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So why is it that I need a mortgage?

Brid Hegarty

Is it just me, or does it seem mad to get a mortgage? Why is it considered the standard thing to do? You're basically forced to flush up to a year's salary worth of money down the toilet, on the assumption that you need to live in luxury.

Why not just buy a smaller house for a number of years first? You'd have paid stamp duty twice by the time you finally get the house you want, but you'd save 30 grand or so in the end. You'd save yourself a lot of hassle too. Mortgage rates are of course about to go up again. Isn't going without it the logical thing to do for a single person? What am I missing?

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StupidLikeAFox

If you are renting your rent will typically increase with inflation, while your savings will decrease with inflation. If you are paying a mortgage then inflation is in your favour.

o1s1n

https://www.boards.ie/discussion/comment/118878259#Comment_118878259

How much is this 'huge' amount of money you'll be saving?

You could be the best saver in the world, you're not going to save up for the averagely priced house in Dublin any time soon.

Say we take 350k as the average house price. If you wanted to buy that ten years from now, you'd have to save 35k a year. Do you make enough money to save 35k a year?

And to top it off, when you go to buy that house in 10 years with all your cash savings, there's a high probability the house will cost a lot more than 350k...

Pomodoro

@Brid Hegarty There are lots of possible reasons to get a mortgage, even assuming you can afford to buy a house without it. Three examples:

The house you can afford is totally inadequate (Too small, far away from work, far away from school) so you borrow to enable a better lifestyle
You think you will do better overall by investing the cash in your pension or other investment vehicle. At the moment with 10 year fixed mortgages at low interest rates, and massive inflation, this is a realistic scenario.
You need the cash for other things (renovation after buying, holidays, career break, emergency fund, whatever)

At the core of the issue is the misconception that the worth and scarcity of money is fixed, and everything else goes up and down in value around it. But in fact, cash can be viewed as just another investment vehicle who's worth rises and falls (and over the long term, it tends to fall). €50k might seem like a lot of money now, but in 20 years time it might be the price of the cheapest available car.

As an exercise, take a look at this flow chart from r/irishpersonalfinance on reddit. You will see that paying off a mortgage is pretty low priority (according to these guys). And there is sound reasoning behind that. If there are things you disagree with, you'll learn a lot by doing some research on the motivation behind each of these rules.

https://i.redd.it/kpxp9c7bdgd61.jpg

wandererz

You have to keep up with the Jones's.

And when you've caught up with them, you need to move on out and up.

Recycle & repeat.

Have a look at The Gallops, Clonee.

See if you don't need a mortgage.

Ubbquittious

If everyone saved for their house the government would further put the kibosh on new house building & make things more expensive in order to make sure they would need a mortgage. As soon as a significant % of the population starts getting houses with no mortgage the global financial system will start to unravel

Just look at how the govt held back prefabricated homes until Ukranians started showing up & now its no longer a problem. They'll probably destroy or re-export those modular homes as Ukranians start to go back home

Danzy

https://www.boards.ie/discussion/comment/118878117#Comment_118878117

You know people?

Ubbquittious

Its the planned economy. The politicians set up the system this way, because all the money in existence or most of it comes from debt and a lot of that debt is mortgage debt, this leads to more money being created which in turn fuels more growth and more debt ad infinitum.

Mortgages are the mechanism through which society pushes people onto the hamster wheel

ongarite

How much does this starter house cost, Brid?

CrookedJack

https://www.boards.ie/discussion/comment/118878177#Comment_118878177

They're not. This poster is always making threads asking absolutely naive questions that somehow manage to allow them to appear superior.

phormium

I'm not sure what your point is but for the average worker they are never going to be able to save enough out of their salary to buy a house outright these days even if they live in a tent!

Years ago people in rural Ireland anyway managed to build houses on land they owned or were gifted by doing it bit by bit with every friend/family able to giving them a hand. A friend of mine built her house for 2,000 pounds about 40 yrs ago, fine grant sized bungalow! You could cobble together that sort of money over time, both lived at home and in fairness there wasn't much else to spend your money on back then, holidays etc would be uncommon but you couldn't finance a house these days from savings only unless you're on mega bucks.

igord

Inflation would hit your savings about the same as interest unless you are able to invest.

[Deleted User]

If you can buy a house for cash OP, go for it, most people can't, that's why they get mortgages.

Seems obvious.......

magicbastarder

endure for 'a little' to save up to buy a house without recourse to a mortgage?

if you're on say €45k gross - how long do you expect to have to save for to be able to buy a house without a mortgage?

Brid Hegarty

https://www.boards.ie/discussion/comment/118878177#Comment_118878177

Well go on then, tell me why? What's important is the end result. So if I can endure for a little while and save a huge amount of money, then it seems worth it.

Furze99

It really depends on where you need to or want to live. And how much effort you're willing to put in. Plenty of older properties in rural Ireland available at reasonable prices, that can be bought for savings as starter homes and done up. Problem is access to work and services, need for personal transport etc. Costs of rural living increasing all the time.

magicbastarder

not sure if serious.

Brid Hegarty

https://www.boards.ie/discussion/comment/118878047#Comment_118878047

I assume it's a lot to do with the fact that people don't save their money. I know people who earn more than me but who will be further behind when it comes to getting their own house.

Glaceon

artanevilla

I need a mortgage to buy a smaller house...

CreadanLady

If you have a big wad of money and can buy a house straight up, more power to you. But the majority of younger people wanting to buy a house simply don't have the luxury of having € 250,000+ sitting in a bank account, or in a biscuit tin in the hot press like Bertie Ahern.

Allinall

You don't need a mortgage.

People borrow money to buy a house. that's their choice.

You make your own choice. Nobody is forcing you to do anything.

magicbastarder

Why not just buy a smaller house for a number of years first.

not sure if serious.