So why is it that I need a mortgage?

Brid Hegarty · 07-11-2023 11:16pm

https://www.boards.ie/discussion/comment/121336828#Comment_121336828

Hang on now, a typo doesn't make one semi-literate.

Brid Hegarty · 07-11-2023 11:28pm

https://www.boards.ie/discussion/comment/121336865#Comment_121336865

No, what I meant was that if I knew the future, and if the future was that there was due to be a crash in the next few years, and that therefore property values would decrease, then that would strongly make me consider declining the option of a mortgage when buying. However, if property values continue to increase (always happens in the long run even with crashes) then I'd effectively be paying back less debt considering inflation. Does that make sense? I have since edited that sentence btw.

Regarding the last point you made; did you mean that buying a home outright at present, wouldn't prohibit me from getting a mortgage on my next buy at some point in the future? How exactly does that deposit idea work?

Geuze · 08-11-2023 2:12am

https://www.boards.ie/discussion/comment/121339589#Comment_121339589

"declining the option of a mortgage when buying"

A mortgage is not something you choose.

All house buyers fall into one of two categories:

(1) cash buyers = you don't need a mortgage

(2) all other buyers, who need a mortgage

Most people are (2). They don't choose to get a mortgage, they simply must get a mortgage.

Geuze · 08-11-2023 2:15am

https://www.boards.ie/discussion/comment/121339589#Comment_121339589

You can indeed be a cash buyer for your first house, and later, get a mortgage for your second house.

Completely normal.

It is somehwat unusual for a FTB to have 200k - 300k cash handy to buy a house without a mortgage, but fair play to you if you do.

lalababa · 08-11-2023 2:28am

https://www.boards.ie/discussion/comment/118878372#Comment_118878372

An architect, Dominic Stevens, built a one off timber framed A rated 3 bedroom (albeit small) house for 25k in c. 2009. With a very simple design he and his friends did the labour. And now the councils can't manage to get a builder to do a 500 house estate for less than 200k per house. Tell me where that makes sense?

Peregrinus · 08-11-2023 3:03am

https://www.boards.ie/discussion/comment/121339937#Comment_121339937

Possibly builders don't have friends who do the labour for free? Just a wild guess. They probably have to pay engineers and architects to do the design and drawings as well. And of course components and supplies cost vastly more now than they did in 2009, in the middle of a global recession.

o1s1n · 08-11-2023 10:40am

https://www.boards.ie/discussion/comment/121339937#Comment_121339937

Labour is very very expensive. Arguably the most expensive part of a build.

By him and his friends doing the labour, they effectively cut out the most expensive part of the project.

You can't compare that to the cost of hiring a team of builders to build a council house.

o1s1n · 08-11-2023 10:44am

https://www.boards.ie/discussion/comment/121339589#Comment_121339589

You still havent explained to us how people are going to afford their transition house without a mortgage.

Do you think everyone who is buying a house is sitting on 200k cash and could buy with cash rather than get a mortgage? a large majority of people even have a hard time scraping the 20-30k deposit together for a mortgage.

RichardAnd · 08-11-2023 10:57am

https://www.boards.ie/discussion/comment/121339937#Comment_121339937

Well material costs in 2009 would have been a lot lower. Also, did the 25k cover the cost of the site? Stevers was presumably not paying for labour either, which is a huge aspect of the cost.

Regardless, let's not delude ourselves that money is the problem here; it isn't. To fund lockdowns, the state borrowed or otherwise magicked 25 billion of funny-money into existence in 2020 alone. At the cost of 200k a house, that would produce 125k houses or apartments. Except, that it wouldn't. One must never conflate money with resources, materials, manpower or time. Even if the budget were unlimited, there is a very real limit to how many houses can be built in any given time. Maybe it can be lessened, but it's still there.

In short, anyone who says that there is a quick and easy fix to the housing crisis by going X to raise however many billions is being dishonest.

Montage of Feck · 08-11-2023 11:17am

But seriously the op does kind of have a point. Why can't a person on an average wage get a place to live today without putting themselves into serious debt?

My parents had a basic level of education and worked very blue collar jobs yet could afford a home. Yet today we've people coming out of college with post grads and not a pot to piss in already on the debt spiral.

o1s1n · 08-11-2023 11:25am

https://www.boards.ie/discussion/comment/121340530#Comment_121340530

The world we live in today is a far cry from the world your folks grew up in. As awful as it is, it's the way things are now and they're not going to change within your lifetime. Unless you're sitting on vast sums of cash you're going to need a mortgage to buy a property. It's not really a choice like the OP seems to think.

Peregrinus · 08-11-2023 11:42am

https://www.boards.ie/discussion/comment/121340530#Comment_121340530

Point of clarification: presumably they could afford a home bought on mortgage?

Montage of Feck · 08-11-2023 11:43am

Well if things aren't going to change, at least give me the satisfaction that Thatcher and Reagan are roasting in hell in eternal agony. The reversal in the standard of living for ordinary people since the debt driven low interest free market got fausted on the world is sickining.

Montage of Feck · 08-11-2023 11:51am

https://www.boards.ie/discussion/comment/121340624#Comment_121340624

No a self build with no mortgage, a basic bungalow bliss thing not the Taj Mahal but still more than you'd get today.

witchgirl26 · 08-11-2023 12:01pm

https://www.boards.ie/discussion/comment/121339589#Comment_121339589

But no one knows the future. My sister bought an apartment at what she thought was the bottom of the market as it had dropped more than 50% in price (new build) however it dropped more. It's a risk you take when buying a house. It's even on the bottom of all financial products that the value of assets may rise as well as fall.

Yes buying a house (or inheriting it) doesn't exclude you from getting a mortgage in the future. And if you did do that, in the banks eyes you're classed as a first time buyer. Deposit rules are simple - first time buyers need 10% (plus amounts for solicitor fees etc), second time buyers need 20%.

https://www.boards.ie/discussion/comment/121340530#Comment_121340530

My dad was a teacher, mum was a stay at home mum. Always needed a mortgage to buy a house. And they were in serious debt. While the amounts differ to today, the % of the household income was much higher. Interest rates were over 15% at one point during the 1980's when they were paying it back. The past wasn't some utopian land. I suggest having a really good (honest because some people will stick on the rose tinted glasses) conversation if you can with your parents about what the costs were of building that house both in terms of financial but time etc.

Montage of Feck · 08-11-2023 12:09pm

Believe me I don't have rose tinted glasses about my relationship with my parents! I'm in full agreement with Philip Larkin on the matter.

witchgirl26 · 08-11-2023 1:22pm

https://www.boards.ie/discussion/comment/121340737#Comment_121340737

I didn't mean you have a rose tinted view of them, more that they might have rose tinted glasses about the realities of their finances at the time of building their own home. Sorry if I didn't put it very well.

RichardAnd · 08-11-2023 2:01pm

https://www.boards.ie/discussion/comment/121340737#Comment_121340737

I had to look that one up. Proto-based!

realitykeeper · 10-11-2023 6:25pm

The reason people need to borrow a lot is because house prices are high. The reason house prices are high is because they were deliderately inflated with 200 billion euro, which FG/FF borrowed since 2008. Had that debt not been incurred, economic reality would have been necessary. Letting defaulters live in the properties they were defaulting on, for years on end, was a manipulation designed to keep houses off the market and house prices high. This would not have been possible had the billions borrowed not also been used to bail out the banks (another manipulation to prevent house prices falling to their true value).

Back in 2008/9, house prices were plummeting and they would have continued to fall if Enda Kenny`s government had not put a false floor under house prices. They did this by insuring a traunche of houses (belonging to the bailed out banks) against negative equity. This prompted buyers to enter the market before house prices had a chance to bottom out naturally, so true price discovery was never achieved. This manipulation gave the appearance that house prices had bottomed out. The true bottom was probably 30% below where our manipulated housing market bottomed out, as a result of that intervention.

Following the insertion of this false floor under the Irish housing market, the 200 billion borrowed was then wasted on inflating house prices. In other words, we got nothing but high house prices for the 200 billion we borrowed. We could have built a lot of infrastructure with that money but all we got was high prices for houses that already existed.

So how do we resolve this mess? Simple. We need punitive monthly taxes to be paid on pre 2009 houses. New builds and first time buyers need to be exempted from property tax. This would create an incentive for owners of pre 2009 houses (the beneficiaries of the 200 billion) to sell up and buy the tax exempt new houses, and this would create a market driven demand for new houses and this demand would result in a construction boom with all the spin off benefits. Obviously, this would correct the artificially inflated pre 2009 houses, and allow them to deflate, bringing them closer to the true value they were attempting to attain before Enda Kenny`s interferrence in the market back in 2009. Consequently, pre 2009 houses would fall in price and become affordable to tax exempt first time buyers.

The money raised by taxing the incumbent beneficiaries of the 200 billion, in their pre 2009 houses, could be used to repay the 200 billion and return the national debt to 2008 levels. It would ensure healthy competition from cash rich sellers of pre 2009 houses for new builds, and that would delight builders, the construction sector and spin off industries. This would be the prefect answer to a recession, especially one affecting multinationals here.

The alternative to this plan, is Irish young people will continue to emigrate and the unsuspecting Ukrainians will pick up the service tab for that 200 billion euro, from day one, when they enter the workforce.