Should i buy the dream house?

Senna

Ok myself and herself are FTB's and we're thinking of buying.
The house is a 4 bed detached, 0.6 acre, with lovely views, in a rural area, 5/10 minutes from work and family. NW of Ireland.
This house would have been valued at €400k :rolleyes: at the hight of the property boom, another up the road sold for slightly less from the plans,
The builder is under serious pressure and has accepted our offer of 275k (turnkey).
Only problem is, with the interest rate rises its pushed our repayments up to 34% of our monthly combined net wages. (both secure jobs).
We aren't tied into the deal yet and can just walk away, but we both think the house is perfect and we can afford the repayments, but is 34% too high for a dream house?
I know in the current market its not sensible to buy, but this house is fairly unique, and although there are loads of other houses for sale, none are like it.

Just looking for some thoughts.

allybhoy

Well ill just give my two cents worth in that I dont think a third of your monthly income is too high a proportion to pay on a mortgage. What I would say is nowadays you would have to have a strong think about these questions before you buy.

What type of mortgage are you going for? If you havnt got at least 7-8% of a deposit I would be wary about applying for a mortgage in the current climate.

Have you been means-tested incase interest rates double over the next few years which they just might?

Do you live with your parents at present or are you used to paying out rent\bills\food every month?

Are Both your jobs secure??

Are either of you due a raise in the next 12months to match interest/inflation rates? Bench Marking etc

If either you or your wife had to give up work, kids etc, in the not so distant future, could you afford the repayments aswell as bills etc?

Have you had the property valued by an independent agent? Does he think its likely to increase\decrease in value

I dont mean to be scaring you off mate, and I hope that if you do go for this house and it turns out to be all you wished for and more. Its just a few friends of mine have seen literally 100k wiped off the value of their overvalued houses in the last year or so and are now in a state of negative equaty. They cant afford to sell up as their mortgage is more than the price of their home, and are commuting 90mins each way to work paying a fortune in petrol.

Senna

allybhoy wrote: »

What type of mortgage are you going for? If you havnt got at least 7-8% of a deposit I would be wary about applying for a mortgage in the current climate.

We have a 9% (25k) deposit, but from looking at rates, there is very little difference (savings to be made) from 92% mortgages and the 95% mortgage that we are approved for from EBS.
I was going to go ahead with the 95% one and keep some cash in the bank, i would prefer to have some liquid asset (all be it small)

allybhoy wrote: »

Have you been means-tested incase interest rates double over the next few years which they just might?

Well if rates double i will be screwed (10-11%), i'm going into the bank again tomorrow, so i'll find out what stress test was applied and ask for more details. is 2% increase too low a stress test?

allybhoy wrote: »

Do you live with your parents at present or are you used to paying out rent\bills\food every month?

Have been renting for 3 years FT, also rented while at college.

allybhoy wrote: »

Are Both your jobs secure??

Mine is very secure and hers is in the same industry, so even if she was layed off, she would have a job with my group.

allybhoy wrote: »

Are either of you due a raise in the next 12months to match interest/inflation rates? Bench Marking etc

Me, yes. Her, i'll say no, but she will look for one.

allybhoy wrote: »

If either you or your wife had to give up work, kids etc, in the not so distant future, could you afford the repayments aswell as bills etc?

Make repayments, yes. But have any money left over after bills, very very little.

allybhoy wrote: »

Have you had the property valued by an independent agent? Does he think its likely to increase\decrease in value

I guess it will decrease in value, hopefully for the short-term only, i know this and am going in with my eyes open to this. But does anyone really know whats going to happen?

allybhoy wrote: »

I dont mean to be scaring you off mate, and I hope that if you do go for this house and it turns out to be all you wished for and more. Its just a few friends of mine have seen literally 100k wiped off the value of their overvalued houses in the last year or so and are now in a state of negative equaty. They cant afford to sell up as their mortgage is more than the price of their home, and are commuting 90mins each way to work paying a fortune in petrol.

I'm prepared to go into negative equality, thats why we are buying the bigger house that well be happy to live in for the long term (till they carry me out in a box:D) We wont look to trade up or move from the area. I know there are other reasons to sell, but our choice wont be to sell.

allybhoy

Well then buddy to be honest you seem to have this well thought through and have already asked the questions that a lot of young couples dont. The fact that you have 25k saved up, and have been paying rent etc in between shows your well able to save and pay off the neccessities, which a lot of new couples (inc myself when I first started out) find really tough. Also the fact that this is not just a starter home for you and you could easily see yourself still living in it ten years or more down the line is a really good thing.

I would try and get tested for at least 8-10% though because trust me thats the way things are going to go. I mean the lowest APR at present is probably 5% so I dont know how they came up with 2%.

You are right what you say about prices fluctuating, but remember that nobody is really buying now, so the builder will be glad of your interest no matter what you offer him. If I was you id be a little bit cheeky and tell them that you only got approved for a mortgage+deposit for 270 or even 265. See what he says, afterall 5k is better in your pocket than his.

Anyway good luck with it buddy hope everything works out

chump

You seem to have it well thought through indeed.
It's a dream home - you can afford it about, moreso than most FTB's.
It have a good snip in price and sounds like a nice spot.

Go for it

astrofool

allybhoy wrote: »

Well then buddy to be honest you seem to have this well thought through and have already asked the questions that a lot of young couples dont. The fact that you have 25k saved up, and have been paying rent etc in between shows your well able to save and pay off the neccessities, which a lot of new couples (inc myself when I first started out) find really tough. Also the fact that this is not just a starter home for you and you could easily see yourself still living in it ten years or more down the line is a really good thing.

I would try and get tested for at least 8-10% though because trust me thats the way things are going to go. I mean the lowest APR at present is probably 5% so I dont know how they came up with 2%.

You are right what you say about prices fluctuating, but remember that nobody is really buying now, so the builder will be glad of your interest no matter what you offer him. If I was you id be a little bit cheeky and tell them that you only got approved for a mortgage+deposit for 270 or even 265. See what he says, afterall 5k is better in your pocket than his.

Anyway good luck with it buddy hope everything works out

They usually test at +2% on the current rate (so up to 7% in the case above). But really, grab a calculator and work out what interest would be if rates were up at 8% (would only be applicable when you come off a fixed rate as well, and thats if rates have gone up that high), you don't need to be "means tested" at this.

Glenbhoy

Yeah, I concur with the consensus, if you're happy to be there long term then you may as well buy.
You'll also be able to take advantage of FTB's TRS which will be a significant saving on the mortgage, you probably can't avail of if it to the full currently, but as interest rates go up, so will the amount of trs you can reclaim.
All in all, I'd be quite happy to be in your situation, good luck.

Ps. I'd maybe try and get another few quid off the builder before I fully committ, you know, tell him the bank will only give x. Which reminds me that there is aother issue that could arise here, the bank will send someone out to value the property, they may not agree that it is worth 275K and indeed may substantially reduce the valuation, the bank will only lend you 90 odd percent of there valuers valuation, maybe the builder won't have a choice but to drop the price further.

jackal

If the house is as unique as you say, then what harm is a bit of negative equity. I mean it probably took no length and no hardship to save up that 25k deposit, and so what if you see it and more wiped out in the next few months or years.

Its funny how almost every first time buyer who posts in here knows they are going to lose money on a purchase, but have found the one unique dream house in Ireland.

I am being a bit sarcastic, and maybe it is as special a house as you describe, but its mad that is still on the market if so. If losing out on it means more than wasting your savings, then go for it, as there is very little chance of it doing anything but losing money/getting cheaper for the foreseeable. Of course, someone could come along tomorrow and snap it up and you would be possibly kicking yourself, but if there is one thing we are not short of in Ireland at the moment its empty houses.

Senna

jackal wrote: »

If the house is as unique as you say, then what harm is a bit of negative equity. I mean it probably took no length and no hardship to save up that 25k deposit, and so what if you see it and more wiped out in the next few months or years.

Its funny how almost every first time buyer who posts in here knows they are going to lose money on a purchase, but have found the one unique dream house in Ireland.

I am being a bit sarcastic, and maybe it is as special a house as you describe, but its mad that is still on the market if so. If losing out on it means more than wasting your savings, then go for it, as there is very little chance of it doing anything but losing money/getting cheaper for the foreseeable. Of course, someone could come along tomorrow and snap it up and you would be possibly kicking yourself, but if there is one thing we are not short of in Ireland at the moment its empty houses.

Yeah 100% agree, 25k is alot of money and if i lost it tomorrow, i'd probably kill myself, but if i buy a house with it and can afford the repayments, and dont need to sell, then value being wiped off it is pain....but not end of the world.

I also agree with the whole unique thing, i've read plenty of post from people here and on other sites (mostly from dublin) that have been dreaming for a 3 bed semi and have found the perfect one!! now that is completly different.

Just to clarify why this house is unique;
- Its 5 minutes walk to the missus home place. not many other houses in the area.
- Its on its own.
- No other houses can be built infront or behind. Which is one of the biggest factors.
- The county council have purchased land about a mile away to build a new ring road, so although its close to town already, it will make it alot handier to get....anywhere;) this may take years, but just a nice bonus.
- Its on the mains for water, alot of the house we looked at that are on their own have wells, which is just more hassel.

This is Donegal, where there are plenty of lovely big houses, but with this house, there are outside factors that make it unique.
p.s. the house itself ain bad either:D

beeno67

allybhoy wrote: »

I would try and get tested for at least 8-10% though because trust me thats the way things are going to go. I mean the lowest APR at present is probably 5% so I dont know how they came up with 2%.

Rates are very unlikely to go this high and certainly the financial markets do not think it will go this high. If you are worried about interest rates and if this is your dream house you could always consider fiing for 10 years at about 6.2%.
You love the house, you have a good deal, go for it

egan007

Looks like a good deal if you are prepared to stay in the house long term. ~10 Years.

jackal

Senna wrote: »

Yeah 100% agree, 25k is alot of money and if i lost it tomorrow, i'd probably kill myself, but if i buy a house with it and can afford the repayments, and dont need to sell, then value being wiped off it is pain....but not end of the world.

I also agree with the whole unique thing, i've read plenty of post from people here and on other sites (mostly from dublin) that have been dreaming for a 3 bed semi and have found the perfect one!! now that is completly different.

Just to clarify why this house is unique;
- Its 5 minutes walk to the missus home place. not many other houses in the area.
- Its on its own.
- No other houses can be built infront or behind. Which is one of the biggest factors.
- The county council have purchased land about a mile away to build a new ring road, so although its close to town already, it will make it alot handier to get....anywhere;) this may take years, but just a nice bonus.
- Its on the mains for water, alot of the house we looked at that are on their own have wells, which is just more hassel.

This is Donegal, where there are plenty of lovely big houses, but with this house, there are outside factors that make it unique.
p.s. the house itself ain bad either:D

Alrighty then, you seem to have your head screwed on and your facts straight, so good luck with everything, I hope it works out for ye!:)

whizzbang

One risk is that if both you and her are in the same sector and that sector takes a nosedive you may both be out of the job.

Also, you never mentioned the term of the mortgage. This can add significantly to the overall cost.

Having said that, it does sound like a significant reduction.