Saving/Applying for a mortgage 2020-22 Edition

HannahR31 · 24-09-2020 9:53pm

cojomo2 wrote: »

Regardless..no exemptions will negatively impact prices. Ill feel happier bidding on a house knowing those bidding against me dont have an exemption.

Same difference as bidding against someone with a higher salary than you. Different circumstances have access to different levels of money. That's never going to change.

Danger781 · 24-09-2020 10:20pm

cojomo2 wrote: »

Good. No exemptions = house prices come down. Why anyone would want to borrow more than 3.5 times their salary is beyond me anyway..

I'm not personally looking for an exception now as I'm in a decent paying job at the moment, but if you asked me a year ago I would have said because 3.5x our joined salary wouldn't have gotten us a house anywhere in Cork Suburbs. We were looking at moving to Bandon / Dunmanway direction because that was all that was in our budget if we were limited to 3.5x.

My GFs sister is looking for somewhere at the moment and is going through the same thing. Neither are earning enough where if they're limited to 3.5x their salary they can't afford Cork, period, unless they go for a remote fixer upper in the middle of nowhere.

I'm not advocating for extensions at all, but just offering a counter argument..

Blowfish · 25-09-2020 9:17am

cojomo2 wrote: »

Good. No exemptions = house prices come down. Why anyone would want to borrow more than 3.5 times their salary is beyond me anyway..

Just did a quick check and a FTB married couple on €45,000 each (so, above average, but not unachievable) have a take home pay of €5,702. Rule of thumb is that spending up to 30% on housing is affordable, so a max of €1,710 for them. With a 4.5 exception, that's a house of €475,000 with deposit and HTB included and a mortgage of €405,000. Over 35 years, the cheapest mortgages for that amount for them are in the €1,450 range or 25% of their take home pay, so within the financially prudent range.

javaboy · 25-09-2020 9:40am

cojomo2 wrote: »

Good. No exemptions = house prices come down. Why anyone would want to borrow more than 3.5 times their salary is beyond me anyway..

The 3.5 LTI rule is a pretty blunt instrument. It doesn't account for the fact that not all living costs increase in line with your income e.g. a couple earning a gross income >200k typically pay the same for milk and bread as a couple on ~75k.

A 1m house with a 900k mortgage is ~3.5k a month which is comfortably affordable for the 200k couple but well beyond the 3.5 LTI rule.

brisan · 25-09-2020 10:10am

bluebottle102 wrote: »

Just looking for some advice.

I have been approved in principle for X amount and have 10% deposit. I plan on buying a site and building.
I've just found out from Bank of Ireland that if I intend on building I also need 10% of the build for any over runs that may occur. Is this standard with all banks offering mortgages? I'm new to this and have never heard of needing this contingency on top of my 10% deposit.

Any info greatly appreciated

I have rarely heard of an extension much less a full house coming in on budget.
I would say the bank know this from experience

brisan · 25-09-2020 10:25am

Blowfish wrote: »

Just did a quick check and a FTB married couple on €45,000 each (so, above average, but not unachievable) have a take home pay of €5,702. Rule of thumb is that spending up to 30% on housing is affordable, so a max of €1,710 for them. With a 4.5 exception, that's a house of €475,000 with deposit and HTB included and a mortgage of €405,000. Over 35 years, the cheapest mortgages for that amount for them are in the €1,450 range or 25% of their take home pay, so within the financially prudent range.

35 year mortgage
I have never had anything over 20 years
Paying till you retire ????

Dolbhad · 25-09-2020 10:30am

brisan wrote: »

35 year mortgage
I have never had anything over 20 years
Paying till you retire ????

Pretty much standard now to have a 30-35 year mortgage since the 2000’s.

brisan · 25-09-2020 10:33am

My 3 children have 20-20-25 year mortgages ,all taken out in the last few years

LoonyLovegood · 25-09-2020 10:38am

It depends on if you ask, I was offered mine over 35 years, but chose 20 because I didn't want to pay more interest than necessary.

Creamy Goodness · 25-09-2020 10:42am

LoonyLovegood wrote: »

It depends on if you ask, I was offered mine over 35 years, but chose 20 because I didn't want to pay more interest than necessary.

There’s no right or wrong way to do this really.

Most like to take it out longer on a variable rate so that the first year or two they can get lower repayments and then when they have built more money up put lump sums off.

If you go for a lower tenure you’re locked into higher repayments from the get go, and it’s very hard to lower your repayments if something untoward crops up.

Both approaches suit different people.

brisan · 25-09-2020 10:46am

Creamy Goodness wrote: »

There’s no right or wrong way to do this really.

Most like to take it out longer on a variable rate so that the first year or two they can get lower repayments and then when they have built more money up put lump sums off.

If you go for a lower tenure you’re locked into higher repayments from the get go, and it’s very hard to lower your repayments if something untoward crops up.

Both approaches suit different people.

Its also very hard to increase your repayments when you get used to having a certain amount of disposable income in your pocket
Works both ways
It all depends on how disciplined you can be with your finances

Creamy Goodness · 25-09-2020 10:50am

brisan wrote: »

Its also very hard to increase your repayments when you get used to having a certain amount of disposable income in your pocket
Works both ways
It all depends on how disciplined you can be with your finances

True, it all comes down to discipline. But I fear if I went the 20 year route it would only take one bad car repair bill or some other unexpected bill to throw my finances off.

I’ve kept my repayments to 30% of my income as I find that’s a relatively comfortable repayment to length of mortgage ratio.

Blowfish · 25-09-2020 11:01am

Creamy Goodness wrote: »

I’ve kept my repayments to 30% of my income as I find that’s a relatively comfortable repayment to length of mortgage ratio.

That's the crux of it really, once you have it at an affordable level you can then choose your preference of longer term larger mortgage or shorter term smaller one. The exceptions above 3.5 will tend to suit the longer term mortgages.

HotMama89 · 25-09-2020 11:41am

My mortgage is over 35 years. The lower repayments suited at the start and after 3 years once I had renovations etc done and my salary had increased I started overpaying it so would be down to 20 years. Suits me as if anything happened that would affect my finances I can just stop the overpayment.

Bubbaclaus · 25-09-2020 11:45am

It makes financial sense to take out as long a mortgage as possible, and overpay it when you can, rather than tie yourself to higher mortgage repayments on a shorter mortgage.

brisan · 25-09-2020 12:17pm

Bubbaclaus wrote: »

It makes financial sense to take out as long a mortgage as possible, and overpay it when you can, rather than tie yourself to higher mortgage repayments on a shorter mortgage.

https://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx

300K mortgage over 30 years @2.5%
Interest 126,730
Same mortgage same interest rate over 20 years
Interest paid 81,530

https://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx

How many people will do the bit in bold

Bubbaclaus · 25-09-2020 12:27pm

brisan wrote: »

https://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx

300K mortgage over 30 years @2.5%
Interest 126,730
Same mortgage same interest rate over 20 years
Interest paid 81,530

https://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx

How many people will do the bit in bold

You are missing the point completely with those calculations.

brisan · 25-09-2020 12:38pm

Bubbaclaus wrote: »

You are missing the point completely with those calculations.

What point
That you can save 45k in interest by paying over a shorter period.
If you can afford the higher payments you are always better going for the shorter time period
Overpaying is great in theory but in practice the majority will not do it
If you get used to a certain level of disposable income from the start you will budget around it ,weather thats a higher level or lower level of disposable income.
Considering most people are either approaching or over 30 getting a mortgage it means you are still paying into your 60s
In my day most people were under 25 getting a mortgage and 20 years was all that was on offer.

25-09-2020 1:02pm

brisan wrote: »

What point
That you can save 45k in interest by paying over a shorter period.
If you can afford the higher payments you are always better going for the shorter time period

The point is that the interest of a 35 year mortgage paid over 20 years is the same as the interest of a 20 year mortgage.

The length of mortgage agreed with the bank dictates the amount you've promised to pay back.
The amount you actually pay back dictates the interest.

So as long as you're on a variable rate with the freedom to overpay, the longer term mortgage will cost the same as a shorter one, but give you the flexibility of paying less when times are tough.

This is exactly what I'm doing, because I'm working on a fixed term contract without guaranteed future income. With the pandemic on top of that, I'd rather know my minimum expected payment is as low as possible, in case I find myself out of work for a period. In the meantime, I've been overpaying by about €1000 a month.

brisan · 25-09-2020 1:17pm

true-or-false wrote: »

The point is that the interest of a 35 year mortgage paid over 20 years is the same as the interest of a 20 year mortgage.

The length of mortgage agreed with the bank dictates the amount you've promised to pay back.
The amount you actually pay back dictates the interest.

So as long as you're on a variable rate with the freedom to overpay, the longer term mortgage will cost the same as a shorter one, but give you the flexibility of paying less when times are tough.

This is exactly what I'm doing, because I'm working on a fixed term contract without guaranteed future income. With the pandemic on top of that, I'd rather know my minimum expected payment is as low as possible, in case I find myself out of work for a period. In the meantime, I've been overpaying by about €1000 a month.

As I said its discipline and you obviously have that
My point is most people do not overpay even though they could afford to ,and so pay more interest

mimimcmc · 25-09-2020 1:19pm

Sure if that's the case why don't people just save for x amount of years and buy with cash later in life = zero interest rates :pac::pac:

different strokes for different folks

brisan · 25-09-2020 1:30pm

mimimcmc wrote: »

Sure if that's the case why don't people just save for x amount of years and buy with cash later in life = zero interest rates :pac::pac:

different strokes for different folks

Missing the point altogether

mimimcmc · 25-09-2020 1:52pm

brisan wrote: »

Missing the point altogether

No I'm just poking fun at yours :pac:

Interested Observer · 26-09-2020 11:04am

Anyone broken out of a fixed rate recently, did it cost you a fortune? I went with BOI for the cashback but we're getting ripped off with the rate.

Cows Go µ · 26-09-2020 11:49am

brisan wrote: »

As I said its discipline and you obviously have that
My point is most people do not overpay even though they could afford to ,and so pay more interest

Loads of people I know overpay on their mortgage. It doesn't require a huge amount of discipline, I just set up a direct debit and it goes out at the same time as my mortgage.

I choose the 35 year mortgage (like pretty much everyone I know who got a mortgage recently). I liked that if something happened I could pay less without issue

javaboy · 26-09-2020 12:21pm

Cows Go µ wrote: »

Loads of people I know overpay on their mortgage. It doesn't require a huge amount of discipline, I just set up a direct debit and it goes out at the same time as my mortgage.

I choose the 35 year mortgage (like pretty much everyone I know who got a mortgage recently). I liked that if something happened I could pay less without issue

Exactly. Plenty of people have the discipline to voluntarily take a financial hit now to save them money long term. Otherwise nobody would make AVCs to pensions etc.

By the same token, plenty of people don’t have the same discipline. Again the lack of private pensions is a perfect example of this.

So each to their own but imo you’re much better off having the choice to reduce your payments when life throws you a curveball than to be in arrears because the bank won’t play ball. That kind of thing can follow you for years.

Cows Go µ · 26-09-2020 1:41pm

It worked well for me as after I got the mortgage I got another job which meant my commute was much shorter but it was lower pay (but the potential to earner significantly more). I kept overpaying but it was comforting to know I could reduce the payment if I needed to on the lower salary. I'm earning more again now and saving to do an extension next year

Ikozma · 28-09-2020 10:13am

Can anyone tell me when selling a house, let's say you sell for 150,000 and there is 80,000 remaining on your mortgage do you just pay the bank the 80,000 that's left or is there interest/fees or penalty for clearing it, I'm looking to sell and not just pay off mortgage early
Thanks.

AlmightyCushion · 28-09-2020 10:25am

Ikozma wrote: »

Can anyone tell me when selling a house, let's say you sell for 150,000 and there is 80,000 remaining on your mortgage do you just pay the bank the 80,000 that's left or is there interest/fees or penalty for clearing it, I'm looking to sell and not just pay off mortgage early
Thanks.

If you are on a fixed rate then there would probably be a breakage fee. Also there will be a small amount of interest. This would be the interest that accrued since your last mortgage payment.

billybonkers · 28-09-2020 11:12am

Ikozma wrote: »

Can anyone tell me when selling a house, let's say you sell for 150,000 and there is 80,000 remaining on your mortgage do you just pay the bank the 80,000 that's left or is there interest/fees or penalty for clearing it, I'm looking to sell and not just pay off mortgage early
Thanks.

You would need to speak to the lender. If fixed rate there can be penalty

Saving/Applying for a mortgage 2020-22 Edition

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