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Downside to buying and being a second time buyer

  • 07-01-2022 1:04am
    #1
    Registered Users Posts: 922 ✭✭✭ WhiteWalls


    Hi,

    I'm currently renting in Dublin and at an age where I think I'd like to have my own space.

    I am currently looking at apartments. My girlfriend and I plan on moving in together in the next year or two. I don't see us leaving Dublin for another 6/7 years.

    The thoughts of paying around 1800 euro a month for a number of years is pushing me to buy an apartment. If I/We then want to buy a house in 6/7 years, am I complicating things by having this apartment, what are the major downfalls?

    Thanks



Comments

  • Registered Users Posts: 604 ✭✭✭ Minier81


    6/7 years is a long time to keep renting. I would see the only downside for second time is being in a chain when it comes to buying. This can delay things and if their sale falls through then they often cannot buy the place they are moving to. This is the reason first time buyers are seen as more attractive for a seller. Of course you can avoid this problem by selling your first place and renting for a few months. Most sales involve a chain though so I wouldn't worry about it.

    The other potential downside to buying is if prices fall significantly. Unless you have a crystal ball you can't predict this. 6/7 years is a long enough time frame that you would hope there is time for prices to go up before or after any fall in price.



  • Registered Users Posts: 7,504 ✭✭✭ Outkast_IRE


    As above being in a chain can work against you a little bit when buying a 2nd house. But there are ways to mitigate it such as going sale agreed on your first house but ensuring you are honest with the buyer that you will not be closing sale until you have another house lined up and you expect it to be x months.

    Otherwise the only other downside right now is that you lose access to some of the government schemes etc , but that doesnt bother me as you are building equity in your own home with each mortgage payment so once you stay put a good few years you will be left in a strong position. Just ensure that you will be able to save some extra each month after your mortgage payment as 6-7 years of payments may not be enough to build equity to 20% deposit if upsizing for 2nd home.



  • Registered Users Posts: 3,418 ✭✭✭ Wildly Boaring


    Agree with both points. The second is very important.


    If you need to use any savings to buy the apartment and you plan in buying a more expensive house in 6 years you'll need a 20% deposit at that time.

    Do your sums assuming that the apartment is worth the same in 6 years and work out where that deposit will come from.

    So how much of your mortgage payments will be lost to interest. How much will you have to save.

    This could be exacerbated completely if the apartment is worth less money in 6 years. After 2007 anyone with an apartment was stuck in it until they could come up with the next deposit. Have cousins and were stuck in apartment with 2 growing kids until 2019.

    Of course if prices rise you may not need any additional savings to buy the house, just the profit. No guarantee.


    The chain can make a difference. But frankly it doesn't in lots of cases.



  • Registered Users Posts: 922 ✭✭✭ WhiteWalls


    Thanks for the replies



  • Registered Users Posts: 979 ✭✭✭ cubatahavana


    I bought in 2007 an apartment. Depreciated 50%. I sold it in December 2020 for 85k over what was owed from the mortgage. Still sold it for 55k less that what I bought it for, but I was living in it, paying less mortgage than if I was renting (3 bed duplex), and had enough money for the deposit of the new purchase with a few savings and the extra 85k. If I would’ve been renting the whole time I’m nearly certain that I wouldn’t have been able to afford buying now.

    Having said this, if I would’ve bought in 2014, I would’ve been in a better position to buy earlier my second home, but nobody has a cristal ball.

    Bottom line, for me it was not much of a problem the crash of 2007. I was lucky that my mortgage was only for 80% of the value of my first place, a 100-110% mortgage back then would’ve been a completely different story


    if you can afford to buy now, I wouldn’t hesitate.



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