Take the plunge - or not?

Ardent

Hi all

I've been tossing this problem around in my head for ages now and just becoming more and more unsure! I want to throw it out here and get your opinions on what you would do in the same situation -

My wife and I live in a 2 bed apartment in Dublin city centre with two kids under the age of 2. We're both in our early forties and both have good paying jobs and we live comfortably.

We are currently sale agreed on a nice family home in Leixlip - finally getting out of the shoebox we live in! The mortgage will be circa 350k and repayments ~1800/month for the next 25 years, which we calculated we can afford. The property ticks a lot of boxes for us - spacious, easy access to work in the city for both of us, close to good schools, etc. The plan is to rent out the apartment and put the calculated 200/300 monthly profit towards the mortgage.

I just received the devastating news that my role is being made redundant early in the new year. I was the main earner in our household - my wife has a decent salary and a steady job in the public sector which is a blessing. I work in the private IT sector and fairly confident I will find work again - there seems to be jobs out there - although maybe not at my current level of pay.

My wife wants to play it safe, pull out of the sale and go through the whole house hunting process again when things are more certain. On my side, I don't know if I could do another year of cabin fever and pass on this opportunity to purchase a suitable long term house, risky as it seems right now with all the uncertainty.

What would you guys do? So confused, such a crucial life decision, appreciate any thoughts!!

caviardreams

It must be awful to hear such bad news at this time of the year especially. Hope you find something else soon!

Will you still get mortgage approval now that you are being made redundant? I presume you have factored in the ability to make repayments on your wife's salary alone.

Also another option would be to sell the apartment - if you are clearing €300 profit a month after paying tax at 50%, you obviously have a substantial amount of equity in the property. It might make more sense to use this to reduce your new mortgage substantially and avoid the hassle of being a landlord with 2 kids to look after?

SarahMollie

How far into the buying process are you? Do you have a guarentee from the bank that they are ready to release the funds? If not, they could always ask you for more details at any point which could prove tricky or if the purchase takes longer than anticipated for whatever reason they might ask you to update your salary cert/payslips if they end up being more than 2/3 months old.

What do you do in IT? I work in the industry myself and cant imagine it being that hard to get a job for most skill sets.

However, if you do this and inform the bank, they will probably require you to pass your probation in your new job before re approving the mortgage.

Ardent

Hi Caviardreams

I don't think we could service the mortgage on my wife's salary alone. We have some savings though that hopefully will tie us over until I find work hopefully soon.

On the apartment, we would certainly sell it if we had to but I would rather keep it if possible. If we were to sell it today we might come out 90K in the clear, but I think it's more valuable to us to receive minor income while having the apartment pay itself off.

Ardent

Hi SarahMollie

We're pretty far into the process. Have the contract for sale, structural survey findings, solicitor acting on our behalf, offer letter, etc.

Significant money invested at this stage but still not too late to pull out.

Thargor

You'll get a job in IT in Dublin no bother Ardent, even if its just a 28k thing to tide you over until you find a proper position.

caviardreams

Ardent wrote: »

Hi Caviardreams

I don't think we could service the mortgage on my wife's salary alone. We have some savings though that hopefully will tie us over until I find work hopefully soon.

On the apartment, we would certainly sell it if we had to but I would rather keep it if possible. If we were to sell it today we might come out 90K in the clear, but I think it's more valuable to us to receive minor income while having the apartment pay itself off.

Have you factored in all your potential costs as a landlord e.g. PRTB, property tax, wear and tear, as well as tax/USC etc. on the full rental income (less 75% of the mortgage interest), not just the surplus over your mortgage repayment. The costs may eat into any potential profit when you do the sums.

If you can't fund the new mortgage on your wife's salary, I would definitely clarify with the bank that they are still willing to front the full amount given the new circumstances.

Skatedude

Will your wifes salary alone meet the new mortgage requirements which only allow a mortgage of 3.5 times your salary.

This came into effect a year or so ago, but not sure if all banks are enforcing it yet or if the fact that you already have property is also a factor.

stefanovich

Pull out now. If you default on your mortgage you'll be blacklisted. Or find a job now.

NyOmnishambles

Thargor wrote: »

You'll get a job in IT in Dublin no bother Ardent, even if its just a 28k thing to tide you over until you find a proper position.

There is also plenty of contract work out there that pays pretty decent daily rates, again depending on what area you are involved in

The banks are aware that IT people move around and that contract work is fairly normal these days

We got mortgage approval based on me being on 6 month contracts without any hassle just some extra paperwork, due to the sale process taking so long I have since changed company and job from a daily rate to a fixed term contract and the bank don't seem in the least bit bothered

SarahMollie

My point was really that if the bank finds out about your change in circumstances that they may take the decision out of your hands.

If you manage to avoid delays and all the legal work is clean first time around then its possible they might never find out but in my experience BOI came back to me on numerous occasions prior to releasing the funds looks for clarifications and for certain paperwork to be renewed etc, and during this process they would likely have become aware if I'd lost my job.

Its up to you if you want to take the risk, but it might not be your choice in the end.

SarahMollie

[QUOTE=NyOmnishambles;98100295

We got mortgage approval based on me being on 6 month contracts without any hassle just some extra paperwork, due to the sale process taking so long I have since changed company and job from a daily rate to a fixed term contract and the bank don't seem in the least bit bothered[/QUOTE]

When did you get your mortgage?

In my experience if a person is on contract work, they need to demonstrate a number of years consistency before the banks would consider you like a person on a salary.

desertcircus

Banks don't refuse mortgage lending for fun. If they'd rescind the offer based on your redundancy, then you need to think about why that is - because the risk of you ending up with your finances underwater is unacceptably high. The situation the bank are trying to avoid is a situation you should be trying to avoid too.

Michael D Not Higgins

Ardent wrote: »

The plan is to rent out the apartment and put the calculated 200/300 monthly profit towards the mortgage.

Others here have given good advice on the redundancy situation but I'd like to just take an aside on this.

I hope that profit is net and not gross. There are pretty hefty taxes on rental income. There can also be some high costs. I assume the bank would have done its due diligence in determining your affordability with the rental income but it's worth noting that landlords have lost thousands to the wrong tenants.

Ardent

Michael D Not Higgins wrote: »

Others here have given good advice on the redundancy situation but I'd like to just take an aside on this.

I hope that profit is net and not gross. There are pretty hefty taxes on rental income. There can also be some high costs. I assume the bank would have done its due diligence in determining your affordability with the rental income but it's worth noting that landlords have lost thousands to the wrong tenants.

Yeah its net, after all taxes and deductibles.

Mrs OBumble

What sort of redundancy payout will you get?

If you find another job quickly, then that may be a lump of cash that you can use to reduce the borrowing amount. It may just make another round of house-hunting worth it.


Also, another issue to consider: what if your next job is on the opposite side of Dublin from the house. It could turn into a nightmare commute.

Ardent

Thargor wrote: »

You'll get a job in IT in Dublin no bother Ardent, even if its just a 28k thing to tide you over until you find a proper position.

That's what I was thinking as well. If necessary i should be able to grab something quick to tie me over.

The Mulk

Ardent wrote: »

That's what I was thinking as well. If necessary i should be able to grab something quick to tie me over.

you've HP and Intel on your new doorstep, they're always taking contract staff on

NyOmnishambles

SarahMollie wrote: »

When did you get your mortgage?

In my experience if a person is on contract work, they need to demonstrate a number of years consistency before the banks would consider you like a person on a salary.

We went through a broker for the application and are going with KBC for the mortgage

You are right of course, my impression was that is was consistency of employment rather than the nature of it
I move between permanent jobs and contract work depending on what comes along

The scenario when I applied was that I had been contracting for 18 months in 3 different jobs since the last permanent job which had also lasted for 18 months
I think what they are concerned with is that you don't have 3-6 months where you are without work which is fair enough and has never been an issue personally over my 16 years of employment

I had to provide a CV (not sure what use that is without them investigating it which I am not aware they did) and a copy of my then current contract

I have since changed jobs again and informed them and there was no further questions

If Ardent gets the CV out and has a job lined up for after the redundancy I don't see the bank being overly concerned

MarkAnthony

The bank are likely to do a last minute employment check - has this been factored in? Be very careful, the last thing you want is the bank not releasing funds after contracts have been signed and deposits paid.

Ardent

MarkAnthony wrote: »

The bank are likely to do a last minute employment check - has this been factored in? Be very careful, the last thing you want is the bank not releasing funds after contracts have been signed and deposits paid.

Yes, plan is to have a clause covering this eventuality should we proceed with purchase.

knucklehead6

what would happen in the worst case scenario? As in you get your mortgage, get your new house but can't get a job. You've already stated your wife's salary can't cover the new mortgage (leaving aside the rental income from the apartment) could you wife's salary cover the apartment mortgage and shortfall in rental income (I'm posting on mobile so can't scroll back through the thread but I think you mentioned repayments of 1800 per month... Rents in Leixlip for houses aren't at that level) and you rent out the new house until you get a new job?

Dr_Bill

In my view you should proceed with the purchase. In the right here, right now you have a job and can pay the mortgage and your living standards will improve these are all positives. Downside is your own role will be changing in the New Year, forget hanging around for the redundancy pay out and spend the time now investing in your CV and contacting agencies that's the key.

The employment market is improving and IT skills are in demand I would envisage you being able to secure another position fairly quickly at the moment, if you had to, you could take on a new role to tie you over until you find something more suitable. We could all be made redundant at any time, a mortgage is a long term commitment, its very unfortunate to experience a bump like this at the very start.

I wish you all the best for your future whatever you decide.

Also worth remembering that for the period of time you are out of work you should be able to work it that you pay less tax on the rental income.