To buy or to rent

Lucy2020 · 13-07-2020 11:07am #1

Hi,
Just looking for some advice on whether to purchase our rented home or not. Myself and my husband are in our early thirties and currently renting a 3 bed semi-detached at €1000 a month and the option to buy it has come up. We have been renting for three years so have spent almost €36000 in rent so far ☹ The house is being offered to us for €220k which is within our budget and we have been approved for the mortgage. Simialr house in the area are this price too. We would like to buy or build a much larger house but wouldn’t be in the position to do this for another 2-3 years or so. So the plan was to continue renting. However now that the option to buy our rented house has come up we are considering whether to buy it or not. Unsure whether to use our first time buyers discount of 10% deposit on this house or keep it for a first time buy on a more expensive house. Would people recommend buying?

PhilipJ · 13-07-2020 11:31am

Hi Lucy,

First thing, What does your gut instinct tell you.
For me, Id purchase. By purchasing there is a chance that you can sell in 3 years for what you purchased at or indeed more than what you paid.
You will have built up a good credit rating with the bank in the mean time and can trade up/Build as when the time is right for you. Why pay someone else mortgage when you could be paying off your own - My train of thought.

Lucy2020 wrote: »

Hi,
Just looking for some advice on whether to purchase our rented home or not. Myself and my wife are in our early thirties and currently renting a 3 bed semi-detached at €1000 a month and the option to buy it has come up. We have been renting for three years so have spent almost €36000 in rent so far ☹ The house is being offered to us for €220k which is within our budget and we have been approved for the mortgage. Simialr house in the area are this price too. We would like to buy or build a much larger house but wouldn’t be in the position to do this for another 2-3 years or so. So the plan was to continue renting. However now that the option to buy our rented house has come up we are considering whether to buy it or not. Unsure whether to use our first time buyers discount of 10% deposit on this house or keep it for a first time buy on a more expensive house. Would people recommend buying?

Gael23 · 13-07-2020 11:33am

Purchase if you can. You will be building up equity which in a few years you can put towards your dream home,
The only thing is house prices may fall in the next few months as a result of Covid 19

Xterminator · 13-07-2020 11:38am

Depends on a ot of variables.

Location location location . The price of houses may fall somewhat. so if your maths is based on turning a handy profit and trading up a few years, you will have to be able to sell this house. As you know the area - what are the prospects of selling, is demand high in this area?

Why does a 3 bedroom house not suit your needs? are you anticipating in years to come you may have need of a bigger house, or is your family needs already leaning towards needing a bigger house now?

Would you be paying more in mortgage than rent? If less then you could put away more per month than currently once all the expenses of moving are done. If significantly more, does that mean trading up would be postponed for longer?

Your landlord is now looking to sell, and how much notice would you be due if they sell elsewhere. what would you pay to rent on the current market, are you going to see a rent hike if you move? Are there more places to rent in your chosen area?

Lucy2020 · 13-07-2020 12:11pm

Xterminator wrote: »

Depends on a ot of variables.

Location location location . The price of houses may fall somewhat. so if your maths is based on turning a handy profit and trading up a few years, you will have to be able to sell this house. As you know the area - what are the prospects of selling, is demand high in this area?

Why does a 3 bedroom house not suit your needs? are you anticipating in years to come you may have need of a bigger house, or is your family needs already leaning towards needing a bigger house now?

Would you be paying more in mortgage than rent? If less then you could put away more per month than currently once all the expenses of moving are done. If significantly more, does that mean trading up would be postponed for longer?

Your landlord is now looking to sell, and how much notice would you be due if they sell elsewhere. what would you pay to rent on the current market, are you going to see a rent hike if you move? Are there more places to rent in your chosen area?

Thanks for the reply. Demand is high in area so I would not be worried about being able to sell in the future. The 3 bedroom house itself suits our needs. We would want to move out of a housing estate setting in the future, further into the country with a bigger garden, a similar house in size but detached would be fine. No children yet – just the two if us and no plans for a couple of years. Our mortgage would be around €200 a month less than our rent. Our landlord has given us the option to buy but understands the current uncertainties with COVID-19 so has also given us the option to continue renting for a min 1 year less. So we are in no rush to move – rental properties are very scarce in this area. We are just worried to lose money on this purchase and then find ourselves in negative equity in 2-3 years when we would want to move further out of the city.

Lucy2020 · 13-07-2020 12:12pm

Gael23 wrote: »

Purchase if you can. You will be building up equity which in a few years you can put towards your dream home,
The only thing is house prices may fall in the next few months as a result of Covid 19

Yes it’s the fall in house prices that’s the worry

awec · 13-07-2020 12:15pm

If prices fell and you were stuck there for a decade would you be happy? If not, don't buy.

Xterminator · 13-07-2020 12:29pm

with a 10% deposit you are almost certainly not going to be in negative equity . A small contraction is possible in price, but not a severe one - that's not likely in current market conditions.

Taking into account you would also be 2400 euro a year better off from from the lowered monthly payment, plus you will hva e paid a little of the mortgage down, rather than the whole payment going to the landlord.

On balance i would go for it. If you get your purchase price back when selling in 3 years, then you would be significantly better positioned financially than if you continue to rent!

old_house · 13-07-2020 12:37pm

Another thing to consider is that you will probably have to move out if you don't buy it. Will you find something suitable if forced to move?
Normally I would say don't buy if you are not sure you like the house long term, but you have to consider the hassle of moving and the impact of potentially paying a higher rent afterwords. How would that impact on you future plans?

If you intended to stay in the house for another couple of years anyway you might as well buy it. At least you know what you get. Maybe you can negotiate a discount since the vendor doesn't need to go through the whole process of giving notice, waiting for you to vacate, scheduling viewings and the like. He might also save the fee for the EA.
You will have to spend some money on stamp duty, solicitor, survey etc., on the other hand you will save some money because you avoid moving and potentially a higher rent. That's what you know. The rest is guesswork.

SozBbz · 13-07-2020 12:37pm

I would not advise you to buy if your long term plans to build are only 2/3 years away. IMO you should probably only buy if you were planning on living there for 5-10 years minimum.

If you buy now, you won't be first time buyers and you won't realistically build up much equity in that house when you're only planning on keeping it for 2-3 years.
You'll pay €2,200 in Stamp Duty
You'll pay €2/3000 in legal fees
You'll probably pay €350-500 for a survey
You'll pay €150ish for a valuation.

You'll have similar set up costs if you buy/build again in 2-3 years, and you'll also need a 20% deposit as non FTBs.

The way I see it is that you're spending €1000 per month as tenants, so anything that goes wrong, the landlord pays. Theres a certainty in that number.

If you bought, You'd probably be paying €7/800 as a mortgage, but you'd be for LPT, mortgage protection insurance, house and contents insurance and the repair of anything that goes wrong.

So, for a saving of maybe only €250 per month, you'd have to pay all the above costs. I'm pretty sure that "saving" would pretty quickly evaporate.

I make it €6-9k over 2-3 years. but just adding up all the initial cost of buying and the ongoing costs of ownership, IMO it doesnt make sense to buy for such a short period.

Once you've bought, there is a risk that the market or wider economic circumstances change, and you're less mobile as owners versus tenants.

JimmyVik · 13-07-2020 1:20pm

Lucy2020 wrote: »

Thanks for the reply. Demand is high in area so I would not be worried about being able to sell in the future. The 3 bedroom house itself suits our needs. We would want to move out of a housing estate setting in the future, further into the country with a bigger garden, a similar house in size but detached would be fine. No children yet – just the two if us and no plans for a couple of years. Our mortgage would be around €200 a month less than our rent. Our landlord has given us the option to buy but understands the current uncertainties with COVID-19 so has also given us the option to continue renting for a min 1 year less. So we are in no rush to move – rental properties are very scarce in this area. We are just worried to lose money on this purchase and then find ourselves in negative equity in 2-3 years when we would want to move further out of the city.

I think that thought goes through everyones head whoever buys a house. Perfectly natural to worry about such a big decision.

MacDanger · 13-07-2020 1:28pm

It sounds from the OP that you wouldn't be considering buying if your LL wasn't selling the house you're living in, if that's the case then you'd be mad to buy.

Even if that's not the case, buying a house and planning to move within 2/3 years seems like a very short time imo.

On this question:

Unsure whether to use our first time buyers discount of 10% deposit on this house or keep it for a first time buy on a more expensive house.

There's no option to "keep" your first time buyers 10% deposit option. You're currently a first time buyer and are allowed to provide a min 10% deposit; once you buy, you will no longer be a first time buyer.

JustAThought · 13-07-2020 1:33pm

Lucy2020 wrote: »

Thanks for the reply. Demand is high in area so I would not be worried about being able to sell in the future. The 3 bedroom house itself suits our needs. We would want to move out of a housing estate setting in the future, further into the country with a bigger garden, a similar house in size but detached would be fine. No children yet – just the two if us and no plans for a couple of years. Our mortgage would be around €200 a month less than our rent. Our landlord has given us the option to buy but understands the current uncertainties with COVID-19 so has also given us the option to continue renting for a min 1 year less. So we are in no rush to move – rental properties are very scarce in this area. We are just worried to lose money on this purchase and then find ourselves in negative equity in 2-3 years when we would want to move further out of the city.

Personally I’d urge caution. You know exactly what you want long term and this is not it. You will spending money on legal fees - a couple of grand - and then be spending on property tax every year . When you go to sell you will incur capital gains tax on your profit and the legal fees, surveyers costs etc to move again . If you know you can stay at that rate for another year and have a 3 year plan in place for your dream why take this risk and why lose your first time buyers grant?

I’d also be asking why a random landlord is so happy to offer a set price in a high demand area to you? Is it a relation, or a pensioner, or someone why has cancer and wants the cash quick but is also prepared to wait a year?

Personally I’d be looking and saving and keep them for another year while you build towards your dream - assuming this is in a any way achievable.

I’m currently tracking actual
house sales in 2 different areas - some real estate agents show the percentage their figures are dropping - currently (in my areas of interest) ranging between 3.5% - 5% - and these are not ‘big’ trophy houses.

Negtive issue is an unspoken guilty secret in this city, as is buyers regret - there are lots of major plans hidden in archives - motorway expansions, giant sewage works, bus transport ireland proposals that will uproot communities and deatroy whole landscapes and streetscapes - thats just the start. I’d be looking very closely at their motivation and urging caution. You know your dream - why take such a costly and short term risk when you are guarnteed security for at least 1 1/2 of your next 3 years in your 3 year dream.

Lucy2020 · 13-07-2020 1:34pm

MacDanger wrote: »

It sounds from the OP that you wouldn't be considering buying if your LL wasn't selling the house you're living in, if that's the case then you'd be mad to buy.

Even if that's not the case, buying a house and planning to move within 2/3 years seems like a very short time imo.

On this question:

There's no option to "keep" your first time buyers 10% deposit option. You're currently a first time buyer and are allowed to provide a min 10% deposit; once you buy, you will no longer be a first time buyer.

Hi Thanks for the reply. sorry I know we can’t “keep” our first time buyers discount. What I meant was we are unsure whether or not to buy now as we won’t have the discount next time.

SozBbz · 13-07-2020 1:38pm

JustAThought wrote: »

Personally I’d urge caution. You know exactly what you want long term and this is not it. You will spending money on legal fees - a couple of grand - and then be spending on property tax every year . When you go to sell you will incur capital gains tax on your profit and the legal fees, surveyers costs etc to move again . If you know you can stay at that rate for another year and have a 3 year plan in place for your dream why take this risk and why lose your first time buyers grant?

There not CGT on your own home, thats only for investment properties (and only if you actually make a profit.)

SozBbz · 13-07-2020 1:40pm

Lucy2020 wrote: »

Hi Thanks for the reply. sorry I know we can’t “keep” our first time buyers discount. What I meant was we are unsure whether or not to buy now as we won’t have the discount next time.

Just to clarify -you know there is no such thing as a first time buyers discount?

There is a lower deposit requirement, but you're still paying the same amount for the property.

There is the help to buy scheme which is a tax rebate available to FTBs on new builds under €500k only.

You wouldnt get any discount/rebate on buying an ex rental. And once you've owned a property at all, you will need a 20% deposit next time around.

Lucy2020 · 13-07-2020 1:49pm

SozBbz wrote: »

Just to clarify -you know there is no such thing as a first time buyers discount?

There is a lower deposit requirement, but you're still paying the same amount for the property.

There is the help to buy scheme which is a tax rebate available to FTBs on new builds under €500k only.

You wouldnt get any discount/rebate on buying an ex rental. And once you've owned a property at all, you will need a 20% deposit next time around.

Yes I understand. From my original post I said we are unsure whether to use our first time buyers “discount” of 10% deposit on this house. I understand that we need 20% next time. I’m using the term “discount” incorrectly but I understand the theory behind it. I should have phrased it differently. Thanks for the help and advice

To buy or to rent

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