything gets paid

But why are you ignoring your partners income? The apartment will be paid off before he retires so assuming no job losses you won't be paying everything.

The_Honeybadger

The_Honeybadger wrote: »

Do you have any prospect of progressing and increasing your own salary over time? If so that should make a big difference over time.

The mortgage and repayments sound very reasonable when balanced against your income to be honest. I don’t think it’s a mad idea at all. You are going to have a lot of the other costs that you listed regardless of whether you rent or buy presumably?

Yes once we can get the mortgage my first thing to do will be to seek employment elsewhere. Im in the private sector with over 15 years experience and my pay there is sh1t tbh. There are 2 things at play reall. 1 My crap wage and 2 the 15 year mortgage term due to my partners age

Smee_Again

Smee_Again wrote: »

But why are you ignoring your partners income? The apartment will be paid off before he retires so assuming no job losses you won't be paying everything.

It may have to be a 60/40 thing as another poster mentioned. Partner works in public sector so safe as houses there. My place safe enough too

awec

Obviously, if all else remains equal every year you wait means shorter mortgage and therefore higher monthly payments.

So your situation only improves if any of the following happen:

1. Your earnings increase by an amount that's greater than the increased monthly payment.
2. Your savings increase by an amount that decreases the amount borrowed by more than the monthly payment difference
3. The house value decreases and you get it for cheaper.

If none of these things feel likely to you then there's a tough conversation you need to have with yourself.

awec

maneno wrote: »

OP Have you requested the bank to reconsider the length of the mortgage to reflect your age and not your partners?

Banks do not like anyone on the mortgage to be retired when the mortgage is still being paid off.

The_Honeybadger

offalyandroid wrote: »

Yes we have some extra set aside for that but it pretty much wipes us out then. I guess Im worried that I will be left with less than 200 per month after everything gets paid

Hey OP. FWIW myself and my partner are in a similar situation where I earn substantially more than her. I look after the mortgage and most of the standing monthly bills in full. She pays for groceries and other smaller costs that crop up and we then have a joint savings account. This works great for us.

Every couple is different but I think you need to sit your partner down, look at all the costs and agree who pays what. Imo a 50/50 split is a bit harsh when one partner is earning nearly three times the other, especially if it leaves you with virtually no disposable income. We look at everything as household income rather than me vs her.

I should mention that the rate is with AIB fixed for 5 years at 2.5% and the other 10 years fixed at 2.95. its a special "green rate" for houses between A1 and B3 ber rating

Smee_Again

offalyandroid wrote: »

It may have to be a 60/40 thing as another poster mentioned. Partner works in public sector so safe as houses there. My place safe enough too

I earn about 50% more than my partner and that's what we do, we pay into a joint account based on our net salaries. I don't know the actual % split but I pay more in than she does and then we both end up with the same personal spending and savings once all bills are paid.

Personally I don't think a 50/50 split is fair when there a large gap between salaries, but others may feel differently.

Bass Reeves

offalyandroid wrote: »

We are very lucky at the moment in that the rent we pay for a 1 bed apt is 639 a month. We are saving €1000 a month but this is by being careful. I'm driving a very old car which needs replacing once we draw down a mortgage. Our outgoings right now are very minimal and we have no dependents or loans of any kind.

You have 1640 at present in surplus income. Your rent will only go one way long-term. If you take out the mortgage you have about 4O0/ month over and above mortgage repayments. In 5 years time if you do not buy the mortgage may be a ten year term as opposed to 15. Get a 5 year fixed rate. We will probably see inflation over the next 3-5 years. By 5 years time inflation may well increase your wages by 10%+. Even if not wage increases will happen anyway.

Drive the car into the ground literally, if you get 2 years out of it you have 10k+ saved. This opportunity may not happen again

deandean

OP from a quick look, it looks as though you'll be able to afford the mortgage OK.
I'd respectfully offer two bits of advice:
1. Make sure your relationship is rock-solid. Hereafter you'll both be in the one boat, for better for worse.
2. Divide the mortgage payments pro-rata to your takehome incomes - as others have said.

Best of luck!

Thanks for the input everyone. Its good to get different opinions and the consensus here is good. I agree with what posters have said in that yes the mortgage payments should be pro rata to reflect our salaries. AIB have said we can have mortgage approval in a week based on our figures etc

deandean

deandean wrote: »

OP from a quick look, it looks as though you'll be able to afford the mortgage OK.
I'd respectfully offer two bits of advice:
1. Make sure your relationship is rock-solid. Hereafter you'll both be in the one boat, for better for worse.
2. Divide the mortgage payments pro-rata to your takehome incomes - as others have said.

Best of luck!

10 year relationship and marriage once a house is bought

Iguarantee

offalyandroid wrote: »

Thanks for the input everyone. Its good to get different opinions and the consensus here is good. I agree with what posters have said in that yes the mortgage payments should be pro rata to reflect our salaries. AIB have said we can have mortgage approval in a week based on our figures etc

Best of luck with your application if you do indeed apply.

My two cents are that everyone’s circumstances are different and there are a lot of variables to table into account for your own circumstances.

Hypothetically, could look to pay €2500 per month and pay the thing off in 8 years, however you’d probably never go on a (substantial) holiday in that time period due to the loss of disposable income. Fair enough that’s just a made up scenario but there is probably a balance that’s right for the both of you.

Personally, your proposed monthly payments are way more than what I pay per month. I chose a lower repayment by loading up the deposit, picking a longer term than you’re proposing etc. It gives me flexibility to spend money elsewhere, invest, holidays etc etc. The other side of the coin is that I’ll have a mortgage long after yours in cleared.

Pick what works for you. And don’t be afraid to swap banks as often as you need to so you get the best rate. I’ve zero loyalty for banks, couldn’t give a damn who my mortgage is with as long as it’s the best deal.

How do you split bills at present and have you not discussed the mortgage costs at all? Difficult to advise without that info

As another poster said, between savings and rent now youll be better off every month with a mortgage

Meeoow

Are you going to pay half of the 1200 per month? That's not too bad. Then all your bills are halved too. Should be manageable.
Would your partner consider paying a bigger percentage, then when the term is over you could pay them back over a few years.

[Deleted User]

[Deleted User] wrote: »

How do you split bills at present and have you not discussed the mortgage costs at all? Difficult to advise without that info

As another poster said, between savings and rent now youll be better off every month with a mortgage

Bills are done as so:

I pay 439 toward th rent
Partner pays 200 toward the rent
I put 300 into joint acc
Partner puts 700 into join acc
Partner pays for netflix
I pay for broadband
We both pay electricity evenly
Food bill paid evenly

No other bills other than that. Frugality this last 2 years has allowed saved us 24k in 24 months.

offalyandroid

offalyandroid wrote: »

Bills are done as so:

I pay 439 toward th rent
Partner pays 200 toward the rent
I put 300 into joint acc
Partner puts 700 into join acc
Partner pays for netflix
I pay for broadband
We both pay electricity evenly
Food bill paid evenly

No other bills other than that. Frugality this last 2 years has allowed saved us 24k in 24 months.

If you combine the rent/savings figures there i would really see the mortgage and insurances being a blocker, if ye kept a similar ratio ye would each still be better off tbh

Wesser

What is your combined NET income?
Your mortgage repayment ( plus other loan repayments) should be no more that 35 % of this.

Personally i think you might not get an opportunity to go at this again given your partners age. If you dont buy now... when will you?

If the house suits your needs.... you like it.... and tje repayments are less than 35% of your net income.... then go for it.

Wesser

Wesser wrote: »

What is your combined NET income?
Your mortgage repayment ( plus other loan repayments) should be no more that 35 % of this.

Personally i think you might not get an opportunity to go at this again given your partners age. If you dont buy now... when will you?


If the house suits your needs.... you like it.... and tje repayments are less than 35% of your net income.... then go for it.

I agree, it's now or never. 10 year mortgage term is out of the question for me

Graham

Mod Note

thread title changed to something meaningful.

Wesser

Key question is

Does the house suit my needs?


Only buy the house if it suits your needs

Xterminator

offalyandroid wrote: »

We are very lucky at the moment in that the rent we pay for a 1 bed apt is 639 a month. We are saving €1000 a month but this is by being careful. I'm driving a very old car which needs replacing once we draw down a mortgage. Our outgoings right now are very minimal and we have no dependents or loans of any kind.

this means at current income levels you can pay mortgage and still save about 400 euro a month without even changing your habits, giving up any existing luxuries, or subscriptions etc.

That 400 euro can be a buffer, so that if things do tighten financially you could stop saving, and put that 400 towards expenses. Not to mention have a few bob in case of unexpected expenses etc.

For me that would be more than sufficient 'head room' . I appreciate everyone is different, but i wonder if you might just be overly nervous as opposed to financially prudent in your worries.

Thats a rhetorical question BTW!

Leprechaun77

offalyandroid wrote: »

Bills are done as so:

I pay 439 toward th rent
Partner pays 200 toward the rent
I put 300 into joint acc
Partner puts 700 into join acc
Partner pays for netflix
I pay for broadband
We both pay electricity evenly
Food bill paid evenly

No other bills other than that. Frugality this last 2 years has allowed saved us 24k in 24 months.

Apologies if I have missed something...

If you earn €25k and your partner earns €67k, that should be about €5k+ per month after tax, no? You mention that you (or both?) have been frugal for 24 months and saved €1k per month.

Where is the unaccounted €2k approx per month going?

Bass Reeves

Leprechaun77 wrote: »

Apologies if I have missed something...

If you earn €25k and your partner earns €67k, that should be about €5k+ per month after tax, no? You mention that you (or both?) have been frugal for 24 months and saved €1k per month.

Where is the unaccounted €2k approx per month going?

I expect that partner has other financial commitments

Leprechaun77

Bass Reeves wrote: »

I expect that partner has other financial commitments

Indeed...as with everything, I am trying to lay some breadcrumbs here to get the other pieces of the jigsaw, without which a lot of the advice will be inaccurate. The OP may not want to discuss their partner’s personal circumstances, but about 40% of household income is yet unaccounted for until further clarification is given.

Sarn

If you look at about €1350 to cover mortgage, mortgage protection and home insurance you are looking at about 26% of household income (€1830 + 3460ish). That should leave plenty of wriggle room. Obviously any additional loans will affect this.

Based on the figures you provided in the original post it looks like the ratio each pays would need to be adjusted.

Smee_Again

Leprechaun77 wrote: »

Indeed...as with everything, I am trying to lay some breadcrumbs here to get the other pieces of the jigsaw, without which a lot of the advice will be inaccurate. The OP may not want to discuss their partner’s personal circumstances, but about 40% of household income is yet unaccounted for until further clarification is given.

OP said they have no loans or dependents so there’s a lot of money unaccounted for.

Also, I think the OP is over contributing to the household based on their income.

39% of rent & savings and 50% of all other bills. What does the partner spend his money on?

Smee_Again

Smee_Again wrote: »

OP said they have no loans or dependents so there’s a lot of money unaccounted for.

Also, I think the OP is over contributing to the household based on their income.

39% of rent & savings and 50% of all other bills. What does the partner spend his money on?

Partner is doing another part time degree so there is fees with that, he has higher diesel costs and saves money with credit union, also has health insurance and subscriptions to Spotify etc .

As for me I usually have couple of hundred left in my current acc each month after I pay everything from my end so there is always a bit there for me as a backup. Plus I have my own savings account seperate to the joint account where I put in 300 a month, but that account is there for when when I buy a better car at some stage, my deposit for that if you will. It's obvious I'm paying a bit more than I should given the wage difference

offalyandroid

offalyandroid wrote: »

It's obvious I'm paying a bit more than I should given the wage difference

"Should" is not really imo an appropriate word here, unless you've discussed this openly as a couple.

Also there's a load of monthly income not at all covered here as a couple.

Also you have a few hundred quid savings and a few hundred quid a month not used which you know of.

TBH OP im very very unclear as to what you're looking for from the thread- is this about the affordability of this proposed mortgage for ye as a couple (easily) or you as an individual if ye split it halfways (easily enough) or about the way ye as a couple split bills?

[Deleted User]

[Deleted User] wrote: »

"Should" is not really imo an appropriate word here, unless you've discussed this openly as a couple.

Also there's a load of monthly income not at all covered here as a couple.

Also you have a few hundred quid savings and a few hundred quid a month not used which you know of.

TBH OP im very very unclear as to what you're looking for from the thread- is this about the affordability of this proposed mortgage for ye as a couple (easily) or you as an individual if ye split it halfways (easily enough) or about the way ye as a couple split bills?

I'm just looking for opinions on what other people think overall for my individual financial situation for when I commit to the mortgage. I've gotten some good feedback from posters here and it's made me feel better about the situation tbh.

fliball123

I would be asking your partner to pay more than half if your in a relationship it should be a combined thing, maybe I am old fashioned. It sounds like you wont be having kids. Also just on the financial side you are used to a 1 bed apartment and are getting 2 beds, you could for a year or a few years rent a room out under the rent a room scheme and you could supplement both of your incomes that way tax free .

DubLad69

From the thread title. I personally think that it's fine to stretch yourself for a house/mortgage. Especially if your in public service or a secure job that would likely only have pay increases in the future.

For the splitting of the bills. For me I think that it should be in proportion to your income just to make sure that you both have a reasonable amount of disposable income.

ted1

offalyandroid wrote: »

I should mention that the rate is with AIB fixed for 5 years at 2.5% and the other 10 years fixed at 2.95. its a special "green rate" for houses between A1 and B3 ber rating

Try Avant you can get 1.95%

I’d say it’s very doable on your incomes.

Also don’t write off houses with a lower BER, the system has its flaws.

Finally , can you avail of the help 2 buy grant ?

https://www.revenue.ie/en/property/help-to-buy-incentive/index.aspx

Bass Reeves

offalyandroid wrote: »

Partner is doing another part time degree so there is fees with that, he has higher diesel costs and saves money with credit union, also has health insurance and subscriptions to Spotify etc .

As for me I usually have couple of hundred left in my current acc each month after I pay everything from my end so there is always a bit there for me as a backup. Plus I have my own savings account seperate to the joint account where I put in 300 a month, but that account is there for when when I buy a better car at some stage, my deposit for that if you will. It's obvious I'm paying a bit more than I should given the wage difference

These figures change it more in your favor. All you need do is rearrage finances if you come under pressure. HTB at present for this year is 10%. On a 250K new house you can reclaim up to 25K over last three years tax. I would not discount older houses either but 25K would be achievable in you and your partner case. That would bring your mortgage requirement back to 160K. This would bring repayments below 1100/month. As well the renta a room for 2-3 years if you so decided would bring 3-500/month

Bass Reeves

Bass Reeves wrote: »

These figures change it more in your favor. All you need do is rearrage finances if you come under pressure. HTB at present for this year is 10%. On a 250K new house you can reclaim up to 25K over last three years tax. I would not discount older houses either but 25K would be achievable in you and your partner case. That would bring your mortgage requirement back to 160K. This would bring repayments below 1100/month. As well the renta a room for 2-3 years if you so decided would bring 3-500/month

I thought it was 5%. That's great if its 10%. We will be doing HTB as that's always been on the cards.

Bass Reeves

offalyandroid wrote: »

I thought it was 5%. That's great if its 10%. We will be doing HTB as that's always been on the cards.

Yes 10% for 2021

dubrov

What's the alternative OP?

Your cheap rent will continue to rise and may get much higher if you have to move.

Your partner then retires and you have to cover all your current bills on one salary with no home equity.

Also, 1k a month is not a lot of savings with no children on those salaries. Maybe you feel like you've lived frugally as you are spending a much higher percentage of your income than your partner