A few questions on buying my 1st house

El Guapo!

Hi all,
Im currently looking into buying my first house and have a few questions. Id be very grateful for any help.

Firstly, I know nothing about mortgages and don't know whats best in the current climate....fixed or variable??

Secondly the house I want is 249k but I dont know how much to offer i.e how low can I really go with my offer?

Finally, (I know this is probably a silly question) when you buy a house is it normal practice to change the locks?? Im not saying the owners are anything but genuine but I suppose you never know!

Any help is greatly appreciated. Cheers

bada_bing

bought a house myself just a few months ago so i have a few comments for you.

rigth now it would be best to get a fixed rate mortgage for 2 years or so as interest rates are very low and you can get a mortgage that will have a low rate for 2 years. The general consensus right now is that interest rates will not remain low for too long as it has not really stimulated the economy at all so they might as well start increasing them.

when i got the keys to my property, i had the locks changed as i felt that perhaps the keys had been available to many people in the time that it was on the market. it's entirely up to you to change locks or not , i did it for peace of mind.

good luck with your mortgage application.

Paulw

bada_bing wrote: »

rigth now it would be best to get a fixed rate mortgage for 2 years or so as interest rates are very low and you can get a mortgage that will have a low rate for 2 years. The general consensus right now is that interest rates will not remain low for too long as it has not really stimulated the economy at all so they might as well start increasing them.

when i got the keys to my property, i had the locks changed.

I'd have to agree. When I bought my place, I went fixed for the first 2 years. That also gave me peace of mind, knowing exactly how much I'd be paying each month for those 2 years. You can budget better that way.

I'd also recommend changing the locks, just for peace of mind. Locks are cheap enough and easy to do.

Best of luck.

spockety

Dean09 wrote: »

Hi all,
Im currently looking into buying my first house and have a few questions. Id be very grateful for any help.

Firstly, I know nothing about mortgages and don't know whats best in the current climate....fixed or variable??

Secondly the house I want is 249k but I dont know how much to offer i.e how low can I really go with my offer?

Finally, (I know this is probably a silly question) when you buy a house is it normal practice to change the locks?? Im not saying the owners are anything but genuine but I suppose you never know!

Any help is greatly appreciated. Cheers

My advice to you is that you should base your affordability calculations on an assumed interest rate of 7.5%, on a mortgage of no more than 25/30 years.

JoeyJJ

Umm I'm considering buying this year maybe in the 3rd quarter. How long does a Mortgage application generally take? I know the approval lasts for 6 months but wondering if the process is long and when I should start.

ZYX

spockety wrote: »

My advice to you is that you should base your affordability calculations on an assumed interest rate of 7.5%, on a mortgage of no more than 25/30 years.

Disagree here. AIB is offering a 5 year fixed rate mortgage of about 3% APR. That sounds like a very good deal and worth going for. Go for the longest term you can 35 or even 40 years. This gives you much better flexibility. You can always pay extra into your mortgage if you want to pay it off earlier (though not during the fixed rate period)

spockety

ZYX wrote: »

Disagree here. AIB is offering a 5 year fixed rate mortgage of about 3% APR. That sounds like a very good deal and worth going for. Go for the longest term you can 35 or even 40 years. This gives you much better flexibility. You can always pay extra into your mortgage if you want to pay it off earlier (though not during the fixed rate period)

:rolleyes:

Go for it! But when that 5 year fixed term ends, and you suddenly find yourself in a market where 7.5% rates are the best you can get, meaning that your monthly repayments almost double from around €890 per month to €1,645, don't come back here moaning and looking for a bail out.

I'd also question whether someone who "knows nothing about mortgages" will heed the kind of advice which tells them that if they choose a 40 year term they should pay extra off their principle over and above their "monthly payment".

My advice stands. Base your monthly repayment ability on a 25/30 year term at 7.5% and stress test your life to see how you would handle those repayments on a single income. If interest rates are currently nice and low at 3%, and you are happy paying at a 7.5% level, you can still overpay from now until rates rise to match.

It just means that when interest rates inevitably rise, or one of you loses your job etc., you will not find yourself in the kind of serious sh*t that you see every week on Frontline or Prime Time. No alarms, and no surprises.

JuliusCaesar

Not too long. Depends on the bank. An average of two weeks - if you have all your paperwork in order. they want a LOT of paperwork. I ended up photocopying the lot X 5 and giving the lot to the person I was dealing with. Found this the most time-comsuming bit, getting the papers together - and then taking time off work to meet each bank person. But worthwhile! Got two mortgage offers for more than I wanted, when the broker could get me only a lot less than I needed.

ZYX

spockety wrote: »

:rolleyes:

Go for it! But when that 5 year fixed term ends, and you suddenly find yourself in a market where 7.5% rates are the best you can get, meaning that your monthly repayments almost double from around €890 per month to €1,645, don't come back here moaning and looking for a bail out.

I am not saying don't stress test yourself for a higher interest rate. I am saying don't go for a short mortgage. Go for the longest one you can. You should then make the repayments as if you mortgage was a 20 or 25 year one (or put the difference in a savings account if on a fixed rate that won't allow overpayments)

The point is, if rates do increase to 7.5% and, as you have suggested one person has lost their job, then, if they have a 25 year mortgage they are up the creek. If they have a 40 year mortgage and this happens they can reduce their repayments to the level of a 40 year mortgage. They can do this without having to go to the bank or having to appear on frontline.

Victor

Realise that 40 year mortgages mean you pay much more interest and it takes longer to gain equity.

Senna

ZYX wrote: »

I am not saying don't stress test yourself for a higher interest rate. I am saying don't go for a short mortgage. Go for the longest one you can. You should then make the repayments as if you mortgage was a 20 or 25 year one (or put the difference in a savings account if on a fixed rate that won't allow overpayments)

Of course we all pay off our credit card on time, we all take our savings out of our wages the minute we get them, we never take out loans or overdrafts.
Giving advice to take out as long a mortgage term as possible is just moronic, and you seem to miss the whole point of a shorter term, if you cant afford the mortgage over 25years at normal interest rates, then you CANNOT AFFORD THE HOUSE.

Stress test yourself at 6-7% over 25 years, if thats too tight, then dont buy the house. The sooner 30yr+ mortgages disappear the quicker a)the market will bottom out and stabilise and b)the less amount of people will make huge mistakes.

El Guapo!

Really appreciate all the advice. I have a lot to think about on the mortgage side of things but these replies should help a lot.
Can anyone shed any light on my second question about how much to offer? Cheers again

fontinalis

How much of a deposit have you saved?

El Guapo!

fontinalis wrote: »

How much of a deposit have you saved?

Between myself and my girlfriend we have €30k

fontinalis

If the house is 240k or there abouts you have over 12%, better than alot who did buy a house in the past. Add your income and divide it b the amount of mortgage you need, I think 4 or 5 is considered a good multiple. Also consider how much you can still save per month for another year or so. Other factors may be; your age, location of house etc

Da GOAT

im a noob but are interest rates really gonna shoot up that high?

I may look myself into getting as much fixed years as possible then right?

Da GOAT

using this link http://www.myhome.ie/calculators/mortgage?cmpid=ppc_mortgagecalc&gclid=CIL43tiMoZ8CFZ1h4wodzDTMJA

a 276k mortgage (which is the max ill borrow) at 7.5 over 30-35 years ranges between 1930-1861.

A little bit concerned. Thoughts??

Id really hope to only borrow 220,000 whihc at 7.5% works out circa 1500 for 30-35 years. I can afford that BUT will hit standard of life ie I wont lose the house but thats very dear. Im an accountant and fiancees a teacher BUT if one lost a job we would be in trouble as would anyone who could lose a job.

Gurgle

Da GOAT wrote: »

im a noob but are interest rates really gonna shoot up that high?

I may look myself into getting as much fixed years as possible then right?

Very unlikely, the point is to 'stress test' your ability to pay by taking the maximum likely interest rate and adding a couple of percent.

ZYX

Senna wrote: »

Of course we all pay off our credit card on time, we all take our savings out of our wages the minute we get them, we never take out loans or overdrafts.
Giving advice to take out as long a mortgage term as possible is just moronic, and you seem to miss the whole point of a shorter term, if you cant afford the mortgage over 25years at normal interest rates, then you CANNOT AFFORD THE HOUSE.

Stress test yourself at 6-7% over 25 years, if thats too tight, then dont buy the house. The sooner 30yr+ mortgages disappear the quicker a)the market will bottom out and stabilise and b)the less amount of people will make huge mistakes.

I get annoyed by people on this site, usually those who have never bought a house or had a mortgage making comments like this. They react instantly to the words 35 year mortgage and go into automatic. Yes if you are so "moronic" not to pay off your credit card when it is due then my idea is not for you. I would argue however is you are so financially incompetent that you don't pay off you credit card bill, and face interest rates of 20+% then you really shouldn't buy a house.

I am not saying borrow as much as you can. I am saying get as long a mortgage as you can. So for example if you are buying a property at 250000, you get a mortgage for 225,000.If you got this over 20 years at 3.5% you would have to pay 1305 a month. So if you had a 40 year mortgage you set up a standing order to pay 1305 a month from your account into the mortgage. If things go well in both situations you have paid off the mortgage in 20 years, end of story.

But say in 5 years time interest rates are 10% Now your repayments have increased to 2150 a month but you have not stressed yourself this high. On a 20 year mortgage you are now in trouble. If you have a 40 year mortgage you simple reduce your repayments and you only have to pay 1720 a month which is well within your budget. Indeed interest rates don't have to go this high. What happens if you loose your job for 6 months, etc. It simply leaves a safety net. Yes it requires a small bit of financial competence and will take 10 mins longer to set up than a regular mortgage.

spockety

Da GOAT wrote: »

using this link http://www.myhome.ie/calculators/mortgage?cmpid=ppc_mortgagecalc&gclid=CIL43tiMoZ8CFZ1h4wodzDTMJA

a 276k mortgage (which is the max ill borrow) at 7.5 over 30-35 years ranges between 1930-1861.

A little bit concerned. Thoughts??

Id really hope to only borrow 220,000 whihc at 7.5% works out circa 1500 for 30-35 years. I can afford that BUT will hit standard of life ie I wont lose the house but thats very dear. Im an accountant and fiancees a teacher BUT if one lost a job we would be in trouble as would anyone who could lose a job.

You're a credit to your family and your family's future that you have even gone to the trouble of making sure you are aware of the implications of changes in circumstance (interest rates, employment, illness, etc.) when making a decision on how much you really should be borrowing. It's my belief that most people don't bother thinking like that. They look at a 1 year fixed term introductory rate of 2.28% and base all of their decisions on the repayments of that. It's a massive mistake to do this, and could end in disaster down the road.

Senna

ZYX wrote: »

I get annoyed by people on this site, usually those who have never bought a house or had a mortgage making comments like this.

Yes i do own a house and unfortunately i do have a mortgage also.

Again you seem to miss the point completely, your argument for longer term sound like an action plan for "I made a huge mistake, what can i do now". By going for a longer term the bank will offer you more money and human nature is to take it.
Banks wont get rid of 30yr+ mortgages because they are more profitable, but people have to realise their just financial suicide.

warrenaldo

ZYX wrote: »

So if you had a 40 year mortgage you set up a standing order to pay 1305 a month from your account into the mortgage. If things go well in both situations you have paid off the mortgage in 20 years, end of story.

I see this as a very smart way of doing things. Is there any pitfalls to this?
I suppose, I must be on a variable rate. But anything else?

I dont see why more people would not do something like this. It makes perfect sense.

Why would I get a 20 year mortgage if I could do this?

ZYX

warrenaldo wrote: »

I see this as a very smart way of doing things. Is there any pitfalls to this?
I suppose, I must be on a variable rate. But anything else?

I dont see why more people would not do something like this. It makes perfect sense.

Why would I get a 20 year mortgage if I could do this?

Financially the biggest drawback is you have to get a longer life assurance/mortgage protection policy and it will cost more. However it is cheaper to get a 40 year policy than to get a 20 year policy and follow up with another 20 year policy in 20 years time. While you may not need life assurance at the moment (except to cover mortgage) you are likely to need it in the future as your life circumstances change.

If you are very disciplined you can get a fixed rate and put the extra into a savings account. As I said you can get a 5 year fixed rate mortgage with AIB for 3%. You could put the extra money into a savings account. You can get about 3.5-4% on these at present (before DIRT) but these should go up if interest rates go up as expected. So it may save you even more money.

bangersandmash

ZYX wrote: »

You could put the extra money into a savings account. You can get about 3.5-4% on these at present (before DIRT) but these should go up if interest rates go up as expected. So it may save you even more money.

You'll do well to get 3% before DIRT in many cases right now. Also a number of banks have indicated that they expect to offer considerably lower rates to savers in future if/when their funding situation improves. I think the attitude of RaboDirect is indicative of that of other banks.

As Nama looms imminently on the horizon, Mr van Veggel said the bad bank could ultimately help RaboDirect by prompting its Nama-participant competitors to lower savings rates.

"The only reason Irish banks pay ridiculous rates for savings is because it's their only source of funding," he said.

"When the banks are healthy again, they will have better access to the international finance markets so they won't have to pay as much for savings from customers."

Another reason to be glad for NAMA :mad:

Freddie59

Dean09 wrote: »

Between myself and my girlfriend we have €30k

:eek: Why are you even THINKING of buying?

Check these out:

www.thepropertypin.com

www.irishhousehunter.com

www.irishpropertywatch.com

Price falls have a long long way to go. And, unless you're getting a bargain,. hold off. You could save tens of thousands of euro.