30 or 35 year mortgage?

0gac3yjefb5sv7

Hi there,

I am in my late 20s, single buyer and wondering if I should go for 30vs35 year mortgage. Over the course of both, I would pay approx 30k more interest if I go for the 35 year one.

Any thoughts?

Amirani

Really depends on a number of factors. What sort of property are you buying? Is it somewhere you intend to stay indefinitely? What's the affordability of each option for you?

c.p.w.g.w

Pheonix10 wrote: »

Hi there,

I am in my late 20s, single buyer and wondering if I should go for 30vs35 year mortgage. Over the course of both, I would pay approx 30k more interest if I go for the 35 year one.

Any thoughts?

You can always pay off chucks when your on a variable rate and shorten your term length, but you can't really extend your term lenght

Spook_ie

Pheonix10 wrote: »

Hi there,

I am in my late 20s, single buyer and wondering if I should go for 30vs35 year mortgage. Over the course of both, I would pay approx 30k more interest if I go for the 35 year one.

Any thoughts?

Go for the 30 years if you can afford it comfortably and put the extra interest saved into a pension account.

EDIT 30k/ 35 years = €71 per month, with current tax relief that would be nearly a €100 a month into a PRSA or similar

Jaster Rogue

It doesn't really make a difference at this stage. Go with the 35 year and if you have money left over each month, overpay. The interest will work out the same as a 30 year if you overpay and clear mortgage in same amount of time, most banks calculate it on a daily basis.

djan

Get the longest term possible. Bank have various limits on how much you can overpay if fixed but it is usually more than enough.

Remember that while you can overpay, you certainly cannot pay less than the agreed mortgage (unless you're in Ireland that is, given its attitude to bad moetgages).

The additional cost of interest is therefore optional so why not choose the more flexible option just in case your repayment capacity de creases.

Also gives you another 5 years of hassle free life/mortgage cover.

manonboard

Always better to pick the longer term if you have the discipline to pay the shorter term anyways. That way you get the flexibility without the cost.

If you think you are undisciplined at that budgeting but can afford the shorter term for the near future, get the shorter term.

BronsonTB

As stated, get the longest term possible. You can over pay on both fixed & variable mortgages but have the flexibility to pay the min when you have other financial commitments without having to renegotiate with the bank.

cruizer101

Yeah I'd be going for the 35, and then overpaying as though you were on the 30, or potentially even more.
It give more flexability if circumstances change

I'm on a 30 year but overpaying enough that if I kept it up it would be done in 20.
It means I get used to paying that amount but if needs be I can pay less e.g. have kids more expense, or if interest rates rise I can absorb without having to pay more (just end up overpaying by less).

Don't think of it as a 35 year mortgage rather a 30 year with option to extend

swarmberg

In a similar situation (late 20's) and never really thought about the 35 year mortgage.

Do you need to apply with your bank for this? Does it depend on the bank? Can you up your repayments above and to the min payment as it suits?

NinjaTruncs

Spook_ie wrote: »

Go for the 30 years if you can afford it comfortably and put the extra interest saved into a pension account.

EDIT 30k/ 35 years = €71 per month, with current tax relief that would be nearly a €100 a month into a PRSA or similar

But they won't get the saved money until their 30 year term is up. What would be interesting is the projected benefit of taking the 35 year term and investing the different between the cost of a 30 year term, seeing can you out perform the interest on the mortgate to ultimately pay off the mortgage quicker than 30 years.

drunkmonkey

If your doing it make sure it's a house you can see yourself in with a few kids in 30yrs time. The last bubble a lot of people got caught with starter homes. Hysteria has got hold again so thread carefully as you may have to hold this house for a good while, flipping in 10yrs for a profit might not be an option and you may need a bigger house by then and can't move without taking a big hit.
If you wait until 35 you can still get a 30yr Mortgage but it'll be a 25yr one by the time you hit 40.

Amirani

Everyone suggesting to just get the 35 year and overpay; this assumes that all fixed rate mortgages allow you to overpay, many do not, or only by a limited amount. Getting a fixed rate is a no-brainer at the moment because of the rates available, so it really depends on whether overpayment is possible. If you're limited to an overpayment of 10% and you can comfortably do this on the 30 year, then it makes sense to choose this over the 35 year.

If completely depends on affordability, you can't give a decent answer to this question without more details.

0gac3yjefb5sv7

So basically the best option is to go 35 generally and ensure I can overpay with my provider?

drunkmonkey

I think so keep the repayment as low as possible but be building up a bit on the side so you can possibly take a lump out if it in a few years, I wouldn't go for anything with less than 3 bedrooms. Think about what it's worth to rent out as well if things change, would it cover the mortgage or close?
Not sure where your buying but there's a lot to be said for being able to walk for some milk or a beer.

0gac3yjefb5sv7

drunkmonkey wrote: »

I think so keep the repayment as low as possible but be building up a bit on the side so you can possibly take a lump out if it in a few years, I wouldn't go for anything with less than 3 bedrooms. Think about what it's worth to rent out as well if things change, would it cover the mortgage or close?
Not sure where your buying but there's a lot to be said for being able to walk for some milk or a beer.

Looking at 2 bed house. I may need a 3 bed but not for 10/15 years. It's in an area I like, close to town and I can't afford a 3 bed.

Spook_ie

NinjaTruncs wrote: »

But they won't get the saved money until their 30 year term is up. What would be interesting is the projected benefit of taking the 35 year term and investing the different between the cost of a 30 year term, seeing can you out perform the interest on the mortgate to ultimately pay off the mortgage quicker than 30 years.

So many people, including myself, forget about pensions and the money you'll need when retired to maintain the house

drunkmonkey

Pheonix10 wrote: »

Looking at 2 bed house. I may need a 3 bed but not for 10/15 years. It's in an area I like, close to town and I can't afford a 3 bed.

This is what I was getting at, there's no way in 10/15yrs time a 2 bed will be worth what it is now as supply should have caught up with demand so now when you need a bigger house you won't have any colleteral in the 2 bed and could be forced to sell at a loss. Your repayments on a mortgage will be over 20/25yrs on a new house by then. So many people got caught the last time making the mistake of buying a starter house.
Considering you know this isn't suitable for more than 10/15yrs I'd be inclined to rent until the market normalises. I don't think you'll be any worse off when it's time to buy.
It's all crystal ball stuff but the 1 and 2 beds will take the biggest hit.

Amirani

drunkmonkey wrote: »

This is what I was getting at, there's no way in 10/15yrs time a 2 bed will be worth what it is now as supply should have caught up with demand so now when you need a bigger house you won't have any colleteral in the 2 bed and could be forced to sell at a loss.

This is complete speculation to be fair. You can't accurately predict what the market will be like in 10/15 years and whether or not supply is meeting demand at that point in time. You certainly can't predict it well enough to suggest that "there's no way in 10/15yrs time a 2 bed will be worth what it is now".

It could easily be worth less, it could easily be worth more. Property prices relative to income in Dublin at present are pretty comparable to European norms (if a little high), we're not in some extreme bubble as in the 2000s.

drunkmonkey

It's not really speculation we have a serious shortage of homes which is keeping prices high that's a fact, it won't be fixed quickly but in 10yrs time the problem should be resolved. I'll be looking at buying in Dublin over the next 10/15yrs but wouldn't consider it at the moment as I don't see any value and expect prices to drop a lot on that time scale. We know the price drop doesn't matter if your buying a house which your happy to live in for the length of your mortgage, op doesn't intend to stay there forever though and that's where the risk is for him with a 35yr mortgage and trying to move on in 10yrs time could be costly.

Amirani

drunkmonkey wrote: »

It's not really speculation we have a serious shortage of homes which is keeping prices high that's a fact, it won't be fixed quickly but in 10yrs time the problem should be resolved.

We do have a supply shortage that has driven price growth, agreed. Still, you don't know what is going to happen with supply over the next 10 years, there are many factors which will influence it. You also don't know what's going to happen with demand over the next 10 years, although most indications are that this is going to continue to increase with a growing population.

The overarching point is that you can't say that any problem "should be resolved" in 10 years, particularly one as fundamental as a supply/demand imbalance. These problems have existed forever, and they will exist in future. We're not going to reach a perfect state in 10 years where there's no more supply/demand imbalance. The problem could easily be "resolved" in 5 years, and then reappear in 10 years.

ted1

Is 35 years an actual thing. Go with the 30. 35 is to long. And while the option to over pay is there. Many don’t. So just force yourself to.

drunkmonkey

Amirani wrote: »

The overarching point is that you can't say that any problem "should be resolved" in 10 years, particularly one as fundamental as a supply/demand imbalance. These problems have existed forever, and they will exist in future. We're not going to reach a perfect state in 10 years where there's no more supply/demand imbalance. The problem could easily be "resolved" in 5 years, and then reappear in 10 years.

It not a case of it should be resolved, it has to be resolved or you won't have a teacher, nurse or Garda who can afford a family home in Dublin, the prices can't keep rising when supply increases prices have to retreat.
It's a massive investment and unless your a speculator you should only take one crack at it, put the 3/4 bed over 35yrs but not a 2bed unless it's in great location which this one sounds like it's not.
Or just rent, meet the person of your dreams and you both buy a house together which meets your long term needs when the time is right.

0gac3yjefb5sv7

drunkmonkey wrote: »

It not a case of it should be resolved, it has to be resolved or you won't have a teacher, nurse or Garda who can afford a family home in Dublin, the prices can't keep rising when supply increases prices have to retreat.
It's a massive investment and unless your a speculator you should only take one crack at it, put the 3/4 bed over 35yrs but not a 2bed unless it's in great location which this one sounds like it's not.
Or just rent, meet the person of your dreams and you both buy a house together which meets your long term needs when the time is right.

It is a nice location, near the dart line. Safe. Settled area. Definitely rentable. 10 years paying rent is an awful loss of money. The market may drop by 20 percent but in the long term it is always slowly rising.

Ray Palmer

Drunkmonkey> All possible but but also not probable. The time for supply to catch up needs to be clean without any other market shocks. The likelihood of that happening is very slim. Brexit is a huge threat and ECB rates are going to have to go up.
Location is a key issue as even if supply increases the locations aren't going to be in the best places as they are already built on. The scale of houses in good locations is very limited and they will sell at a premium more likely to be much more than a 2nd hand house in the same area. Look at the development on the Smurfitt building in Drumcondra to see.

OP> 35 years is best and reduce the term if and when you can. Do it sensibly so if getting a car don't overpay the mortgage but use the money to get a car to pay less interest.
Getting a house too small is fine if you can see extension possibilities. Generally cheaper than moving. Even things like wall beds can make massive improvements to space and worth the money

Amirani

drunkmonkey wrote: »

It not a case of it should be resolved, it has to be resolved or you won't have a teacher, nurse or Garda who can afford a family home in Dublin, the prices can't keep rising when supply increases prices have to retreat.

Do you not think there'll be any increases in pay for teachers, nurses or Gardaí over the next 10 years? Do you not think they'll at least keep pace with inflation? In the long-run, house prices generally rise. Same as wages, and the general cost living in society. Inflation erodes debt, this is a bit of a cornerstone of economic growth and development. You're suggesting a significant fall in house prices between now and 10 years from now, that's a wild enough projection.

I agree that purchasing now with a view to buying again in 10 years is a risk, and people need to acknowledge as such. You may be unlucky and prices at that time may be unfavourable to you. However, despite having the worst economic downturn in this country's history, only a relatively small proportion of the population were stuck in starter homes. The concept of a couple buying a 2 bedroom apartment in their 20s isn't foolish once the affordability is right and the risks are considered. Once these are considered it's just a question of your level of risk aversion.

iluvfatfrogs

Also, i'd imagine the proportion of mortgage holders switching providers will be rise every year in my opinion due to the withdrawal of restrictions.
So signing up for the 35 year term now may be purely theoretical.

You may switch in two years time to another provider onto a 30 year term, which would be 32 years in total and possibly switch multiple more times over the course of the mortgage.

So just because you are signing upto 35 years today, does not mean you are definitely tied in for 35 years. I've lost two years alone with one switch.

0gac3yjefb5sv7

Also I'm not buy to definitely flip it in 10 years. Also a 2 bed home may suit my needs and won't need 3 bed. So it's probably a safer bet to buy now than wait 10 years. Also rent etc and permanence of living location.

drunkmonkey

Amirani wrote: »

. You're suggesting a significant fall in house prices between now and 10 years from now, that's a wild enough projection.

Not in all areas but if supply can meet demand as intended by Government yes you'll see house prices fall that's the plan, it's not a wild projection. Wages can't keep rising just to keep up with Dublin house prices especially in the Public Service it's unsustainable.
Think about it anyone born this year if your think things will keep going as they are will mean the generation coming will not be able to rent or buy. A 2 bed apartment could be 500k asking by then with 500k in interest, that's a cool 1 million all in for a starter home. Prices have to stop and reverse there is no other option or we won't be getting a state pension.
Were not at peak bubble but were in one all the same.

Jaster Rogue

drunkmonkey wrote: »

Not in all areas but if supply can meet demand as intended by Government

You're giving current (and any successive government) waaaay too much credit there. When have they ever delivered on anything 'as intended' ? (health, education, housing, transport, justice, etc..) It's a neverending cycle of one crisis after another. If supply ever outnumbers demand by any significant margin, it will be completely accidental by some external force outside our government's remit.

jimmycrackcorm

The simple answer to the is question is if you can afford to debate paying 30 years instead of 35 years then go for the 35 year mortgage but overpay at the amount that can bring you down to 30.
Minimizing the account of interest you have to pay as well as giving flexibility in the event you need that