Is this right time to buy a house?

masterboy123

Well the only issue which kept us from not buying the house until now is the fact that I don't have a permanent work contract. I usually get 2 year contracts. I am hoping that we don't have to move anymore now as my wife has a permanent job. And i can travel to nearby city if i don't get same job in same city after 2 years.
In worst case scenario if i get job really far away from Limerick then in that case we will have to give our house on rent and rental income will hopefully be 20% more than mortgage which can cover repair costs etc. Correct me if this assumption is wrong?

I am the major earning member of the family so we have been moving to different cities every often.

eeguy wrote: »

No matter what way you go, a mortgage is a chain around your neck for 20-35 years. There are definitely a million benefits to owning a house, but it costs much more to run a house than the 1000-1500 euro a month to the bank.

I wouldn't even consider buying a house unless I had a child on the way and needed to put down roots.

Graham

masterboy123 wrote: »

rental income will hopefully be 20% more than mortgage which can cover repair costs etc. Correct me if this assumption is wrong?

Have you allowed for tax on the rental income?

masterboy123

No i haven't. Is it 20% tax on rental income?

Graham wrote: »

Have you allowed for tax on the rental income?

Cuddlesworth

masterboy123 wrote: »

No i haven't. Is it 20% tax on rental income?

Its treated as income. So if your already in the higher tax band, then its taxed at that effective rate.

masterboy123

Ok, good that you mentioned it. Yes I pay 40% tax after a certain amount has reached in a tax year.

Cuddlesworth wrote: »

Its treated as income. So if your already in the higher tax band, then its taxed at that effective rate.

Pawwed Rig

masterboy123 wrote: »

The Irish housing market has been through a remarkably volatile and unpredictable period, and many believe we're still years away from reliable stability. This could explain why more and more borrowers are opting for the certainty of fixed rate mortgages.

I don't understand why this statement makes a fixed rate more desireable?

Cuddlesworth

masterboy123 wrote: »

Ok, good that you mentioned it. Yes I pay 40% tax after a certain amount has reached in a tax year.

Pretty sure its just over 50%.

Pawwed Rig wrote: »

I don't understand why this statement makes a fixed rate more desireable?

If we get hit with a financial crisis again, probably from external factors, then people will stop paying their mortgages and interest rates will rise quickly. Those on fixed rates will be shielded.

SteM

Cuddlesworth wrote: »

If we get hit with a financial crisis again, probably from external factors, then people will stop paying their mortgages and interest rates will rise quickly. Those on fixed rates will be shielded.

But that didn't happen during the last financial crisis?

Cuddlesworth

SteM wrote: »

But that didn't happen during the last financial crisis?

You would appear to be correct. Interest rates lowered. And god knows nothing got repossessed.

2005 3.65%
2006 4.86%
2007 5.46%
2008 5.86%
2009 4.16%
2010 4.02%
2011 4.42%
2012 4.33%
2013 4.38%
2014 4.2%
2015 4.14%
2016 3.63%
2017 3.41%

I guess the opposite is True then. You should fix if you fear that the market is spiralling out of control(but has a few years left in it).

masterboy123

We saw few lands on sale in the city area with planning permission approved.
Is building your own house going to cost considerably less? Say for 3 double bedroom house. I know it will take alot of time.
Any thoughts?

aido79

masterboy123 wrote: »

I didn't know this was possible. Is 80% fixed and 20% variable a good acceptable ratio? I am sorry, I have no knowledge in this area.

This will most likely be the biggest purchase of your life. Spend the time to do your own research and educate yourself. Don't rely on banks and estate agents for information. There is plenty of information on the internet and typing some figures into a mortgage calculator will open your eyes to how much extra you will pay in interest between a 25 and a 35 year mortgage. In your case you would probably pay an extra $50k in interest between and 25 and a 35 year mortgage.

bigpink

masterboy123 wrote: »

We saw few lands on sale in the city area with planning permission approved.
Is building your own house going to cost considerably less? Say for 3 double bedroom house. I know it will take alot of time.
Any thoughts?

Very hard to get a mortgage for a new build or doer upper I think

Lu Tze

aido79 wrote: »

This will most likely be the biggest purchase of your life. Spend the time to do your own research and educate yourself. Don't rely on banks and estate agents for information. There is plenty of information on the internet and typing some figures into a mortgage calculator will open your eyes to how much extra you will pay in interest between a 25 and a 35 year mortgage. In your case you would probably pay an extra $50k in interest between and 25 and a 35 year mortgage.

We are on a 32 year mortgage, but we over pay once a year with whatever we have spare. We alhave knocked 4-5 years off the mortgage length already. It gives flexibility in that when you have the extra you can pay it down, but if one of us losses a job or unexpected large expense comes up, we can continue to maintain the the lower monthly payment. On the shorter mortgage, we would be locked in at the higher monthly payment, and this would not be possible.

Edit: if we can maintain the additional payments, it will turn into a 15-16 year mortgage.

masterboy123

I am looking for 30 years mortgage.
Do you mind me asking how much is fixed and how % variable did you get?

Lu Tze wrote: »

We are on a 32 year mortgage, but we over pay once a year with whatever we have spare. We alhave knocked 4-5 years off the mortgage length already. It gives flexibility in that when you have the extra you can pay it down, but if one of us losses a job or unexpected large expense comes up, we can continue to maintain the the lower monthly payment. On the shorter mortgage, we would be locked in at the higher monthly payment, and this would not be possible.

Edit: if we can maintain the additional payments, it will turn into a 15-16 year mortgage.

Lu Tze

masterboy123 wrote: »

I am looking for 30 years mortgage.
Do you mind me asking how much is fixed and how % variable did you get?

Its all variable, the fixed rates were much higher at the time.

aido79

Lu Tze wrote: »

We are on a 32 year mortgage, but we over pay once a year with whatever we have spare. We alhave knocked 4-5 years off the mortgage length already. It gives flexibility in that when you have the extra you can pay it down, but if one of us losses a job or unexpected large expense comes up, we can continue to maintain the the lower monthly payment. On the shorter mortgage, we would be locked in at the higher monthly payment, and this would not be possible.

Edit: if we can maintain the additional payments, it will turn into a 15-16 year mortgage.

That's the best way to do it. I was just highlighting the difference in interest paid between different mortgage terms.

SteM

Cuddlesworth wrote: »

You would appear to be correct. Interest rates lowered. And god knows nothing got repossessed.

2005 3.65%
2006 4.86%
2007 5.46%
2008 5.86%
2009 4.16%
2010 4.02%
2011 4.42%
2012 4.33%
2013 4.38%
2014 4.2%
2015 4.14%
2016 3.63%
2017 3.41%

I guess the opposite is True then. You should fix if you fear that the market is spiralling out of control(but has a few years left in it).

They're average figures so not exact. KBC topped out at 4.25% during this period IIRC so it's not like everyone experienced huge mortgage interest rate hikes like back in the 80s/90s.

'nothing got repossessed', where did I say that? However very little property got repossessed during the last crisis compared to the amount of mortgages in arrears during that time. 8200 repossessions since 2009 despite 100000 borrowers being in arrears during the height according the Times.

Idbatterim

yes Op, I would absolutely buy, if it is a long term property and if you are currently renting! The prices are not near manic levels yet, the way they were in 2006,2007. The government here fully supports rising prices. I would absolutely buy! Pretty much everyone plans to buy long term anyway, this years of dithering is a waste of mental energy, will prices rise, will they fall... :rolleyes: Fair enough if the market is blatantly massively inflated, hold out, but I dont think it is at this point...

Idbatterim

But we are worried that next year prices may go down, back to the range of 220k euros which suits our budget. So we are in the dilemma whether to continue paying 1000e every month as rent or invest in our own home?

Agent also told us even if there is a crash coming up, Dublin is mostly effected and Limerick will be effected by only few grands. Is this true?

I am sorry, is this a wind up? I am sure prices will fall back again at some point. But they will likely rise for a few years before that. Lets take your current predicament. Say for arguments sake we are looking at 10% house price increase over the next 5 years, for a total of 50%. Then prices drop a very hefty 50%. You are simply back to where you are now, without 5 more years of renting!

The_Conductor

Cuddlesworth wrote: »

Pretty sure its just over 50%.

If we get hit with a financial crisis again, probably from external factors, then people will stop paying their mortgages and interest rates will rise quickly. Those on fixed rates will be shielded.

Depends on your employment status- however, you could be paying up to 52% inclusive of USC, PRSI etc.

Vis-à-vis fixed term rates- the whole concept of floating rates is unique to Ireland in the Eurozone- so if/when interest rates are increased by the ECB- the borrowers in Ireland are going to be slaughtered in a manner unique to Ireland. Rather staggeringly- the Irish government are keeping schmum about this inconvenient fact.

wersal gummage

homerjay2005 wrote: »

look at it this way though, in 1 year you will have paid 12,000 on rent and be 12,000 less paid on your mortgage, which you will inevitably have to pay anyway.

2 years is 24000, 3 years 36000 etc etc plus as i said another 36000 less you have not paid off your mortage, so a difference of 72000 if you want to look at it from a realistic point of view that somebody else mortgage is 36000 down and yours is too.

Just a small comment which I suppose anyone with a mortgage will know, but the person asking might not be aware of.

If you pay 12k per year of mortgage payments, your mortgage does not reduce by 12k per year. I haven't done the sums, but in my own case, after 15 years of paying a mortgage I would estimate that my mortgage has reduced by approximately half of the total amount that I have repayed (it could be 40%, 60% etc, just ballpark figure of around 50%)

SteM

wersal gummage wrote: »

Just a small comment which I suppose anyone with a mortgage will know, but the person asking might not be aware of.

If you pay 12k per year of mortgage payments, your mortgage does not reduce by 12k per year. I haven't done the sums, but in my own case, after 15 years of paying a mortgage I would estimate that my mortgage has reduced by approximately half of the total amount that I have repayed (it could be 40%, 60% etc, just ballpark figure of around 50%)

This is a great site for doing those calculations....

https://www.drcalculator.com/mortgage/ie/

It'll also let you add lump sum payments and changes in interest rates to the calculation to show you how these will effect the overall repayment amounts.

Cuddlesworth

Idbatterim wrote: »

I am sorry, is this a wind up? I am sure prices will fall back again at some point. But they will likely rise for a few years before that. Lets take your current predicament. Say for arguments sake we are looking at 10% house price increase over the next 5 years, for a total of 50%. Then prices drop a very hefty 50%. You are simply back to where you are now, without 5 more years of renting!

A 10% increase per year, is a 61% increase over 5 years.

Also pretty sure income rises are not matching that.

SteM wrote: »

'nothing got repossessed', where did I say that?

Nowhere, I was both admitting I was wrong and pointing out that regardless of what way the rates swing, failure to pay in Ireland has little negative impact.

masterboy123

It's a great calculator. The difference in an interest rate is like 60k euros between 25 and 35 years. See attached pic.

SteM wrote: »

This is a great site for doing those calculations....

It'll also let you add lump sum payments and changes in interest rates to the calculation to show you how these will effect the overall repayment amounts.