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Bigger deposit vs bigger mortgage?

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  • 20-10-2019 10:07am
    #1
    Naos
    Registered Users Posts: 4,728 ✭✭✭


    House value: 350k
    Savings: 100k
    Term: 30years

    In the scenario above, what value mortgage would you take out?

    I can see the benefits in having the lower mortgage (lower overall interest payments) vs benefits in higher mortgage (there will be approx 15k work needed to be done on the house + furnishing).

    Open to experience/suggestions on what you have done and why?

    Thanks!


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    #2
    PhoenixParker
    Registered Users Posts: 2,671 ✭✭✭PhoenixParker


    I'd probably go for something like 70k deposit to get the LTV under 80% and get a lower interest rate. That leaves you plenty of wiggle room on the 15k for decor/reno and furniture.

    If a bigger deposit doesn't get you a lower interest rate then I'd start with the bigger mortgage and in a year when you've decorated and have furniture sorted reevaluate.


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    #3
    raxy
    Registered Users Posts: 820 ✭✭✭raxy


    70k deposit, 15k for work on the house & 15k rainy day fund.
    You can always pay off additional amounts over the term of the mortgage.


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    #4
    Creamy Goodness
    Registered Users Posts: 26,556 ✭✭✭✭Creamy Goodness


    Higher mortgage. As you said work needs to be done which you estimate at 15k depending on the work this could rise to €30k.

    A mortgage is the cheapest money you’ll get.


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    #5
    zapper55
    Registered Users Posts: 684 ✭✭✭zapper55


    My house needed some minor changes or so I thought. Between realising that something like the boiler needed to be replaced and the increasing cost of tradesmen, 30k will go very quickly. I'd say keep 30k minimum, given my experience I'd keep back 40k.


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    #6
    johnnyskeleton
    Moderators, Entertainment Moderators, Politics Moderators Posts: 14,465 Mod ✭✭✭✭johnnyskeleton


    The bank will ask younif the house needs work done, how you will furnish it, and how this will be paid for. So to be honest the bank will probably insist that you keep back enough for all that


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    #7
    SozBbz
    Registered Users Posts: 1,889 ✭✭✭SozBbz


    also you need to factor in all your buying costs,

    Stamp duty - €3500
    legal fees (inc searches etc) -I'd budget €2500
    Survey - Id budget €350-500
    Valuation - your bank may pay for this but if not I'd budget €150

    We also engaged other specialists in a recent house purchase and spent approx €1000 on professional opinions and reports. That was made up of a survey, damp expert and roof expert as well as the valuation required by the bank.


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    #8
    zapper55
    Registered Users Posts: 684 ✭✭✭zapper55


    johnnyskeleton wrote: »
    The bank will ask younif the house needs work done, how you will furnish it, and how this will be paid for. So to be honest the bank will probably insist that you keep back enough for all that


    Not in my experience I must say.


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    #9
    wirelessdude01
    Registered Users Posts: 8,417 ✭✭✭wirelessdude01


    johnnyskeleton wrote: »
    The bank will ask younif the house needs work done, how you will furnish it, and how this will be paid for. So to be honest the bank will probably insist that you keep back enough for all that

    Haven't heard this myself. What banks are you aware of that ask for this?


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    #10
    cruizer101
    Registered Users Posts: 3,205 ✭✭✭cruizer101


    johnnyskeleton wrote: »
    The bank will ask younif the house needs work done, how you will furnish it, and how this will be paid for. So to be honest the bank will probably insist that you keep back enough for all that

    Got a mortgage a year ago and talked to a few banks and was never asked this.
    Might be an issue is there was some sort of significant work needed to make it habitable e.g no running water.


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    #11
    Sarn
    Registered Users Posts: 3,059 ✭✭✭Sarn


    We held back a sizeable chunk to get the house extended and refurbished, new furniture, appliances etc. You’ll be amazed how work on the house eats money. You could always hold back €50k, see how things pan out and then make a lump sum repayment in the future.


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    #12
    Naos
    Registered Users Posts: 4,728 ✭✭✭Naos


    Cheers for all the suggestions & info folks!


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    #13
    Grumpypants
    Registered Users Posts: 7,749 ✭✭✭Grumpypants


    No brainer, take the biggest mortgage you can. Get into the house get the work done and if you have cash left over pay it off the mortgage.

    You aren't tied to that mortgage for 30 years.

    We fixed for 3 years, after that point the house value had gone up and we had paid down enough of a chunk to move from a 3.9% rate to 2.6%.


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    #14
    Sinister Kid
    Registered Users Posts: 7,503 ✭✭✭Sinister Kid


    Grumpypants wrote: »
    No brainer, take the biggest mortgage you can. Get into the house get the work done and if you have cash left over pay it off the mortgage.

    You aren't tied to that mortgage for 30 years.

    We fixed for 3 years, after that point the house value had gone up and we had paid down enough of a chunk to move from a 3.9% rate to 2.6%.

    How does this work? Did you have to get a valuation on the property so the banks would reduce the rate?


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    #15
    Grumpypants
    Registered Users Posts: 7,749 ✭✭✭Grumpypants


    Sinister Kid wrote: »
    How does this work? Did you have to get a valuation on the property so the banks would reduce the rate?

    Bank will do the valuation. They just do a general search. Search something like like "4 bedroom house 220m2 in Galway" and get a rough value. That was it. We got under the 60% mark so didn't need to do much more. But i think Ulster bank have a 4 or 5 year fixed rate of 2.6% for a ltv of 80%. Or even a 90% is 2.75%.


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    #16
    raxy
    Registered Users Posts: 820 ✭✭✭raxy


    Sinister Kid wrote: »
    How does this work? Did you have to get a valuation on the property so the banks would reduce the rate?

    Depends who your mortgage is with. I'm with kbc. We had to get a valuation done before applying to change rate. Think we had to pay €126 for the valuation but with the way house prices went after we bought we dropped into a lower bracket & got a cheaper rate.


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    #17
    Q&A
    Registered Users Posts: 554 ✭✭✭Q&A


    My thinking is go with the biggest mortgage possible, initially at least, for 2 reasons.

    1. Insurance policy - if after moving in you find you need to carry out work on the house it's a lot easier if you have that money rather than having to go back to the bank. Yes you'll pay more but there is an element of piece of mind. A couple of months in you'll have a better idea of the state of the house. Assuming there are no significant issues you can then channel the money towards the mortgage.

    2. Depending what bank you go with their cashback offers actually make it more cost effective to borrow as much as possible. There is nothing to stop you borrowing 100k more and handing it straight back to them the next day. With 2% cashback an additional 2k will offset the higher mortgage repayment for many months.


    To be clear after you get your cashback and the house isn't s money pit I would be looking to chuck a lot of your savings at the mortgage.


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    #18
    JohnnyChimpo
    Registered Users Posts: 1,074 ✭✭✭JohnnyChimpo


    Q&A wrote: »
    My thinking is go with the biggest mortgage possible, initially at least, for 2 reasons.

    1. Insurance policy - if after moving in you find you need to carry out work on the house it's a lot easier if you have that money rather than having to go back to the bank. Yes you'll pay more but there is an element of piece of mind. A couple of months in you'll have a better idea of the state of the house. Assuming there are no significant issues you can then channel the money towards the mortgage.

    2. Depending what bank you go with their cashback offers actually make it more cost effective to borrow as much as possible. There is nothing to stop you borrowing 100k more and handing it straight back to them the next day. With 2% cashback an additional 2k will offset the higher mortgage repayment for many months.


    To be clear after you get your cashback and the house isn't s money pit I would be looking to chuck a lot of your savings at the mortgage.

    none of this is how mortgages work


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    #19
    SteelyDanJalapeno
    Registered Users Posts: 14,237 ✭✭✭✭SteelyDanJalapeno


    Q&A wrote: »
    My thinking is go with the biggest mortgage possible, initially at least, for 2 reasons.

    1. Insurance policy - if after moving in you find you need to carry out work on the house it's a lot easier if you have that money rather than having to go back to the bank. Yes you'll pay more but there is an element of piece of mind. A couple of months in you'll have a better idea of the state of the house. Assuming there are no significant issues you can then channel the money towards the mortgage.

    2. Depending what bank you go with their cashback offers actually make it more cost effective to borrow as much as possible. There is nothing to stop you borrowing 100k more and handing it straight back to them the next day. With 2% cashback an additional 2k will offset the higher mortgage repayment for many months.


    To be clear after you get your cashback and the house isn't s money pit I would be looking to chuck a lot of your savings at the mortgage.

    If my house is only worth 200k, are you saying I can borrow 800k to avail of a better cashback? Amazing how has nobody thought of this


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    #20
    Sarn
    Registered Users Posts: 3,059 ✭✭✭Sarn


    SteelyDanJalapeno wrote: »
    If my house is only worth 200k, are you saying I can borrow 800k to avail of a better cashback? Amazing how has nobody thought of this

    In fairness to the poster, my understanding of it is to borrow as much as you can, and get the cashback e.g. borrow 300k rather than 200k on a house worth say 330k. You’d then get 6k rather than 4K cashback.


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    #21
    s7ryf3925pivug
    Closed Accounts Posts: 4,007 ✭✭✭s7ryf3925pivug


    You can get better rates if you pay off more of the value.
    You can pay off a lump sum after getting the cash back and switch to a better rate then.
    I had enough to pay off my mortgage in full. I chose to leave about 75k on it which is locked in to a 10 year fixed rate repayment. Very affordable. Wouldnt like to repay mortgage only to need to take out a loan at a higher rate.


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    #22
    cruizer101
    Registered Users Posts: 3,205 ✭✭✭cruizer101


    JohnnyChimpo wrote: »
    none of this is how mortgages work

    Yes it is.

    1. House value 300k, you have 60k deposit, you could get a mortgage for 240k and use up all your deposit and then have nothing left to spend on any works you have to get done. Or you could get mortgage for 270k and have 30k left over, which you can then spend on any work you want to get done if in a year after all work done you have extra left over e.g. 10k you can knock it off the mortgage.

    2. The same in this case you can get 2% cashback that is 4.8k on the 240 or 5.4k on the 270k, extra 600 in your pocket. You are paying bit more interest but it should still work out in your favour. Obviously no-one is suggesting you can take a mortgage larger than 90% LTV.


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