Am I mad not wanting to get a mortgage?

Ramasun

I'd rather be paying off a fixed sum to a bank than playing roulette with rental rates.

It's difficult and expensive to get a mortgage because once you're in it's very hard for any creditors to put you out. I've mixed feelings about that.

Timfy

I agree with this to a point, you have to have an optimistic outlook on life to be a long term renter!

However, a €250,000 mortgage will cost over full term VERY roughly (counts on fingers) €324,000. At the end of your mortgage term you will have the equity on your house... I will have topped up my pensions and indemnities by around €100,000, a decent safety net.

Don't forget, once outside of the cities, rent is very much lower. I am currently in a large 3 bed detached on a couple of acres overlooking the sea in Co Galway and paying about a third of a 2 bed flat in Blanchardstown

ParkRunner wrote: »

That’s the key really. As long as you (and any dependants) have good health and wealth renting is a viable option. If those things fail you could end up in a bit of trouble trying to manage high rents or finding an appropriate alternative. Long term fixed interest mortgages are slowly becoming a reality in this country thankfully. Renting should be a temporary measure unless you’re going to be moving around a lot.

Louis Friend

Timfy wrote: »

I agree with this to a point, you have to have an optimistic outlook on life to be a long term renter!

However, a €250,000 mortgage will cost over full term VERY roughly (counts on fingers) €324,000. At the end of your mortgage term you will have the equity on your house... I will have topped up my pensions and indemnities by around €100,000, a decent safety net.

Don't forget, once outside of the cities, rent is very much lower. I am currently in a large 3 bed detached on a couple of acres overlooking the sea in Co Galway and paying about a third of a 2 bed flat in Blanchardstown

That might suit you. But I like having shops, restaurants, work, the airport, my friends, etc all on my doorstep.

I like the security of living “rent-free” with a valuable asset when I’ve paid off my mortgage.

And I like the idea of planting something in my garden today or making some sort of home improvement and hoping that I’ve many decades to enjoy it.

Casati

It’s gas that we are programmed to assume you need a mortgage to own a house, how many people don’t consider how they can buy a house for cash? Avoiding a mortgage and saving isn’t a bad ideal, especially in a market where prices are artificially high versus income levels as you avoid interest.

A typical 300k mortgage over 30 years at 4% interest will cost you 215k in interest payments with payment of 1423 per month.

Somebody who bought a new house in 2006 for 300k would likely have a house maybe worth 300k now but using the mortgage example above they would still owe 200k, despite having made payments of over 250k in that time. Yes most of the repayments are interest in early years.

If you don’t want a mortgage, then live as cheap as possible now - inc all options re moving home, and invest as much money as possible and watch it grow.

S&P 500 has returned 10% pa+ return over the last 15 years. If you had invested even half a mortgage repayment, i.e 715 a month into an average basket of stocks since 15 year ago, it would now be worth 300k and you could buy that house for cash

ParkRunner

Timfy wrote: »

I agree with this to a point, you have to have an optimistic outlook on life to be a long term renter!

However, a €250,000 mortgage will cost over full term VERY roughly (counts on fingers) €324,000. At the end of your mortgage term you will have the equity on your house... I will have topped up my pensions and indemnities by around €100,000, a decent safety net.

Don't forget, once outside of the cities, rent is very much lower. I am currently in a large 3 bed detached on a couple of acres overlooking the sea in Co Galway and paying about a third of a 2 bed flat in Blanchardstown

I agree with you on the quality of life aspect for sure. I moved from a small terraced house in north county Dublin to a large detached house with land in the sunny south east. The equity built up in the Dublin house meant the next mortgage was a lot lower than it would otherwise have been. But I wouldn’t have been able to afford to stay in Dublin with a growing family. Everyone’s circumstances are different I guess so once people make an informed decision that will suit long term that’s the main thing.

dubrov

Casati wrote: »

It’s gas that we are programmed to assume you need a mortgage to own a house, how many people don’t consider how they can buy a house for cash? Avoiding a mortgage and saving isn’t a bad ideal, especially in a market where prices are artificially high versus income levels as you avoid interest.

A typical 300k mortgage over 30 years at 4% interest will cost you 215k in interest payments with payment of 1423 per month.

Somebody who bought a new house in 2006 for 300k would likely have a house maybe worth 300k now but using the mortgage example above they would still owe 200k, despite having made payments of over 250k in that time. Yes most of the repayments are interest in early years.

If you don’t want a mortgage, then live as cheap as possible now - inc all options re moving home, and invest as much money as possible and watch it grow.

S&P 500 has returned 10% pa+ return over the last 15 years. If you had invested even half a mortgage repayment, i.e 715 a month into an average basket of stocks since 15 year ago, it would now be worth 300k and you could buy that house for cash

I disagree. That 215k in interest in 30 years will likely buy you the equivalent of about 110k today. For that you get the use of the property for 30 years.

With rising rents and property prices some might never be able to buy in cash even if they waited forever. Many need to move on with their lives rather than waiting at home for 10-15 years to buy with cash. Even those who bought in 2007 are probably better off today than if they had continued renting.

Also, purchasing a property is significantly more tax advantageous than investing in other asset classes like the stock market.

Graham

Casati wrote: »

It’s gas that we are programmed to assume you need a mortgage to own a house, how many people don’t consider how they can buy a house for cash? Avoiding a mortgage and saving isn’t a bad ideal, especially in a market where prices are artificially high versus income levels as you avoid interest.

A typical 300k mortgage over 30 years at 4% interest will cost you 215k in interest payments with payment of 1423 per month.

Somebody who bought a new house in 2006 for 300k would likely have a house maybe worth 300k now but using the mortgage example above they would still owe 200k, despite having made payments of over 250k in that time. Yes most of the repayments are interest in early years.

If you don’t want a mortgage, then live as cheap as possible now - inc all options re moving home, and invest as much money as possible and watch it grow.

S&P 500 has returned 10% pa+ return over the last 15 years. If you had invested even half a mortgage repayment, i.e 715 a month into an average basket of stocks since 15 year ago, it would now be worth 300k and you could buy that house for cash

Hmmm

I can't help but think a bit of cherry-picking there in terms of both the 2006 example and the 10%+ return.

They certainly couldn't be classed as representative examples for most.

You've also ignored the 15 years of rent most would have to pay while saving.

Louis Friend

Casati wrote: »

A typical 300k mortgage over 30 years at 4% interest will cost you 215k in interest payments with payment of 1423 per month.

Somebody who bought a new house in 2006 for 300k would likely have a house maybe worth 300k now but using the mortgage example above they would still owe 200k, despite having made payments of over 250k in that time

You’re basically destroying your own argument even though you’ve cherrypicked the figures and dates to suit it.

You’ve picked the worst possible time to buy a property and yet that person has done fine. They’ve paid out an ‘extra’ €150k for 15 years, so €10k a year, which is still less than the property would cost to rent, nevermind the certainty and fixity of tenure. And over the 20-30 year time-horizon that people have referred to within this thread, they should do pretty well.

radia

How much is the house worth? You say your parents will have money saved for nursing home care - how much? If they're not going to use Fair Deal and eat into the equity in the house, then there's a good chance that they will use up a large sum of cash, leaving very little behind.

If the sister has her own home where she lives, then she will need to pay capital acquisitions tax on the full value of the house, over the category A threshold. So currently she would have to pay 33% tax on everything over €335k. That could be a very significant tax bill. Where will she find the money to pay that?

And will there be enough in the way of non-house assets to give you stuff of similar value? Quite probably not.

It seems that by far the better solution would be to leave the house to both offspring equally. Between them they could then inherit a house worth up to €770k without CAT, making a speedy sale much less likely to be necessary. They could then work out how to proceed - sell it to a third party, have one sibling buy the other out, keep it with one living in it for their lifetime, etc.

The current situation described seems to have no advantages for either sibling, and seems far more likely to cause financial difficulties and family stress.

purpleshoe

Based on what you have outlined, this is an appalling decision made by your family. Unlikely that this decision won't result in a family rift.

There is zero gain for your sister. In fact this scenario, should it come to pass, makes her financially worse off. You appear ok with this, or have you simply applied no foresight?

Time you put on your big boys pants and step up so you are not a drain on others.

Reading this thread and your responses, you are not mad for not wanting a mortgage but you are coming across as a leach for not wanting a mortgage.

kippy

Casati wrote: »

It’s gas that we are programmed to assume you need a mortgage to own a house, how many people don’t consider how they can buy a house for cash? Avoiding a mortgage and saving isn’t a bad ideal, especially in a market where prices are artificially high versus income levels as you avoid interest.

A typical 300k mortgage over 30 years at 4% interest will cost you 215k in interest payments with payment of 1423 per month.

Somebody who bought a new house in 2006 for 300k would likely have a house maybe worth 300k now but using the mortgage example above they would still owe 200k, despite having made payments of over 250k in that time. Yes most of the repayments are interest in early years.

If you don’t want a mortgage, then live as cheap as possible now - inc all options re moving home, and invest as much money as possible and watch it grow.

S&P 500 has returned 10% pa+ return over the last 15 years. If you had invested even half a mortgage repayment, i.e 715 a month into an average basket of stocks since 15 year ago, it would now be worth 300k and you could buy that house for cash

15 years ago we bought our first house. We've gotten married and have had a number of kids since, as well as sold that house (at a paper loss) and moved to a better location and house.

I don't know how we could have had a family, rented, saved, and managed to move to the house we are in now by your method. Granted if you are smart enough/paid well enough to start investing that kinda money at 22 (and not touching it for 15 years) you might have 300K cash in your mid to late thirties (at best) but where will things be in 15 years time with respect to houses prices and or stocks?

the-island-man

fairyribbon wrote: »

I should adD- I am planning eventually to live in my parents house rent and mortgage free

Does right of residence mean the right to sole residence or can you sister rent out rooms to other tenants?

Found the answer here:

https://ipoa.ie/life-interest-v-right-to-reside/

beveragelady

It's understandable that people have differing views on whether it's smarter in the long term to rent, wait, buy, re-sell etc. There arguments to be made for each, from the point of view of cold finance, sentimentality, security, family and all the other variables.

This isn't particularly relevant to the OP. His plan is to live rent free. He's not looking for the best way to invest the money that we all need to spend on accommodation, he thinks his family will allow him to keep that money and still avail of the accommodation forever.

It is possible, as somebody mentioned earlier, that there are some special circumstances such as a disability that might motivate the family to take responsibility in this way. It would explain why the parents are leaving the house to the sister but allowing him to stay in it. It might be their way of passing on the supportive role to the sister to ensure his future stability.

Louis Friend

kippy wrote: »

15 years ago we bought our first house. We've gotten married and have had a number of kids since, as well as sold that house (at a paper loss) and moved to a better location and house.

I don't know how we could have had a family, rented, saved, and managed to move to the house we are in now by your method. Granted if you are smart enough/paid well enough to start investing that kinda money at 22 (and not touching it for 15 years) you might have 300K cash in your mid to late thirties (at best) but where will things be in 15 years time with respect to houses prices and or stocks?

Sounds great…operate in the jungle that’s the rental market for a decade and a half, ride the rollercoaster of the stock market for 15 years, and after all of that be a cash buyer for a 2 bed apartment in Tallaght.

Perpetual renters are like people sipping urine and telling you it’s great.

listermint

Timfy wrote: »

I agree with this to a point, you have to have an optimistic outlook on life to be a long term renter!

However, a €250,000 mortgage will cost over full term VERY roughly (counts on fingers) €324,000. At the end of your mortgage term you will have the equity on your house... I will have topped up my pensions and indemnities by around €100,000, a decent safety net.

Don't forget, once outside of the cities, rent is very much lower. I am currently in a large 3 bed detached on a couple of acres overlooking the sea in Co Galway and paying about a third of a 2 bed flat in Blanchardstown

That's all fine, but how are you going to afford that house over looking the sea on Galway at what 800 900 pm with no Job? You'll be eating into your modest safety net or you'll be forced to work.

So where is the enjoying any retirement?

tom1ie

tom1ie wrote: »

Where did you find out that info?

Happened to come across it when looking for HAP rates. https://droghedalife.com/news/hap-scheme-not-meeting-needs-of-louth-renters-munster
"Just under a quarter receive the maximum top-up of 20%". That sets a floor on rental for a house at about €1300 per month. Someone on minimum wage would have to spend 85% of take home pay to match it. Insane.

awec

Timfy wrote: »

I agree with this to a point, you have to have an optimistic outlook on life to be a long term renter!

However, a €250,000 mortgage will cost over full term VERY roughly (counts on fingers) €324,000. At the end of your mortgage term you will have the equity on your house... I will have topped up my pensions and indemnities by around €100,000, a decent safety net.

Don't forget, once outside of the cities, rent is very much lower. I am currently in a large 3 bed detached on a couple of acres overlooking the sea in Co Galway and paying about a third of a 2 bed flat in Blanchardstown

Actually you miss the point. At the end the person with the mortgage will have a house. Their monthly housing costs will be zero. Almost nobody in Ireland downsizes so the equity is really only beneficial to those who inherit it. Housing is generally the largest expense in people's lives, so not having to pay for it is a big reason as to why people can have a decent lifestyle on a pension income (which is going to be a fraction of what your working income was unless you have an insane pension fund).

You will have nothing, and will have to pay to house yourself for as long as you live. What you are likely to find is that once you retire and income stops your standard of living will have to drop significantly in order for you to be able to continue to support yourself for as long as you will need to (could be 30 years post retirement).

BTW 100k is absolutely nothing pension wise for someone who will have to pay for housing.

Of course, many people with mortgages pay them off long before they retire and so they enjoy many years of high income and low outgoings where they can either pump way more money into their pension or enjoy a more care free lifestyle.

BailMeOut

Knowing you will own your home when you retire is a big weight of most people's minds and the main driving factor for us wanting to buy. If you chose not to buy just make sure you still save for your retirement, invest wisely and max your pension each year so you have a nest egg at the end and so can still pay rent.

riclad

if you take inflation into account by the time you retire 100k might buy
you a small house in the middle of nowhere ,
do you want to live in donegal or cavan,most people in rural area,s need to have a car,
you have to take into account rental expenses .
versus the cost of a mortgage.
Are you sure you will be allowed to live there in 20-30 years from now?
if you are not buying ,you should be saving 10-20 per cent of your income each month.

Wanderer78

riclad wrote: »

if you take inflation into account by the time you retire 100k might buy
you a small house in the middle of nowhere ,
do you want to live in donegal or cavan,most people in rural area,s need to have a car,
you have to take into account rental expenses .
versus the cost of a mortgage.
Are you sure you will be allowed to live there in 20-30 years from now?

id say at current rates of property price inflation, you might be able to buy a brick for 100k

Would you want to live with your sister?

What if she has a spouse and a rake of kids, would you want to live with them?

Does right to residence guarantee you a bedroom/ living space of your own?

Just things to consider.

I'm fond of my siblings, but I wouldn't want to live with them.

(Also, do you plan on staying single? I don't think a right to residence would extend to any spouse of yours?)

Aisling(",)

It's worth the OP considering that a life interest in a property is a taxable inheritance and depending on his age when he moves in could result in a tax liability for him.

Some people seem to think its an unheard of thing to see life interests in a property given in a will but it comes up quite a bit.It is important to note that the remainderman (sister) can still sell the property before the OP dies. I've mainly seen a life tenancy given to elderly or disabled individuals. If someone remarries and wants their spouse to be secure but for the property to go to their children this would be a common scenario.

I am assuming the OP is single because there's no mention of a spouse or kids.I would think if they were in the picture then there might be more of a push for them to own their own property. It gives the freedom to fully establish a home rather than waiting 20/30 years for his parents to die and him to move back into the family home.

HBC08

fairyribbon wrote: »

I am not, I think the house will be lest to my sister but I can live in it for as long as I want. So even though I will have a roof over my head , I am feeling pressure to buy an apartment for equity purposes not really necessity. Obviously if I bought a place I would live on it I would not leave it idle.

What benefit is it to your sister if the house is left to her but a tenant (you) is going to live there rent free for life?

standardg60

Aisling(",) wrote: »

It's worth the OP considering that a life interest in a property is a taxable inheritance and depending on his age when he moves in could result in a tax liability for him.

Some people seem to think its an unheard of thing to see life interests in a property given in a will but it comes up quite a bit.It is important to note that the remainderman (sister) can still sell the property before the OP dies. I've mainly seen a life tenancy given to elderly or disabled individuals. If someone remarries and wants their spouse to be secure but for the property to go to their children this would be a common scenario.

I am assuming the OP is single because there's no mention of a spouse or kids.I would think if they were in the picture then there might be more of a push for them to own their own property. It gives the freedom to fully establish a home rather than waiting 20/30 years for his parents to die and him to move back into the family home.

At what age does the tax liability cease? And does the right of residence continue to exist after the sale of the house?

If I was the OP, and had no ambition to marry or have dependents, and was happy to wait for my parents to die before i moved back into their home where i would live until I die, and I could afford to support myself in the meantime, and then my younger sister would inherit the property for the benefit of her dependents, then I would see no need to acquire another property.

awec

Surely the only way you can sell a property with a right of residence on it is if the person waives their right and agrees to the sale, or the new buyer continues to honour it.

Otherwise a right of residence is a totally pointless thing.

Casati

awec wrote: »

Surely the only way you can sell a property with a right of residence on it is if the person waives their right and agrees to the sale, or the new buyer continues to honour it.

Otherwise a right of residence is a totally pointless thing.

Right of residence is very common covenant in wills - its most common use is where a son or daughter inherits a family farm and as part of the deal he/ she must allow a parent or aunt or uncle etc to stay living in the house until they die. its very unusual for such covenant to exist between siblings unless one was significantly older than the other but if that's what they want you can't stop them

Casati

dubrov wrote: »

I disagree. That 215k in interest in 30 years will likely buy you the equivalent of about 110k today. For that you get the use of the property for 30 years.

With rising rents and property prices some might never be able to buy in cash even if they waited forever. Many need to move on with their lives rather than waiting at home for 10-15 years to buy with cash. Even those who bought in 2007 are probably better off today than if they had continued renting.

Also, purchasing a property is significantly more tax advantageous than investing in other asset classes like the stock market.

I'd love to know what part of my post you disagree with?

ted1

fairyribbon wrote: »

I am not, I think the house will be lest to my sister but I can live in it for as long as I want. So even though I will have a roof over my head , I am feeling pressure to buy an apartment for equity purposes not really necessity. Obviously if I bought a place I would live on it I would not leave it idle.

If they go into a nursing home they may need to sell the house. If they want to enjoy retirement they may sell the house. If your sister needs money she may look to sell her inheritance or rent it at market rates.

If you bother getting a job your parents house might not suit you.

Just noticed you posted that your sister already has bought a house of her own.

It seems strange that if thats the case, that your parents wouldn't will their property to their children, equally.

Anything less is making the situation overly-complicated. I'd ask them why they are doing it this way, and of what benefit they think it is to you and your sister.

standardg60

Deleted User wrote: »

Just noticed you posted that your sister already has bought a house of her own.

It seems strange that if thats the case, that your parents wouldn't will their property to their children, equally.

Anything less is making the situation overly-complicated. I'd ask them why they are doing it this way, and of what benefit they think it is to you and your sister.

Sister is the youngest, old habits die hard.