Am I mad not wanting to get a mortgage?

fairyribbon

fairyribbon wrote: »

Well this is what my family decided on. First born got the house but she already owns a house she is happy in so in order for the house to not be left idle, I can live in it

Sister is the first born?

TheW1zard

Yes OP

standardg60

Deleted User wrote: »

Sister is the first born?

Apologies, other way round then.

dubrov

Casati wrote:

I'd love to know what part of my post you disagree with?

The whole lot really.

We aren't programmed to think we need a mortgage, the system is setup to make it very attractive.

Saving to buy outright is not an option and makes little sense for most people.

The stock market wouldn't be a better investment long term due to tax reasons.

Even those who bought in 2007 are generally better off financially than those who have been renting over the same period.

Jim2007

awec wrote: »

Most people aren't buying a house because they have no alternative. Most people are buying a house because it is by far the most secure and stable way to provide a home for their family and their future.

Where are all these alternatives then, is there a long list of property to rent through out the country? Plenty of rental property in the town and cities...

You need to accommodate a family for maybe twenty years of your live...

Wealth is what secures a future and property represents a high risk low return way of getting there, it also leaves you very concentrated in local risks which may not be reflected in the economy at large.

For instance the loss of a major local employer could see you struggling to find work and seeing the value of your major asset declining at the same time - double hit.

Jim2007

fairyribbon wrote: »

It’s not an assumption it has been discussed and I have seen the will.

I’m beginning to wondering what’s the real question here, I don’t think it’s the merits of buying property versus the alternatives.....

It seems more like am I OK doing nothing and expecting it will all work out in the end.

OP, of course it an assumption, you have heard discussions and you have seen a will. But that does not mean that people can’t change their minds and there is no requirement on your parents to show you a new Will they make.

Circumstances change, maybe your parents need additional cash, maybe someone in the family needs their support etc...

JimmyVik

Nobody wants to get a mortgage, but they end up having to.
Look at all the posts in the early 2010s of people boasting about how little they were paying in rent and how people were nuts to buy.
They would be renting all their lives.
I wonder how they are all getting on nowadays?
And if your sister inherits the house she might have a big tax bill.
So she would have to pay that for you to continue living there.
Best to split the house, sell it and you both get your halves.

awec

Jim2007 wrote: »

Where are all these alternatives then, is there a long list of property to rent through out the country? Plenty of rental property in the town and cities...

You need to accommodate a family for maybe twenty years of your live...

Wealth is what secures a future and property represents a high risk low return way of getting there, it also leaves you very concentrated in local risks which may not be reflected in the economy at large.

For instance the loss of a major local employer could see you struggling to find work and seeing the value of your major asset declining at the same time - double hit.

You're still missing the point.

If a major local employer leaves and you cannot find work you will be a LOT worse off if you are renting than you will be if you have a mortgage.

Property is high risk? Compared to what? What is the low risk approach to securing your wealth while simultaneously ensuring a roof remains over your head?

SteM

Timfy wrote: »

I agree with this to a point, you have to have an optimistic outlook on life to be a long term renter!

However, a €250,000 mortgage will cost over full term VERY roughly (counts on fingers) €324,000. At the end of your mortgage term you will have the equity on your house... I will have topped up my pensions and indemnities by around €100,000, a decent safety net.

Don't forget, once outside of the cities, rent is very much lower. I am currently in a large 3 bed detached on a couple of acres overlooking the sea in Co Galway and paying about a third of a 2 bed flat in Blanchardstown

You must realise that you're the exception to the rule for renters in Ireland? Everyone knows that it's cheaper to rent down the country but up until recently it was never an option for the majority of office workers to work remotely. Going forward, companies that have been happy for people to work from home for the last 14 months will want some return to the office (https://www.forbes.com/sites/jackkelly/2021/04/01/google-wants-workers-to-return-to-the-office-ahead-of-schedule-this-looks-like-a-blow-to-the-remote-work-trend/) so people that had been looking at moving out of cities may not have that option.

Most people have to live close to where they work, most work is in large cities. That's why 2 bed flats in Blanch exist.

Deeec

Timfy wrote: »

I agree with this to a point, you have to have an optimistic outlook on life to be a long term renter!

However, a €250,000 mortgage will cost over full term VERY roughly (counts on fingers) €324,000. At the end of your mortgage term you will have the equity on your house... I will have topped up my pensions and indemnities by around €100,000, a decent safety net.

Don't forget, once outside of the cities, rent is very much lower. I am currently in a large 3 bed detached on a couple of acres overlooking the sea in Co Galway and paying about a third of a 2 bed flat in Blanchardstown

Timfy please seek proper financial advice if you have not already done so. You probably need a pension pot of near a million to keep a basic lifestyle for the rest of your life ( you could live to a ripe old age) while still paying rent. Also remember there may be no such thing as a state pension in years to come.

Also out of interest have you ever done a rough count of what you have paid out in rent over the years? Over 30 years this figure is way more than you would have paid in a mortgage. In your twenties you probably could have bought a property for €50000 or less and had your mortgage paid off long ago. Also making capital gains as you moved around.

Casati

dubrov wrote: »

The whole lot really.

We aren't programmed to think we need a mortgage, the system is setup to make it very attractive.

Saving to buy outright is not an option and makes little sense for most people.

The stock market wouldn't be a better investment long term due to tax reasons.

Even those who bought in 2007 are generally better off financially than those who have been renting over the same period.

Please provide a few numbers to show me where I gone wrong with my calculations then

Claw Hammer

fairyribbon wrote: »

It’s not an assumption it has been discussed and I have seen the will.

In order to inherit under a will a few things need to happen.
1. The will is not changed before death.
2. The estate is not insolvent or in debt so assets have to be sold.
3. There is no legal challenge by a disappointed party to the will resulting in the
assets being dissipated by legal costs.

I would not be counting my chickens.

paulieeye

We dont know all the details of why the sister is getting the house even though she already has one. From OP saying that "because she is the eldest" seems like a strange reason. But maybe there is more to it.

But I agree with everyone else who say that it is a recipe for disaster. If that is the reason to not buy now then I think its a bit loose. But thats not saying that you should buy, some people prefer to rent and not be tie down with a massive debt. But relying on living in your sisters inherited house rent free seems like a bad idea. But there is probably more to this!

Personally I need the security. In the many rental houses I have had over the years I have been made move out 3 times for either the owner selling or for a family member moving in. I dont want to have to deal with that if I have a family.

dubrov

Casati wrote: »

Please provide a few numbers to show me where I gone wrong with my calculations then

I didn't say your numbers were wrong.
However, you cherry picked a period where property has performed particularly poorly and the stock market particularly well. I wouldn't use that as guide for future growth.

Even then in your example, you ignore the equity in the property, capital gains tax and the usage of the property for 15 years.

Scenario 1: Purchase property
Pay mortgage 1430 a month => -257k
At end of 15 years, equity = 100k
Total cashflow = -157k

Scenario 2: Buy shares
Invest 715 a month for 15 years = -130k
At end of 15 years, equity = 290k (about 160k) profit
Capital gains tax @33% (possibly higher rate if dividends are paid) = -53k
Less equivalent rent on equivalent house for 15 years (assuming a 7% rental return => 1750 pm => -315k over 15 years)
Total cashflow = -208k

So even in this cherry-picked period, you would still be far better off purchasing than renting an equivalent property.
.

Ray Palmer

OP you are not mad for wanting to avoid a mortgage. Your current plan and inheritance is an issue. It requires you to be lucky that neither parents need a nursing home at the very least. Loads warned you about family reactions and how money/inheritance can change expected behaviour. So many people have experienced this.
I had a friend tell me they never would have to get a mortgage as his grandparents were leaving them their house. He saw the will and he knew he was protected. As a result he didn't try to get a property and acted very self centred. Then the grandparents both died close to each other.
He was waiting for probate and gearing up to move in. His brother and his parents were left the house. He was given right to residency. He told us he was given the property but acted a little cagy on how it actually was. In the end his brother told me. The grandparents had decided he wasn't responsible enough to be given the property. They didn't give him residency but asked in the will he be taken care of by those actually inherting. His brother was very successful married with kids and his wife earns a good salary. Problem is he was successful because he owned 2 restaurants. He is not doing so well now. Has now asked for rent as a result and the parents think this fair because his job is still OK and he lost no income. He is having a huge hissy fit over this. It will not end well.

My own situation means I will inherit a large property close to Dublin City centre. My brother and sister will also inherit a property each. I have been taking care of basic issues on the properties for years but now fully in control due to my parents decling abilities. Lots of work to be done as they didn't maintain them to a great standard. Tenants were badly chosen and there are issues there.
Recently a property developer has shown interest in one property ear marked for my brother. It means the value of this property has soared in value. Maybe 50% more than the others. If my parents died and my brother inherited this getting much more than me on a property I have had nightmare events on would stick in my throat. They have never helped out as they live in another country. Even though I am very lucky and will do well it would bother me.

As you get older your parents are doing the same. There will be a point where they will be a lot less able and it will feel sudden. Everything changes and you start taking care of them more and more.

I was effectively kicked out of their rental property as they wanted me to stand on my own 2 feet. Now 5 years left on my mortgage and this gives me ample personal resources.only 5 years left on mortgage and have plans to change my life as a result.

Avoiding a mortgage might be good but also a restriction that effects your future. You cannot bank on what you think will happen and you seem to be missing dangers.

Timfy

Timfy wrote: »

However, a €250,000 mortgage will cost over full term VERY roughly (counts on fingers) €324,000. At the end of your mortgage term you will have the equity on your house... I will have topped up my pensions and indemnities by around €100,000, a decent safety net.

At current rents, that 100k safety net will evaporate in about 5 years (based on a conservative 1,500 per month). God knows what the rental market will be like in 20 years' time. It's not inconceivable that rents will be 2,500+ in 2040. That's little over 3 years before your "decent" safety net is up in smoke and you're penniless at age 71. What's the plan then?

Timfy wrote: »

Background
I can live in some amazing properties and in outstanding locations for the same (or less) cost

This just doesn't hold any water, I'm afraid. Rents have been outstripping mortgages since tthe early 2010s. There are very few high end properties where the rent payable is less than the mortgage you'd get on a similar properties and those that do exist are snapped up quicksmart. Anybody claiming otherwise is lying to themselves.

Casati wrote: »

a) A typical 300k mortgage over 30 years at 4% interest will cost you 215k in interest payments with payment of 1423 per month.

b) Somebody who bought a new house in 2006 for 300k would likely have a house maybe worth 300k now but using the mortgage example above they would still owe 200k, despite having made payments of over 250k in that time. Yes most of the repayments are interest in early years.

a) A typical renter paying 1500 per month will pay half a million over that same 30 year period. and that's without the rent going up during that time period. Why do you think it's better, financially, to pay an extra 300,000 and end up with nothing but a reference at the end of it?

b) If someone had started renting in 2006 and were paying an average of €1,000 per month (extremely conservative estimate) over that time frame, you're talking at least €180k in rental payments. So, 70k less than the buyer in your example. Except the mortgage is going down every month, and the rent is going up. Know what else is going up? Property value. How much will that house be worth when they're eventually finished paying off the 200k, and the renter has paid another 300k?

Renting has its upsides, and is suitable for plenty of people. Someone with a guaranteed income past retirement would be fine to keep renting if it suits them. Unfortunately, that's a very small number of people. Most will have their pension and that's it.

Having to face a monthly bill of €2,000 in your 70s just isn't realistic for the vast, vast majority of people. To suggest otherwise is ridiculous. though not as ridiculous as the suggestion that people should just save for 15 years and buy for cash. WTF are you supposed to live on and where do you propose doing that if you're saving 300k over 15 years?

beveragelady

Deleted User wrote: »

the suggestion that people should just save for 15 years and buy for cash. WTF are you supposed to live on and where do you propose doing that if you're saving 300k over 15 years?

This reminds me of somebody I knew who was able to put a massive cash deposit on a house in D6, having saved up a huge chunk of money on a teacher's starting salary. She was so pleased with herself, couldn't understand how so many people were getting thumping great mortgages and whingeing about repayments. (This was in '05 and '06, when if you went into a bank to replace a card they'd sit you down and try to get you take a mortgage for 500k.)

Turned out her Dad had been paying for her to live IN A HOTEL during term time, and she'd go home during the holidays. She was getting all her meals in the hotel, they even cleaned her car for her. I'm pretty sure if you asked her now she'd tell you she was very prudent and saved all her pennies when everybody else was going mad for designer clothes and expensive coffee!

riclad

There can be crash,s and economic slowdowns, in the long term house prices tend to rise.The value of the dollar and euro falls in line with inflation.
With property you have to think in terms of 20-30 years.
Theres a limited amount of sites where people can build houses near citys
or towns.
no one builds new houses near the city centre as land is too expensive.
People tend to stay where they are after the mortgage is paid unless they have to move for a reason .
the only upside to renting i can think of is you can rent a flat or apartment
close to work reducing time spent commuting and money spent on bus fares
And you are not locked into a 25 year mortgage.
rents to to rise every few years .
Say you have a 1000, euro mortgage ,you can opt to pay 1200 or more to reduce the length of the mortgage .

Casati

Deleted User wrote: »

At current rents, that 100k safety net will evaporate in about 5 years (based on a conservative 1,500 per month). God knows what the rental market will be like in 20 years' time. It's not inconceivable that rents will be 2,500+ in 2040. That's little over 3 years before your "decent" safety net is up in smoke and you're penniless at age 71. What's the plan then?



This just doesn't hold any water, I'm afraid. Rents have been outstripping mortgages since tthe early 2010s. There are very few high end properties where the rent payable is less than the mortgage you'd get on a similar properties and those that do exist are snapped up quicksmart. Anybody claiming otherwise is lying to themselves.



a) A typical renter paying 1500 per month will pay half a million over that same 30 year period. and that's without the rent going up during that time period. Why do you think it's better, financially, to pay an extra 300,000 and end up with nothing but a reference at the end of it?

b) If someone had started renting in 2006 and were paying an average of €1,000 per month (extremely conservative estimate) over that time frame, you're talking at least €180k in rental payments. So, 70k less than the buyer in your example. Except the mortgage is going down every month, and the rent is going up. Know what else is going up? Property value. How much will that house be worth when they're eventually finished paying off the 200k, and the renter has paid another 300k?

Renting has its upsides, and is suitable for plenty of people. Someone with a guaranteed income past retirement would be fine to keep renting if it suits them. Unfortunately, that's a very small number of people. Most will have their pension and that's it.

Having to face a monthly bill of €2,000 in your 70s just isn't realistic for the vast, vast majority of people. To suggest otherwise is ridiculous. though not as ridiculous as the suggestion that people should just save for 15 years and buy for cash. WTF are you supposed to live on and where do you propose doing that if you're saving 300k over 15 years?

I agree that renting for life isn't realistic- indeed I think having a mortgage into your 50's isn't a good idea, but many people seem to be addicted to debt and don't consider alternative ways to attain assets and wealth. Buying at the top of the market now is probably as good an idea as buying at the top of the market 15 years ago, yet we see many people programmed to give up their freedom by signing off for 30 years on house they really have no idea what will be worth in 5 year or if they can afford the payments.

Graham

Casati wrote: »

buying at the top of the market 15 years ago, yet we see many people programmed to give up their freedom by signing off for 30 years on house they really have no idea what will be worth in 5 year or if they can afford the payments.

and if you're wrong calling the top of the market now only to later discover the top of the market doesn't arrive until 2026?

I'm not suggesting now or 2026 is the top, I don't know.

awec

Casati wrote: »

I agree that renting for life isn't realistic- indeed I think having a mortgage into your 50's isn't a good idea, but many people seem to be addicted to debt and don't consider alternative ways to attain assets and wealth. Buying at the top of the market now is probably as good an idea as buying at the top of the market 15 years ago, yet we see many people programmed to give up their freedom by signing off for 30 years on house they really have no idea what will be worth in 5 year or if they can afford the payments.

What alternatives is there to acquiring a house where you know exactly what's going to happen in 5 years time?

No mortgage in your 50s seems like a completely arbitrary number to pick. Why not 40s? 60s?

Smouse156

fairyribbon wrote: »

I’m at that age when all my peers are saving and getting mortgages. Am I mad for not wanting to jump on board? I’m worried that I’m missing out on the chance of gaining a profit in years to come. Part of me wants to just continue to rent and I keep hearing “ it’s dead money” “you won’t own the place” “your paying another person’s mortgages” which are all valid statements but the thoughts of getting into this 25-30 year loan and paying interest and everything else that comes with it seems mad to me especially as the property here seems very overpriced.
I’m also curious- when people do pay off their mortgages do they tend to move and sell at 50-60 years old like they say? I would imagine you would be less likely to move at that age.

I would it depends on your circumstances. If you are single and wish to travel then it’s probably not a bad idea to rent and invest with the freedom to travel for better opportunities. If you want to live in the same place for the next 30 years then buying is clearly better.

Irish people don’t understand that a house isn’t an asset, it’s a giant liability! It financially limits you and doesn’t put money in your pocket. It only takes and takes. Given how overpriced the current 2021 market is it would be foolish to buy at the moment. You only realise any equity when you sell which most people never do therefore it never becomes an asset. Have a think about what you want long term then the choice becomes easier. Just something to bear in mind.

SteM

Smouse156 wrote: »

I would it depends on your circumstances. If you are single and wish to travel then it’s probably not a bad idea to rent and invest with the freedom to travel for better opportunities. If you want to live in the same place for the next 30 years then buying is clearly better.

Irish people don’t understand that a house isn’t an asset, it’s a giant liability! It financially limits you and doesn’t put money in your pocket. It only takes and takes. Given how overpriced the current 2021 market is it would be foolish to buy at the moment. You only realise any equity when you sell which most people never do therefore it never becomes an asset. Have a think about what you want long term then the choice becomes easier. Just something to bear in mind.

Yeah, no irish people know what they're getting into when buying a house and we all live in the same place for ever.

Talk about hyperbolic posting.

Smouse156

SteM wrote: »

Yeah, no irish people know what they're getting into when buying a house and we all live in the same place for ever.

Talk about hyperbolic posting.

No Irish people are deluded into thinking their home is an asset. It’s only an asset for banks! But as most people haven’t a clue about finance this isn’t surprising!

Just saying the current narrative of buy at any cost isn’t exactly smart advice.

Deeec

Smouse156 wrote: »

No Irish people are deluded into thinking their home is an asset. It’s only an asset for banks! But as most people haven’t a clue about finance this isn’t surprising!

Just saying the current narrative of buy at any cost isn’t exactly smart advice.

Sorry I dont get your logic here at all. Are you saying it is better to pay rent ( basically paying someone elses mortgage for them) than to pay a mortgage on a house you will eventually own

In many cases now rent is higher than actually paying a mortgage on the same house. Property is always an asset and you will gain if you are willing to hold onto it long enough. Most people dont buy a home for quick gains.

Casati

awec wrote: »

What alternatives is there to acquiring a house where you know exactly what's going to happen in 5 years time?

No mortgage in your 50s seems like a completely arbitrary number to pick. Why not 40s? 60s?

The alternative is financial freedom- don't get me wrong, Im not saying don't get a mortgage, Im saying people to educate themselves and really understanding as much as possible and realise there are multiple options.

The mortgage in your 50's comment is based on the fact average age of first time buyer is now 34 (REA report) and average mortgage is paid off in 22 years. Sorry for dealing in actual facts and figures, its seems like a lot of people don't like them

awec

Casati wrote: »

The alternative is financial freedom- don't get me wrong, Im not saying don't get a mortgage, Im saying people to educate themselves and really understanding as much as possible and realise there are multiple options.

The mortgage in your 50's comment is based on the fact average age of first time buyer is now 34 (REA report) and average mortgage is paid off in 22 years. Sorry for dealing in actual facts and figures, its seems like a lot of people don't like them

What are these options?

TheW1zard

My mortgage is 1150. Neighbour rents for 2950.
I dont envy his 'financial freedom' tbh

Diemos

Tails142 wrote: »

Well a few things come to mind - the backside could fall out of the property market and you could go into negative equity, interest rates are at historic lows, these could sky rocket shooting up your mortgage repayments.

I'm saying buying isn't the no brainer move either.

House prices drop, mortgage rates go up, rents fall.

But yeah for the last maybe 10 years buying has made more sense than renting if you can do it. Talk to someone who bought in 2007 though.

Isn't that the issue though, there has only been 1, 3 to 4 year period (2005 - 2007), were it was a bad time to buy a gaff, pretty much every other year in the last 100 years and you would be fine.
Christ, not even who bought in those years necessarily lost out, if you got a place you were happy with and a good interest rate, you could still get off fine.

Lot of scare mongering going on.
Of course buying has risk but like anything, as long as you are not over stretching and buying the right thing.

Diemos

awec wrote: »

What are these options?

I'm sure you'll get an answer soon.....I mean there are just so many options.