30 or 35 year mortgage?

miezekatze

People on here always say go for the longest term possible and overpay to pay it off early. Realistically though, how many people actually do that and stick to overpaying regularly? I'd go for the shorter term if I could afford it comfortably and try and overpay that. If you'd be stretching yourself a bit by going with 30 years then the longer term is probably better though.

tommythecat

miezekatze wrote: »

People on here always say go for the longest term possible and overpay to pay it off early. Realistically though, how many people actually do that and stick to overpaying regularly? I'd go for the shorter term if I could afford it comfortably and try and overpay that. If you'd be stretching yourself a bit by going with 30 years then the longer term is probably better though.

Well the main thing is the bank will always allow you to shorten the term if you wish but it’s unlikely they will let you lengthen it if you got into trouble at some point so taking the longer term and just having a bit of disipline about overpaying to shorten should not be too much trouble. If you can’t manage that then your fiscal skills are fairly lacking so you’d probably be better off on the longer one anyway!

drunkmonkey

Jaster Rogue wrote: »

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.

It's just feels like we're around 2000 sometime right now, the Taoiseach can do no wrong and will ride off into the sunset on winnings from Paddy Power. It's all too easy it spooks me when every politician is literally getting away with murder.
Those external shocks though we have Brexit and there's a Junk Corporate debt problem close to raising it's head in the states soon and that will have an effect like or worse than the last financial crisis. So I'd be betting on external forces.

handlemaster

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.

I would put school and work higher up the list than beer and milk

SteelyDanJalapeno

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. 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.

What's the average 1 or 2 bed rent in Dublin these days? I'd guestimate 1500 PM probably lowballing, but that' 180k - 270k in rent over 10-15 years.

Would you expect these properties to fall in a greater value than this?

drunkmonkey

Well if your looking at a 35yr Mortgage your going to pay that in interest alone. Your effectively paying 500k for a 250k apartment. You've saved on rent but blown that saving on interest repayment. It's why I'd be only inclined to look at a forever home in the current market if going for a super mortgage. Pay what you'd pay in rent so get a 20yr mortgage.

SteelyDanJalapeno

drunkmonkey wrote: »

Well if your looking at a 35yr Mortgage your going to pay that in interest alone. Your effectively paying 500k for a 250k apartment. You've saved on rent but blown that saving on interest repayment. It's why I'd be only inclined to look at a forever home in the current market if going for a super mortgage. Pay what you'd pay in rent so get a 20yr mortgage.

Well that's assuming you pay the minimum per month, continue to pay whatever you're currently paying in rent and you'd be looking at closer to 25 years and a lot less interest, you just have that option if times ever got tough to moving back to minimum payments (probably under 1k) as other have mentioned.

I know I'd rather be putting my money into an asset over the next 15 years versus rent, if you're planning on purchasing anyway.

Yourmama

drunkmonkey wrote:

get a 20yr mortgage.

The worst possible advise. You never know what your situation will be in 10 years. You may be in very difficult financial situation and be hammered even more by high mortgage repayments. Always, always, go for the longest possible term and overpay if you can. If you can't, it means it was right decision to go for the long term.

drunkmonkey

It's not an asset it's a liability for the first 20yrs.

Jaster Rogue

drunkmonkey wrote: »

It's not an asset it's a liability for the first 20yrs.

Technically it's both, the difference between an asset and liability is called equity. With the cb deposit rules in place 5 years now, and rising prices, there is little to no negative equity. Interest can be viewed as the cost of servicing the loan, and comparable to rent (cost of service, use of property) , the difference being if you pay 1500 in rent, none of that is increasing your equity in the property (no asset gain/loss), whereas with a mortgage, say 750 of the 1500 goes towards interest, that leaves the other 750 increasing your equity (net asset gain) .

4ensic15

drunkmonkey wrote: »

Well if your looking at a 35yr Mortgage your going to pay that in interest alone. Your effectively paying 500k for a 250k apartment. You've saved on rent but blown that saving on interest repayment. It's why I'd be only inclined to look at a forever home in the current market if going for a super mortgage. Pay what you'd pay in rent so get a 20yr mortgage.

There will also be inflation on the price of the apartment, so the 250k apartment may be worth 750K after 35 years.

drunkmonkey

4ensic15 wrote: »

There will also be inflation on the price of the apartment, so the 250k apartment may be worth 750K after 35 years.

Back to my point earlier these price rises aren't sustainable, either supply improves or businesses will pull out of Dublin.

4ensic15

drunkmonkey wrote: »

Back to my point earlier these price rises aren't sustainable, either supply improves or businesses will pull out of Dublin.

Property always tracks inflation in the long term.

drunkmonkey

4ensic15 wrote: »

Property always tracks inflation in the long term.

It's gone 50yrs ahead of inflation at the moment. Were in a bubble right now everyone is aware of that and nobody is denying it, when the market normalises it may start tracking inflation.

Amirani

drunkmonkey wrote: »

It's gone 50yrs ahead of inflation at the moment.

This doesn't really make any sense.

drunkmonkey wrote: »

Were in a bubble right now everyone is aware of that and nobody is denying it, when the market normalises it may start tracking inflation.

What criteria are you using to determine that we're currently in a property bubble? I'm not sure that current economic indicators are necessarily consistent with an undeniable asset bubble. Are you aware of what exactly constitutes an asset bubble?

David McWilliams for example doesn't think there's a clear bubble in house prices: http://www.davidmcwilliams.ie/dublins-housing-market-not-yet-ripe-for-a-crash/

drunkmonkey

Ask David McWilliams this year. He's well aware there's a land bubble. He's warned that it's OPs age group are the most exposed 20/35yr olds in any recession. Dublin property prices are already in a recession they've had 3mts of continual declines. If phoenix bought in January he'd already be in negative equity nursing a 7k loss only after 3mts.

Why do I think we're in a bubble.
Cheap Finance
Super Mortgages
Extreme land prices. (It's cheaper buy than build)
Shortage of property
Euphoria feeling in the market (blindingly obvious in this thread nobody besides me saying OP should be vigilant in the current market)
Property is overvalued in Dublin.

Even if you think we're not in a bubble the economy is heavily reliant on foreign investment (a lot of it pushing up prices will the clammer for houses in the BTL market), any wobble in the Global economy and we'll feel it), America will go into recession in the next couple of years, so will we it's a cycle. I reckon we've got 5 more years thinking this is all fine.

You've also Brexit.

I don't think we have a nationwide problem there's some good value out there but Dublin is the major problem.

Amirani

drunkmonkey wrote: »

Ask David McWilliams this year. He's well aware there's a land bubble. He's warned that it's OPs age group are the most exposed 20/35yr olds in any recession. Dublin property prices are already in a recession they've had 3mts of continual declines. If phoenix bought in January he'd already be in negative equity nursing a 7k loss only after 3mts.

This isn't what negative equity is. You know there's no 100% mortgages anymore? If prices had dropped 7k since he bought, his mortgage would still be less than the value of his property at this stage.

drunkmonkey wrote: »

Why do I think we're in a bubble.
Cheap Finance
Super Mortgages
Extreme land prices. (It's cheaper buy than build)
Shortage of property
Euphoria feeling in the market (blindingly obvious in this thread nobody besides me saying OP should be vigilant in the current market)
Property is overvalued in Dublin.

The central bank rules are clearly having a constraining effect on large mortgages, and cheap finance isn't that prevalent, certainly not at unaffordable levels. I think you're overestimating the euphoria in the market and indeed misreading the sentiment of the thread. I (and many other posters) do believe Dublin prices are overvalued at the moment, possibly leading to a price fall/correction and the OP should be cognizant of that as well as other risks. This doesn't fit the economic definition of market euphoria.

However, Dublin rents are much more overvalued than property prices, and this needs to be a factor in decision making. You are obviously quite risk averse and thus your opinion that you should continue to pay these high rents for a number of years before buying property makes sense for you. This isn't the right decision or the wrong decision, it just suits your risk profile. Same goes for buying (providing you've adequately assessed the risks, particularly under a stressed financial projection).

drunkmonkey

I'm not risk averse just believe in buying low and selling high and buying right the first time. We know he won't be there forever and prices have risen 100% and beyond in the last 6yrs. I think he's missed the boat on this round and it'd be prudent to wait 5 or 6yrs or even 6mts until we see how brexit plays out. He's at that age when everything can change rapidly in the next few years especially work and family commitments and that's when the 2 bed could become a liability if the economy isn't still roaring.
Rent prices will come down once all these new rental homes come online.
I'm not saying don't buy just buy the right place in the right location, can you walk to shops, schools, how easy it it get a buggy up the stairs. None of those things matter to OP now but they should all be playing a factor in where you buy as you should be thinking about selling it the same day if it's not a forever home.

Paul_Mc1988

Quick question. I'm 30 picking 25 years for my term going fixed for 5 years. After the 5 years with 20 years left with my current bank could I just switch to another bank and take out a 25 year mortgage for my remaining capital ?

4ensic15

drunkmonkey wrote: »

Rent prices will come down once all these new rental homes come online.

The new rentals won't cause a drop in rental prices. The new building is not sufficient to match the household formation rate. There are more and more people entering the rental market and the new builds are not sufficient to take all of them. Rents won't fall until building exceeds the required number required to match demand. AT the moment the rate of new builds is less than half or the required rate. There is no prospect of that changing for years yet. The only possible way in which rents will fall is if there is a drop in population and a consequent drop in the household formation rate.

phantom_lord

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. 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.

Dublin is a constrained market though. It's quite possible that demand continues to outstrip supply. We've a young growing population. Brexit could possibly add a ton of high earners that want to live in the city. Our planning regulations are a mess. The future could easily be a case where most people are priced out of the capital, but that there's till enough high earners to sustain the prices.