Thinking about buying. Advice appreciated

adocholiday

Hi all,

Myself and the OH have been renting for a number of years (both studying at different times, working in min wage jobs etc.) and we're now both finally working in decent jobs, both permanent positions with well established companies.

We've been doing the sharing thing for a while and we are quite happy where we are for now but want to get moving on a mortgage asap. We're both 27, no kids and unmarried. Neither of us have any savings (looking into that now) but I have a credit card and have had a few loans in the last few years and never missed a payment so my credit rating should be ok. We have a joint gross income of 70k inc. commission. Not much I know but that will increase annually for the next few years all going well.

Can anyone advise what we should be doing in the short term. Obviously we need to save for a deposit before a bank would even speak to us, but what would be a realistic price range for us? How much should a deposit be?

Also very important, whatever we buy now would be with a view to selling on in a few years if/when we have kids. We would be happy with a 1 or 2 bed apartment for now. Would it be better to wait and save a bit longer and just get the property we aim to get in a few years and rent a place for now? I just feel that renting is dead money and I want to get out of it as quickly as possible, but that could be the wrong mentality here. Also very difficult to save a decent amount when paying a grand per month in rent.

Sorry for the long post, just so much misleading info out there would love some proper to the point information or some unbiased material that I could read myself. Thanks to all in advance

D3PO

so many things in your post where do I start.

1) Buying to get on the ladder right now with a view to selling in a few years time is such an awful idea. Nobody knows how the market will be in a few years time especially apartments (and when you reference 1 bed that's what your looking at) If your going to buy then buy something you can grow into not grow out of.

2) You have no savings so thinking about buying now isn't even a remote option for you. Go save your asses off for at least a year and then reassess your situation. You will then have a better idea of what you could potentially afford in terms of monthly repayments based on the rent you pay plus savings minus additional costs of ownership.

3) 70K inc commission isn't what the bank will look at. They don't care about your commission or your bonuses or your overtime. Just your basic salaries so bear that in mind. You also need to get it out of your head that in a few years you will be earning more. You might and you might not and even if you do interest rates that will inevitably rise as will taxes most likely which will gobble probably all and more of any wage increases you get.

Essentially you guys need to start saving you will need a min of 10% of the purchase price to cover deposit, legal fees etc and realistically a lot more as you will need money for furnishing.

Regarding what can you afford. You really do not want to be spending more than 30% of your net income on your mortgage. 25% really if you can. So you need to be looking at what would 25% of your combined net incomes pay back over 30 years at about 7-8% interest that will give you an idea of realistically what pricepoint you should be looking at.

You can of course most probably get a mortgage larger than that but stretching yourselves is precisely what got so many people into trouble during the boom so its not advisable.

I should also add and people generally don't want to hear it but its reality. If your going to buy with a boy or girlfriend you have to talk openly about what you will do if you split up. Too many people bought with the mentality we are rock solid that wont happen to us and now are in a world of pain dealing with a NE property and an Ex.

No couple are unbreakable unfortunately so sit down and discuss it and have legal documents drawn up on how things will be handled should the worst case scenario happen.

JoeyJJ

Renting is not dead money, I was 33 when I bought a couple of years ago so I have the experience of being a professional renting in Dublin. I rented in some less desirable areas so I could save more.

Sounds like you want an apartment and flip it in a couple of years, this is very risky and the desposit for the apartment would probably not be too much less than a house and last I heard most apartments require 20% deposit where houses you will probably need 8% plus expenses.

Get the head down for a couple of years, cut down on socialising, if that doesn't split ye up its also a test for future life together and you should save a few quid.

My advice would be to buy a place you would be happy in for 15 years and take into consideration schools etc. But who am I to dish out advice..

Scortho

Great post D3PO.

OP I'd also be wary about buying a property when neither of you are married.
It can cause a lot of issues especially as both of you would be jointly and severly liable for the mortgage.
At least when a marraige breaks down there's a process to split assets etc.
there's lots of people out there who bought houses with their partners, only for the relationship to break up and now they're up **** creek.

adocholiday

Thanks for the great replies. As you can tell I simply don't have a clue about any of this so your input really is appreciated. As you say, no couple is unbreakable but we have been together 9 years and marriage is hopefully on the cards in the near future (ssshhh ) so we should be ok in that regard.I also understand your point regarding the commission and salaries and its something that I will consider.

I'm being realistic about the whole thing too; I wasn't expecting to be walking into the bank in the next 12 months. What I'm looking for is advice on what I should be doing right now to give myself the best chance of getting a mortgage in as soon a time as possible, but without putting myself in a bad financial situation. We're not in any major panic, but with house prices as they are it seems like not taking advantage of it in the next 12-24 months could be a wasted opportunity.

Looks like it could be a frugal 24 months with a hard 30 years ahead

Idbatterim

where are you looking to buy?

adocholiday

South County Dublin. I'm well aware that prices are inflated here and that I can expect to pay over the odds for a place but I'm prepared to do that to remain in the area. Nothing against any other part of the county, but this is where I've lived since I moved to Dublin and I'm settled and happy here.

Collyob26

Myself and the missus are currently looking at buying a place also. We have roughly the same combined salary and have recently been approved for €260,000 from AIB after having our initial application for €300,000 declined.

18 months ago when I had my own application declined I was advised to set up direct debits on my account for savings and for rent. The bank need to see transparency when calculating your repayment capacity. They recommend a minimum of at least 6 months of regular saving/rent payments. They also require people to be in permanent contract jobs for a minimum of 2 years.

Each bank will differ but with AIB it was a max of 92% mortgage available for a house or 75% for an apartment. If I were you I would arrange a preliminary meeting with a mortgage advisor in my bank, they will be able to offer better advice on what you should or should not be doing.

lima

adocholiday wrote: »

South County Dublin. I'm well aware that prices are inflated here and that I can expect to pay over the odds for a place but I'm prepared to do that to remain in the area. Nothing against any other part of the county, but this is where I've lived since I moved to Dublin and I'm settled and happy here.

This is a terrible mentality. You will end up in a shoebox. There are plenty of areas of Dublin outside the 'southside' that are better and much cheaper. Drumcondra, Clontarf, Sutton, Glasnevin.

Clearly being from the country you need to learn a bit about the big smoke.

lima

Also Rent is not dead money. Times have moved on since your mother told you that in 2005.

Paying increasing interest rates on a risky asset that could fall in value is dead money!

adocholiday

lima wrote: »

This is a terrible mentality. You will end up in a shoebox. There are plenty of areas of Dublin outside the 'southside' that are better and much cheaper. Drumcondra, Clontarf, Sutton, Glasnevin.

Clearly being from the country you need to learn a bit about the big smoke.

Why is it a terrible mentality? What's wrong with wanting to live in a particular area for what are in my opinion valid reasons? Sure by your reasoning why bother living in Dublin at all when I could have a beautiful 5 bed detached house at home for the price of a 3 bed semi here?

And my being from the country is irrelevant. I've lived in Dublin for almost 1/3 of my life. I'm well aware of what it means to live in 'the big smoke' :rolleyes:

And renting is dead money in my opinion. It's a necessity of course, but tell me how spending around 10-12k per year on rent is money well spent? Your post was unnecessarily condescending. No need for it.

Shedite27

lima wrote: »

This is a terrible mentality. You will end up in a shoebox. There are plenty of areas of Dublin outside the 'southside' that are better and much cheaper. Drumcondra, Clontarf, Sutton, Glasnevin.

Clearly being from the country you need to learn a bit about the big smoke.

People get very territorial about their areas!

Have to agree tho. My story, moved to South Dublin when I was 24 (from small smoke), lived there 4 years venturing very little outside that area and town for work/socialising. Up to that point thought South Dublin was definitely for me.

Then started dating a girl from Drumcondra, working northside also. Still renting southside, but having experienced a bit of the northside, would definitely consider buying there.

But now that I'm looking to buy, I am very glad most people prefer South Dublin coz there's some frikin steals (relatively) on the northside

lima

adocholiday wrote: »

Why is it a terrible mentality? What's wrong with wanting to live in a particular area for what are in my opinion valid reasons? Sure by your reasoning why bother living in Dublin at all when I could have a beautiful 5 bed detached house at home for the price of a 3 bed semi here?

And my being from the country is irrelevant. I've lived in Dublin for almost 1/3 of my life. I'm well aware of what it means to live in 'the big smoke' :rolleyes:

And renting is dead money in my opinion. It's a necessity of course, but tell me how spending around 10-12k per year on rent is money well spent? Your post was unnecessarily condescending. No need for it.

1. There are lots of equivalent areas of Dublin that are compatible to the 'lifestyle' in South Dublin. Clearly you do not know about Dublin if you don't know that. you've been living in one place and are unaware of the other equivalent areas.

2. South Dublin is overpriced, my point is you can get a bigger house in an equivalently safe area (even with an added beach/rail link) somewhere else in Dublin.


Renting is purchasing a service, i.e accommodation

Renting money from a bank can be considered 'dead money', with extreme risk involved. In my case, I rent and save double my rent and it works out as a far better investment than renting money from a bank and paying a small amount of capital off the rented money each month. Also you have added freedom to move if you lost your job etc.

The weird Irish obsession about property sometimes doesn't make sense.

Duckjob

adocholiday wrote: »

And renting is dead money in my opinion. It's a necessity of course, but tell me how spending around 10-12k per year on rent is money well spent?

This topic has been covered many times already, but a brief rundown on why the "rent is dead money" line is a pile of horse manure goes like this...


First of all, you have to keep in mind at all times 3 basic points:

1) Accomodation of some kind, is an unavoidable necessity

2) Accomodation of any kind (buying or renting) for any given period of time carries a cost.

3) When people discuss buying vs renting they tend to always use the example of buying vs renting for life. In reality, this comparison is largely irrelevent since most people do have plans to buy at some point (at a suitable time for them), and there are far more choices than just buying now vs renting for rest of life.

Sample scenario- Today, in September 2013, you have the option to buy a house at €300,000.

Option A) You buy the house today at €300,000
Option You rent an equivalent house at say €1,200/month

Roll forward to September 2014, and imagine that the property market has dropped 10% and your house is now worth €270,000.

Option A) Your accomodation for the 12 mths has cost you €30,000 in the year in the form of a capital loss that you are sitting on.
Option Your accomodation for the 12 mths has cost you €14,400, and you have the option to buy at €270,000.

This is just one possible scenario (a falling market) in which renting is far from dead money. Obviously in a rising market the opposite is true.

The point here isn't whether the property market is going to drop by x% / rise by x% / stay level. The point is that the answer to the question of whether renting makes sense or not depends on what the property market is doing, and how that intersects with your personal plans (marriage, family etc).