Does the CB realise how the new mortgage rules have effected people

_Kaiser_

athtrasna wrote: »

Not aimed at any one poster, just reminiscent of frequenting this forum for the best part of a decade

Point taken - maybe we need a "Property Ireland - the Political Angle" megathread?

riclad

There needs to be some more incentives for landlords ,encourage people to
rent out property .
The tax system on landlords is tough .
make zero profit you still pay tax.
You only get tax credit on part of the mortgage payments.

MarkAnthony

_Kaiser_ wrote: »

Point taken - maybe we need a "Property Ireland - the Political Angle" megathread?

Maybe a politics forum of some kind? :pac:

pablo128

_Kaiser_ wrote: »

.. which was because of the view being pushed (and still the case) that renting is "dead money" and a temporary stop-gap on the road to ownership, or something for those with no better option.

We're obsessed with property ownership in this country.

We shouldn't be made to feel guilty for wanting to own our own home though.

Even rental properties are owned by someone, therefore every property is 'owned'.

hognef

RandomAccess wrote: »

I was speaking to two non eu national couples who have decided to buy as soon as they get Stamp 4 (I don't really know what that is or how long it takes but they seem to be taking about next year) citing rent prices as the reason.

One of those certainly intends to return home within a few years, whether they can keep the property to rent or will sell I do not know.

I would have thought that mortgage interest would make such short term purchases poor value? I've never run the numbers on such a plan.

Why? Take out a 100% mortgage of €100k @ 5% interest over 20 years. 5 years later you've reduced the mortgage by €17k. Sell, and buy again, both for the same €100k. You'll now have €17k for a deposit, needing only €83k of a mortgage. This can be repaid at the same rate in 15 years.

In other words, while you pay more interest at the start of the mortgage, each year of paying on a mortgage still reduces the number of years remaining overall, even if you sell, buy again, and take out a new mortgage.

There are of course costs involved in buying and selling, and those need to be taken into account, but you'd want to move very frequently for those costs to make a significant enough difference compared to buying and owning the same property for total life of the mortgage(s).

RandomAccess

hognef wrote: »

Why? Take out a 100% mortgage of €100k @ 5% interest over 20 years. 5 years later you've reduced the mortgage by €17k. Sell, and buy again, both for the same €100k. You'll now have €17k for a deposit, needing only €83k of a mortgage. This can be repaid at the same rate in 15 years.

In other words, while you pay more interest at the start of the mortgage, each year of paying on a mortgage still reduces the number of years remaining overall, even if you sell, buy again, and take out a new mortgage.

There are of course costs involved in buying and selling, and those need to be taken into account, but you'd want to move very frequently for those costs to make a significant enough difference compared to buying and owning the same property for total life of the mortgage(s).

I believe mortgages have some conditions for early termination.

For example this from a BOI info page,
"Warning: You may have to pay charges if you pay off a fixed rate loan early."
I'm not sure what those may be.

MrMaki

It is not only an issue for first time buyers.

I pay mortgage already for a house I bought in Dublin few years ago, never had a problem with repayments, etc, and because my family got bigger I decided to search around Dublin ( approx 1h drive from work place) for a new , bigger, cheaper place with some land, or large garden.

Unfortunately I need to have 22% deposit + few K for everything else up front.
Despite fact that bank knows me for number of years already they still treat me like a new customer from a street, so I will have to go through all the process of applying for a mortgage from beginning.

It doesn't matter that new place will be cheaper and my monthly repayments will be smaller ( more affordable to repay) bank still wants me to have 40k up front, what for a family of 5 is not easy thing to do.

MarkAnthony

MrMaki wrote: »

It is not only an issue for first time buyers.

I pay mortgage already for a house I bought in Dublin few years ago, never had a problem with repayments, etc, and because my family got bigger I decided to search around Dublin ( approx 1h drive from work place) for a new , bigger, cheaper place with some land, or large garden.

Unfortunately I need to have 22% deposit + few K for everything else up front.
Despite fact that bank knows me for number of years already they still treat me like a new customer from a street, so I will have to go through all the process of applying for a mortgage from beginning.

It doesn't matter that new place will be cheaper and my monthly repayments will be smaller ( more affordable to repay) bank still wants me to have 40k up front, what for a family of 5 is not easy thing to do.

Sorry I know this is going to be polarising but why have the extra kids then? There needs to be more forward planning. Given it's hard you have to understand the banks reluctance of letting you get up to your eyeballs. What happens if three weeks after you move in something happens which isn't fully covered by insurance. Do the kids go hungry - of course not - the mortgage is put on hold.

pablo128

MrMaki wrote: »

It is not only an issue for first time buyers.

I pay mortgage already for a house I bought in Dublin few years ago, never had a problem with repayments, etc, and because my family got bigger I decided to search around Dublin ( approx 1h drive from work place) for a new , bigger, cheaper place with some land, or large garden.

Unfortunately I need to have 22% deposit + few K for everything else up front.
Despite fact that bank knows me for number of years already they still treat me like a new customer from a street, so I will have to go through all the process of applying for a mortgage from beginning.

It doesn't matter that new place will be cheaper and my monthly repayments will be smaller ( more affordable to repay) bank still wants me to have 40k up front, what for a family of 5 is not easy thing to do.

What's the problem? Sell the house you have, and use the money to buy a bigger house? Or am I missing something?

MrMaki

MarkAnthony wrote: »

Sorry I know this is going to be polarising but why have the extra kids then? There needs to be more forward planning. Given it's hard you have to understand the banks reluctance of letting you get up to your eyeballs. What happens if three weeks after you move in something happens which isn't fully covered by insurance. Do the kids go hungry - of course not - the mortgage is put on hold.

Lol did I mention somewhere, that myself or my wife have any problems to look after kids and household? We have 4 bedrooms, it is enough for us and 3 kids, but still I would like to have an office room, or guest room, or a garage and a bigger garden away from the capital city. It is really not your business to ask why have the extra kids... as long as we can properly support them.

It is just the thing of having those 40k in cash...

MrMaki

pablo128 wrote: »

What's the problem? Sell the house you have, and use the money to buy a bigger house? Or am I missing something?

Looks like you are. I need to have 40k cash to apply for a new mortgage. What if I sell the house, show money to the bank and they refuse new mortgage?

Also I'm not looking for any house... it can take months before I sell and find new suitable property.

MarkAnthony

MrMaki wrote: »

Lol did I mention somewhere, that myself or my wife have any problems to look after kids and household? We have 4 bedrooms, it is enough for us and 3 kids, but still I would like to have an office room, or guest room, or a garage and a bigger garden away from the capital city. It is really not your business to ask why have the extra kids... as long as we can properly support them.

It is just the thing of having those 40k in cash...

Right so you've no issue then. What you want to do is get yourself into a more precarious financial position for almost no benefit - you're kinda proving the CB's point here. 5 kids and not having €40K in savings seems to be that you are at a level where you're comfortable but can't take on anymore.

pablo128

MrMaki wrote: »

Looks like you are. I need to have 40k cash to apply for a new mortgage. What if I sell the house, show money to the bank and they refuse new mortgage?

Also I'm not looking for any house... it can take months before I sell and find new suitable property.

You have an asset worth more than 40k though.
I may be wrong(I probably am) but surely you can remortgage your current house and sell it as soon as you buy a new place?

MouseTail

MrMaki wrote: »

Looks like you are. I need to have 40k cash to apply for a new mortgage. What if I sell the house, show money to the bank and they refuse new mortgage?

.

You don't need 40k cash if you have that equity. You apply for a mortgage on the proviso you sell your house and use the equity as your deposit.

MarkAnthony

pablo128 wrote: »

You have an asset worth more than 40k though.
I may be wrong(I probably am) but surely you can remortgage your current house and sell it as soon as you buy a new place?

The bank are probably looking for a proven track record of savings, it's how you demonstrate your ability to pay the additional mortgage. I suspect the deposit would be covered by the current asset. If that's the case then this has nothing to do with the CB rules and is simply the, prudent, internal policies of the bank.

Graham

MouseTail wrote: »

You don't need 40k cash if you have that equity. You apply for a mortgage on the proviso you sell your house and use the equity as your deposit.

This

Brioscai

If the government were in any way serious about the housing situation, they would do something to increase supply such as losing zoning on land banks. We are approaching, 40. We bought a house ten years ago, were given a mortgage of 6 times our combined earnings. We had no problem servicing this as it was less than the rent we'd pay elsewhere. Fast forward to now, we are having to get an exemption on deposit leading to a lower than x3 multiple on our earnings. We are renting, paying more than we can get a mortgage for, for a very basic house. There's something seriously wrong with that.I understand that people want to own houses, as there is no reduction in cost when renting. There's a lack of security and also major difficulties in old age if you have not purchased as you will wind up reliant on the county councils if you cant pay market rates.

hognef

RandomAccess wrote: »

I believe mortgages have some conditions for early termination.

For example this from a BOI info page,
"Warning: You may have to pay charges if you pay off a fixed rate loan early."
I'm not sure what those may be.

Fixed rate, yes. Variable rate, no. If you're planning to keep the mortgage for only a short period, you certainly shouldn't go fixed rate.

andekwarhola

Divelment wrote: »

40 years ago, my parents, who were in their early-mid 30's at the time, on one full-time middle class income/salary, could afford to buy a spacious 3 bed semi detached house in the suburbs of Dublin with a generously spaced front and back garden.

Fast forward 40 years and a similar couple with 2 incomes, with double the spending power, would struggle to be able to afford to buy a two bed shoebox apartment in the same area

Dublin is the capital of a modern country now with a far bigger middle class. Who all want to live in the same few Dublin postcodes.

With the expansion of our economy and wage inflation comes the same property scenario that afflicts other European capitals.

For sure, the housing market here has been chronically mishandled and overheated here for a long time but you will never get the mix you are looking for: expansion of the middle class, good standards of living/wages but with property in desirable areas on the cheap.

I have a so called middle-class family income. I'd love to live in Ranelagh or Blackrock but I can't afford it so I sucked it down and moved to somewhere I could afford without thinking the market will eventually deliver the house I want when 'normality' returns.

Grolschevik

Angel2016 wrote: »

I rented it out at first for a very low rent also it meant I wasn't making a profit on the place which with the affordable housing you are not allowed to plus income tax didn't have to be paid so in actual fact I was smart with my decision and never set out to be a landlord.

Angel2016 wrote: »

A tenant and she was paying a very low rent for the area which just covered my costs so I wasn't making anything, all taxes are paid on it NPPR, LPT, management fees etc and income tax was not liable as I paid out just slightly more then I was taking in I had that worked out for me.

Tigger wrote: »

thats not how it works

Angel2016 wrote: »

I have no problem with someone coming in here and working and paying taxes like everyone else, .

Cough...

L1011

Angel2016 wrote: »

I had a few quid in the credit union but used it get debt free that was my rainy day money

I suspect you may have needed to keep it for the fairly significant income tax liability you have from your rental property!

Michael D Not Higgins

MOD: Enough on refugees and other off topic posts. I've deleted these and next one gets a card. Take it to pm or Politics Cafe.

Graham

CruelCoin wrote: »

I think it's working our perfectly.

I'd rather you keep renting for a while longer, as opposed to the nation legging it to housing bubble 2.0

+1

Although easing the deposit restrictions would likely stimulate the construction market it would more than likely be accompanied by house price inflation, particularly while supply/demand are so out of kilter.

As painful as restrictions are, they will force the government to find other methods of increasing construction activity and/or decreasing construction costs. If this can be done in a non-inflationary way, it has to be a good thing for most people buying a property as a family residence.

intheclouds

Graham wrote: »

I think you're right and for what it's worth I think people perception of lack of security when renting is well founded. The entire Irish rental market is built on the fundamental premise that it's a short-term stepping stone on the route to property ownership.

It's this fundamental premise that must change. Long-term, secure renting must become a feasible option for both landlords and tenants.

Absolutely.

With the lack of supply currently the rental market is more insecure than ever. A work colleague has just been given an illegal rent increase (illegal because he hasnt been given 90 days notice, it wasnt given in writing, and its less than 2 years since his last rent increase) but he is afraid if he refuses to accept it then he will be homeless, there is literally nowhere else for him to rent.

This is someone in their 50s. They dont want to move and as its a one bed, they cant really find anywhere cheaper.

Graham

intheclouds wrote: »

Absolutely.

With the lack of supply currently the rental market is more insecure than ever. A work colleague has just been given an illegal rent increase (illegal because he hasnt been given 90 days notice, it wasnt given in writing, and its less than 2 years since his last rent increase) but he is afraid if he refuses to accept it then he will be homeless, there is literally nowhere else for him to rent.

I can well believe it.

It's your next comment that starts to open up the more terrifying questions being asked by many others in that situation:

intheclouds wrote: »

This is someone in their 50s. They dont want to move and as its a one bed, they cant really find anywhere cheaper.

What happens in 15 years when the same person retires on a substantially reduced income?

L1011

Graham wrote: »

You can't really regulate the builders into pricing houses below cost although there are areas where government could influence those underlying costs (VAT, tax, local authority contributions, planning etc).

I do have some faith things will change this time, the CB rules will essentially force the governments hand. I wouldn't like to speculate as to the type of change and whether it will be good or bad.

LA contributions and 'riders' to planning (build this footpath / this section of ringroard etc) are probably the only area significant savings can be made (would be very hard to justify the VAT going below 9%, for instance) and that would have to be made up by giving authorities vastly more direct funding - either by hiking property tax or from general taxation.

I'm not sure which is more palatable even if continual rather than lumpy funding from taxation is much better for service provision.

intheclouds

Graham wrote: »

What happens in 15 years when the same person retires on a substantially reduced income?

Presumably they will move to a very rural part of Ireland where they have a son and either rent a small place there for a lot cheaper than it is to rent in Dublin OR move in with the son OR go on the council housing list OR try and save enough to buy a small place in said rural area when they retire.

What do people who rent in other European countries do to pay rent when they retire?

jester77

intheclouds wrote: »

Presumably they will move to a very rural part of Ireland where they have a son and either rent a small place there for a lot cheaper than it is to rent in Dublin OR move in with the son OR go on the council housing list OR try and save enough to buy a small place in said rural area when they retire.

What do people who rent in other European countries do to pay rent when they retire?

Pension and savings, prudent people plan for this.

intheclouds

jester77 wrote: »

Pension and savings, prudent people plan for this.

And imprudent people?

CruelCoin

Graham wrote: »

You can't really regulate the builders into pricing houses below cost although there are areas where government could influence those underlying costs (VAT, tax, local authority contributions, planning etc).

http://www.independent.ie/irish-news/surveyors-break-down-the-cost-of-building-a-threebed-semi-d-in-dublin-34726020.html

"According to the report by the Society of Chartered Surveyors Ireland (SCSI), the average cost of building a three bedroom, semi-detached house in the greater Dublin area is €330,000.
The construction costs – or “hard costs” - came to €150,000, amounting to less than half (45pc) of the total cost of building the house.

The remaining €180,000 consists mainly of “soft costs” such as the land and acquisition costs of €57,000 (17pc of total), VAT of €39,000 (12pc) and a margin of €38,000 (11pc)."

Those soft costs total up to €134k, with 46k not accounted for (though i'd place my bets on this being regulatory expenses and social housing provision).

As stands right now, it's simply not commercially viable to build a house in dublin that anyone on the average industrial wage can afford.

The social housing provision needs to be dropped, and a big axe needs to be swung at the legs of the regulatory costs.