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So why is it that I need a mortgage?

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  • 04-04-2022 11:49am
    #1
    Registered Users Posts: 1,244 ✭✭✭


    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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Comments

  • Moderators, Category Moderators, Arts Moderators, Sports Moderators Posts: 49,275 CMod ✭✭✭✭magicbastarder


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

    not sure if serious.



  • Registered Users Posts: 6,642 ✭✭✭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.



  • Registered Users Posts: 791 ✭✭✭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.

    The MFV Creadan Lady is a mussel dredger from Dunmore East.



  • Moderators, Education Moderators, Sports Moderators Posts: 10,505 Mod ✭✭✭✭artanevilla


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



  • Registered Users Posts: 2,075 ✭✭✭Glaceon





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  • Registered Users Posts: 1,244 ✭✭✭Brid Hegarty


    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.



  • Moderators, Category Moderators, Arts Moderators, Sports Moderators Posts: 49,275 CMod ✭✭✭✭magicbastarder


    not sure if serious.



  • Registered Users Posts: 10,900 ✭✭✭✭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.



  • Registered Users Posts: 1,244 ✭✭✭Brid Hegarty


    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.



  • Moderators, Category Moderators, Arts Moderators, Sports Moderators Posts: 49,275 CMod ✭✭✭✭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?



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  • Posts: 18,749 ✭✭✭✭ [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.......



  • Registered Users Posts: 24 igord


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



  • Registered Users Posts: 3,329 ✭✭✭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.



  • Registered Users Posts: 583 ✭✭✭CrookedJack


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



  • Registered Users Posts: 8,232 ✭✭✭ongarite


    How much does this starter house cost, Brid?



  • Registered Users Posts: 6,199 ✭✭✭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



  • Registered Users Posts: 13,697 ✭✭✭✭Danzy




  • Registered Users Posts: 6,199 ✭✭✭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



  • Registered Users Posts: 2,546 ✭✭✭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.



  • Registered Users Posts: 54 ✭✭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



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  • Registered Users Posts: 34,748 ✭✭✭✭o1s1n
    Master of the Universe


    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...



  • Registered Users Posts: 7,700 ✭✭✭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.



  • Registered Users Posts: 1,633 ✭✭✭victor8600


    Having a mortgage saves you money in general. Example:

    • I have a mortgage on a small 2-bedroom terrace house close to work, pay €1000 a month for the mortgage and can save €500 a month. I don't need a car and walk to work. Great for the environment and I am getting more savings every year.
    • Let's say I did not have a mortgage. For the same house, I would pay €1800 a month. Or I could rent far away for €1000, but would need to get a car and spend hours in traffic, burning hundreds of €€ in petrol and car depreciation. No money saved as I have more expenses => I will be renting until the retirement, and then I would need to move to live under a bridge somewhere.

    Is there a flaw in the logic above? Any alternatives? Ah, I know, *live with parents and save* until you are 40 years old?



  • Registered Users Posts: 1,807 ✭✭✭mrslancaster


    Well hopefully you'll have bought your own place before you get to retirement or if you're in private rental, you'll pay huge rent until the end...Or maybe as Antivaxxer says, "housing list all the way" but that's not an option that's available to everyone.



  • Moderators, Category Moderators, Arts Moderators, Sports Moderators Posts: 49,275 CMod ✭✭✭✭magicbastarder


    Is there a flaw in the logic above?

    when did you buy your house? i.e. are you comparing a purchase price from several years ago with current rental prices?



  • Registered Users Posts: 1,633 ✭✭✭victor8600


    Good point. With the mortgage, your repayments stay more or less constant, while rents generally rise.

    I've bought the house at the peak of the housing bubble in 2008. If I had only waited until 2009, I would have been paying around €600 a month for the same mortgage term.



  • Registered Users Posts: 2,118 ✭✭✭witchgirl26


    OP I know someone who saved for years, wouldn't have been the type to be spending everything and still had to get a mortgage to buy a small enough place for just herself. Granted her mortgage will be paid off years before a lot of people's as it was a small enough one, but she still needed it to afford something that suited.

    I got a larger mortgage to essentially future proof - I saw too many people stuck in those starter homes from pre-2008. Trying to raise families in small 2 bed houses or apartments that were only really meant for a couple a most. But with negative equity, they could afford to move somewhere bigger. Therefore somewhat worth the extra little bit to me to know that we don't have to move if that does happen again. That the house we're in works for us now & into the future. And hopefully by the time I retire, it'll be paid off & I won't have to worry about where I'll live.



  • Registered Users Posts: 7,700 ✭✭✭StupidLikeAFox




  • Registered Users Posts: 1,633 ✭✭✭victor8600


    Of course, 2 times already. The first lender (some subprime provider, as I didn't have an Irish passport then and was rejected by main banks) was very expensive (€1300 - €1500/month), but after a year I moved to PTSB and then KBC and with those normal banks, by getting best mortgage offers, the difference in repayments was under €100/month. When the loan-to-value ratio falls below 50% I may get a better deal, but I would probably keep the same repayments and reduce the term instead.



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  • Registered Users Posts: 3,404 ✭✭✭NSAman


    That looks like a nightmare.

    Squished together, everyone trying to act the same while using an "address" to one up the rest of the area?

    No thanks.

    Bought an old house for cash and have been doing it up over the last few years. No it is not in Dublin. No it is not for show. The difference is, it is mine and I love it.

    If you have the ability to purchase while living somewhere else while work takes place on the house, then apart from the original cost, it can be spread over time until you can safely move in.



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