Is it madness to buy our first home now??

daithimacgroin

there are plenty of people out there who sold before the crash, and thus have a large amount of cash in the bank, it makes sense for these people to go and snap up their dream home now, even though prices keep falling.
a house is for life, so what if the perceived value of the house falls in the next 5 years? It is not a big deal to people who only need a small mortgage.

If u need a mortgage of 230000 for a house that costs 250000 then u obviously can't afford a house in the first place

Mr. Loverman

daithimacgroin wrote: »

there are plenty of people out there who sold before the crash, and thus have a large amount of cash in the bank, it makes sense for these people to go and snap up their dream home now, even though prices keep falling.

I'm sorry, but that makes no sense.

The less you pay for your house, the more money you have to spend on other things.

daithimacgroin

because in a few years when prices have fallen more, you'll look around and find all the nice houses have been snapped up already

Mr. Loverman

daithimacgroin wrote: »

because in a few years when prices have fallen more, you'll look around and find all the nice houses have been snapped up already

"If you don't buy now, all the nice houses will be gone forever!"

Haha! :pac:

Estate agent?
Trying to sell your home?

Be honest.

daithimacgroin

hardly, just saying what i'd do if i had a 150000k lying around which i dont

iguana

Mr. Loverman wrote: »

"If you don't buy now, all the nice houses will be gone forever!"

Haha! :pac:

Estate agent?
Trying to sell your home?

Be honest.

Well you know, there are only 7 nice houses in the whole country.

mathie

iguana wrote: »

Well you know, there are only 7 nice houses in the whole country.

And I've got one so that leaves six.

daltonmd

Mr. Loverman wrote: »

This is slightly off topic, but I am astounded by the amount of people who have told me "I never knew interest rates could change" as they panic at their growing mortgage.

If you are going to buy now, please please research what you are getting into. daltonmd's excellent post (http://www.boards.ie/vbulletin/showpost.php?p=74616179&postcount=292) should be *obvious* if you are buying a house due to the amount of research and analysis you have done. (I don't mean to take away from your excellent post daltonmd, I'm just saying all home buyers should be aware of all the risks before buying; it makes no sense to buy based on the advice from your dad and bank manager).

Absolutely Mr.Loverman. I am in full agreement with you. Even when I look at the scenarios I laid out - these are real life situations so it's actually wrong to label them as "worst case" because the reality is that either/all of them could come to pass. Particularly in this climate of uncertainty.

Here's a link to a good mortgage calculator amortization table and below it an income tax calculator.
http://realestate.yahoo.com/calculators (go into the comprehensive mortgage calculator)
www.hookhead.com


I would advise anyone considering buying a home to try and work out what their mortgage might be in 5 years time.


They should work out what their remaining mortgage will be after paying 5 years off. Recalculate the balance outstanding and the mortgage term and stress to 7%.

A 200k mortgage taken out today at 4% is a repayment of about 950pm the balance after 5 years is 181k, at 7% over 25 years it jumps to 1,280pm.

They should also use the tax calculator to get a good indication of what their net pay may be with lower tax credits/higher tax rate. A 1% increase in the lower and higher tax rate means 35 Euro less in your take home pay each month. May not seem a lot but added to a possible 330 Euro hike in your mortgage when you go to fix in 5 years time and it means that you have to be sure that you can find an extra 365 Euro each month.

Even if interest rates stay the same, our disposable income is going to be annihilated in the coming years through higher cost of living/taxes/pay cuts. You can take that to the bank as fact.

Anyone contemplating buying a home and not doing this groundwork are asking for trouble.


daltonmd

daltonmd

daithimacgroin wrote: »

there are plenty of people out there who sold before the crash, and thus have a large amount of cash in the bank, it makes sense for these people to go and snap up their dream home now, even though prices keep falling.
a house is for life, so what if the perceived value of the house falls in the next 5 years? It is not a big deal to people who only need a small mortgage.

If u need a mortgage of 230000 for a house that costs 250000 then u obviously can't afford a house in the first place

Personally if my dream house was 150k (or whatever amount) and I had that in cash - do you know what I'd do? I'd take a cruise around the world for 20k - I'd blow it big time ....

Then I'd come back and buy that same dream house OR another dream house for 130k.



daltonmd

daithimacgroin

all i'm saying is people aren't rational creatures(i.e women aren't), the most sensible course of action may not be always the best...

sure u'll save that 20 grand, but u'll have to put up with your wife complaining about the other 'better' house u missed out on when you waited for prices to drop

daltonmd

daithimacgroin wrote: »

all i'm saying is people aren't rational creatures(i.e women aren't), the most sensible course of action may not be always the best...

sure u'll save that 20 grand, but u'll have to put up with your wife complaining about the other 'better' house u missed out on when you waited for prices to drop

You're absolutely right, but would she complain before or after the cruise lol!!

At the end of the day it's up to each individual to decide whether or not they want to buy a house now. My point is that people don't look down the road, they don't envision any bumps in the road, they don't allow for illness or any change in circumstances.

When making such a big decision - one that can absolutely effect your life, your relationship, your children's future, some people really don't realise that when you sign for 30 years - particularly in this climate, that unless all goes well you have no way out.

The main advice on the thread has been to sit down and punch the numbers - be realistic and factor in what could go wrong and what you plan to do such as having a family. Give yourself a cushion and don't get caught short.


daltonmd

Mr. Loverman

daithimacgroin wrote: »

all i'm saying is people aren't rational creatures(i.e women aren't), the most sensible course of action may not be always the best...

sure u'll save that 20 grand, but u'll have to put up with your wife complaining about the other 'better' house u missed out on when you waited for prices to drop

Nice to see sexism is alive and well.

quaalude

daithimacgroin wrote: »

all i'm saying is people aren't rational creatures(i.e women aren't), the most sensible course of action may not be always the best...

sure u'll save that 20 grand, but u'll have to put up with your wife complaining about the other 'better' house u missed out on when you waited for prices to drop

This is a joke, right?

Ray Palmer

daithimacgroin wrote: »

there are plenty of people out there who sold before the crash, and thus have a large amount of cash in the bank, it makes sense for these people to go and snap up their dream home now, even though prices keep falling.

What is strange about this is that it ignores the fact banks aren't lending.
Unless you had cash to buy the first property and the "profit" you made off the sale vastly more than the mortgage you aren't going to be able to buy your dream house now anymore than when you bought earlier.

You just can't get the mortgages.

Bought a house for 300k with 250k mortgage your dream house was 600k
Sold for 600k pay off mortgage you have 350k your dream house is 1200k
Wait prices drop you old house is worth 250k the dream house is 575k

You need (575k-350k) 225k mortgage

It is years later you are older wages have gone down and banks lend less money. How did it make you afford a dream house?

If you invested your money in the right place sure you could have done it. That is a large gamble. I haven't even mentioned costs of selling,rent and other expenses. If you have a family your kids aren't getting a stable home and that is a lot of stress too.

The reality is you will probably get a similar house to the one you had but have a small mortgage or maybe even none. It was never a smart move it was high stakes gambling that some people timed right. Big difference doing it at 25 versus 35 versus 45.

If you are young wait to buy because you have the time