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Shoot down my idea

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  • 24-03-2019 3:16pm
    #1
    Nevermindnow
    Registered Users Posts: 42 ✭


    Let me start by saying that I do think house prices at the moment are over valued, especially when looking at the average wage in Ireland. However, I'm in a situation where it feels like I should buy and if I don't - I'll regret it in years to come.

    Why? Because at the moment I would qualify for the rebuilding Ireland scheme which would mean I could borrow more and at a low enough interest rate. If it wasn't for this scheme there's no way I'd buy right now, I'd keep living at home and hope for some sort of crash over the next few years.

    Current situation is:

    - around 65k in savings
    - in my 20s, no immediate plans for a family etc
    - just under 50k salary, which means if I get an increase within the next few years (which I should do) I won't be able to use rebuilding Ireland and will struggle to buy anything half decent

    My line of thinking is to potentially get a 2 bed apartment and rent out a room. That way, most of the mortgage repayment would be paid off by renting out the room.

    Even if I do this and house prices drop a decent bit, I reckon I'd still be in a much better position then than I would be if I waited say 5 years and had to get a normal mortgage from the banks!?

    Feel free to shoot down my idea and tell me I'm mad.


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    #2
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭Avatar MIA


    Have you proof of being turned down by two financial institutions?


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    #3
    Nevermindnow
    Registered Users Posts: 42 ✭Nevermindnow


    Avatar MIA wrote: »
    Have you proof of being turned down by two financial institutions?

    Yes. Got letters with insufficient offers.


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    #4
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭Avatar MIA


    Nevermindnow wrote: »
    Yes. Got letters with insufficient offers.

    Surprised given your details


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    #5
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭Avatar MIA


    One other thing are they still lending? Thought I heard they ran out of funds to lend.


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    #6
    Nevermindnow
    Registered Users Posts: 42 ✭Nevermindnow


    Avatar MIA wrote: »
    Surprised given your details

    Say I'm on 40k, that means banks will lend say 120k. Plus my savings is 185k. Not much on the market for that. So if I need 250k to buy for example, RI should work.


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    #7
    Nevermindnow
    Registered Users Posts: 42 ✭Nevermindnow


    Avatar MIA wrote: »
    One other thing are they still lending? Thought I heard they ran out of funds to lend.

    I'm hearing mixed things to be honest so I'm not sure.


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    #8
    Wildly Boaring
    Registered Users Posts: 3,646 ✭✭✭Wildly Boaring


    Nevermindnow wrote: »
    I'm hearing mixed things to be honest so I'm not sure.

    Loan scheme for first-time buyers needs another €600m - but government yet to decide on stumping up cash https://jrnl.ie/4553373


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    #9
    Thargor
    Registered Users Posts: 17,935 ✭✭✭✭Thargor


    Nevermindnow wrote: »
    Say I'm on 40k, that means banks will lend say 120k. Plus my savings is 185k. Not much on the market for that. So if I need 250k to buy for example, RI should work.

    So they just lend you whatever you need even if it's more than 3.5x your salary?


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    #10
    Iseedeadpixels
    Registered Users Posts: 4,248 ✭✭✭Iseedeadpixels


    Thargor wrote: »
    So they just lend you whatever you need even if it's more than 3.5x your salary?


    Doubt it the online calculator only gave me 3.5 times my wage.


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    #11
    charlietheminxx
    Registered Users Posts: 2,579 ✭✭✭charlietheminxx


    They loan you up to 4.5 times your salary, which is what the online calculator offered me when I considered applying.


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    #12
    Thargor
    Registered Users Posts: 17,935 ✭✭✭✭Thargor


    Sorry for being thick but Im trying to understand if theres a way to get to 4.5X income which is what I need and I never heard of this....

    You need to be turned down by 2 banks first? Or you need to have been turned down by 2 sellers? Why would a bank turn you down if you have a steady job and if its turned down by 2 sellers why not just bid 100k for 2 mansions and get refused. What is the advantage of this scheme if its still only 3.5x your income?


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    #13
    Nevermindnow
    Registered Users Posts: 42 ✭Nevermindnow


    Thargor wrote: »
    Sorry for being thick but Im trying to understand if theres a way to get to 4.5X income which is what I need and I never heard of this....

    You need to be turned down by 2 banks first? Or you need to have been turned down by 2 sellers? Why would a bank turn you down if you have a steady job and if its turned down by 2 sellers why not just bid 100k for 2 mansions and get refused. What is the advantage of this scheme if its still only 3.5x your income?

    Literally all the information you need is on their website. Google it.


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    #14
    hmmm
    Registered Users Posts: 11,205 ✭✭✭✭hmmm


    RIHL looks like a great deal if you qualify for it (in my opinion). Particularly if you think you have greater earning potential in the future it sounds like a particularly good deal. You are absolutely right that you might find it harder to get a loan from a bank, plus you will end up paying more interest.

    Would you be able to afford the mortgage on your own if you didn't rent out a room? If you have a good buffer in place you're in a good position IMO. A 2 bed gives you a bit of room if your life circumstances changes.


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    #15
    Nevermindnow
    Registered Users Posts: 42 ✭Nevermindnow


    hmmm wrote: »
    RIHL looks like a great deal if you qualify for it (in my opinion). Particularly if you think you have greater earning potential in the future it sounds like a particularly good deal. You are absolutely right that you might find it harder to get a loan from a bank, plus you will end up paying more interest.

    Would you be able to afford the mortgage on your own if you didn't rent out a room? If you have a good buffer in place you're in a good position IMO. A 2 bed gives you a bit of room if your life circumstances changes.

    One of the first replies that addresses my OP - thanks. I've a similar line of thinking.

    I could just about afford it without renting a room I'd say, it'd be around 35% of my take home pay without renting the spare room.


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    #16
    Thargor
    Registered Users Posts: 17,935 ✭✭✭✭Thargor


    Nevermindnow wrote: »
    Literally all the information you need is on their website. Google it.
    Yeah I have but how does the insufficient finance from 2 institutions bit work? Insufficient to buy a mansion? Insufficient to buy a log cabin?


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    #17
    3DataModem
    Registered Users Posts: 3,997 ✭✭✭3DataModem


    If you are willing to rent a room long term, then buying a place at those prices is a very good deal. High rents + rent-a-room relief means that buying a 2/3 bed flat to live in and RAR can mean you are in great shape 5/6 years down the road.

    Bear in mind that if you cohabit with someone who doesn't have to rent, or have a kid, the plan is bollixed.


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    #18
    Tiddlypeeps
    Closed Accounts Posts: 2,103 ✭✭✭Tiddlypeeps


    Nevermindnow wrote: »
    If it wasn't for this scheme there's no way I'd buy right now, I'd keep living at home and hope for some sort of crash over the next few years.

    Just pointing out a flaw in your alternative plan. You will likely have a hard time buying if there is a crash because you'll still need a mortgage and banks become very stingy about lending during a crash. You'd be taking a massive gamble that 1) a crash will happen within a reasonable amount of time, impossible to predict and 2) that the banks will actually give you money if/when this does happen.

    If a 2 bed apartment in the location you are looking is likely to suit you for at least the next 5 years then I'd say go for it now if you have the financials worked out.


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    #19
    Nevermindnow
    Registered Users Posts: 42 ✭Nevermindnow


    Tiddlypeeps wrote: »
    Just pointing out a flaw in your alternative plan. You will likely have a hard time buying if there is a crash because you'll still need a mortgage and banks become very stingy about lending during a crash. You'd be taking a massive gamble that 1) a crash will happen within a reasonable amount of time, impossible to predict and 2) that the banks will actually give you money if/when this does happen.

    If a 2 bed apartment in the location you are looking is likely to suit you for at least the next 5 years then I'd say go for it now if you have the financials worked out.

    True. Although I'd reckon I'd have more savings then and be one of the few with a decent lump sum saved. But I do get your point.


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    #20
    Nevermindnow
    Registered Users Posts: 42 ✭Nevermindnow


    3DataModem wrote: »
    If you are willing to rent a room long term, then buying a place at those prices is a very good deal. High rents + rent-a-room relief means that buying a 2/3 bed flat to live in and RAR can mean you are in great shape 5/6 years down the road.

    Bear in mind that if you cohabit with someone who doesn't have to rent, or have a kid, the plan is bollixed.

    Yep. The way I look at it is, even if rent prices drop a lot (surely they will eventually), it'll still pay a good portion of the mortgage. But you're right when it comes to having a kid etc.

    Saying that, how many people in their 20s can afford a house for life right now - very few. Vast majority can't get a studio apartment even.


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