Can't afford family home - should I invest instead?

N

NovDecJan

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2
Age: 37
Spouse’s/Partner's age: 37

Number and age of children: 1 - 3 years


Income and expenditure
Annual gross income from employment or profession: €43,000
Annual gross income of spouse: N/A

Monthly take-home pay: €2600

Type of employment: Civil Servant

In general are you:
Saving €600pm


Summary of Assets and Liabilities
Renting at €850pm
Cash of €165,000

Family home mortgage information
Sold our family home in 2022 (no mortgage) and have been looking for another property since. Just been declined a mortgage due to my contract only being temporary, unable to afford a house in the current market with €165,000.

Other borrowings – car loans/personal loans etc
No debt.


Buy to let properties

Other savings and investments:
Single pension with HSE. Only been contributing since Dec, 2022

Do you own any investment or other property? No, but I'm considering buying as an investment.

What specific question do you have or what issues are of concern to you?

I've been declined a mortgage and can't afford a family home in an area we want to live in. I have €165,000 in cash that's just sat in a current account earning nothing. I'm considering whether to invest in a buy to let as a cash buyer. Apartments around Waterford City are between €120k to €140k and rental return is still quite high. I'm wondering might this be a good investment for a couple of years to allow me to save more and increase my budget for my own home.

Or would I be better investing in something else?
 
NovDecJan said:
Just been declined a mortgage due to my contract only being temporary,
Click to expand...

Will you be made permanent? If so, when?

Can you get a permanent job somewhere?

Can your partner work? Presumably with chid care, it's not worth it.

How much would a home in the area you want to live in cost?

Brendan
 
Buying an apartment does not seem like the right idea.

The advantage would be that it will probably give you a hedge against property prices rising. In other words, if property goes up 20% before you are able to buy your home, then the apartment will probably go up around 20% as well.

But the downsides outweigh this advantage.

1) When you are ready to buy, it might be very difficult or time consuming to sell the property.
2) You face transaction costs - stamp duty and legal fees.
3) But the big disadvantage is that the tenant might refuse to leave or make it very difficult for you to terminate the tenancy.

So, on balance, I don't think you should buy an investment property.

Brendan
 
I think I would keep saving and do everything you can to secure a permanent employment contract so you can get a mortgage.

Investing in a BTL can seem attractive, especially if you are a cash buyer, but after tax it is not as lucrative as it seems.

You also have all the disadvantages Brendan mentions as well as the risk of the apartment falling in value.
 
At the very least you should be moving the money into an interest paying account.

If you are not comfortable locking it away for any length of time, the open a series of regular savings accounts between yourself and your partner.

Your focus should be on getting a permanent position. You should then be in a good position to get a relatively small mortgage- one with roughly the same repayments as the rent you are now paying. this, together with your savings should enable you to buy ( depending on where you are, of course).
 
Finding a permanent job is key to getting mortgage approval. If you secure a permanent job, you'll have 1 year probation so put your savings in an interest saving account with the likes of Raisin as soon as you can.

Otherwise, there are semi-Ds for €180-200k in Waterford City on the market. Maybe not a popular approach on this forum, but you could see about getting a personal loan from the Credit Union to make up the difference. Say €45k @ 10.6% interest over 5 years would be €970 per month in repayments. That's not far off your current rent. Concentrate on aggressively paying it down and you'll be in a good position in a few years.
 
Bluecup said:
Maybe not a popular approach on this forum, but you could see about getting a personal loan from the Credit Union to make up the difference.
Click to expand...

Clearly a mortgage would be cheaper.

But if someone is short a small amount to buy a home and have to pay 9%, so be it.

It's irrelevant whether that point of view is popular or unpopular on askaboutmoney. It's not an opinion poll.

Brendan
 
Brendan Burgess said:
Clearly a mortgage would be cheaper.

But if someone is short a small amount to buy a home and have to pay 9%, so be it.
Click to expand...
Except for the fact that a credit union can't issue a personal loan to fund the purchase of a property. I'm sure some do in practice but their regulations prevent it, which seems mad where the LTV might be 25%/
 
NovDecJan said:
Age: 37
Spouse’s/Partner's age: 37

Number and age of children: 1 - 3 years


Income and expenditure
Annual gross income from employment or profession: €43,000
Annual gross income of spouse: N/A

Monthly take-home pay: €2600

Type of employment: Civil Servant

In general are you:
Saving €600pm


Summary of Assets and Liabilities
Renting at €850pm
Cash of €165,000

Family home mortgage information
Sold our family home in 2022 (no mortgage) and have been looking for another property since. Just been declined a mortgage due to my contract only being temporary, unable to afford a house in the current market with €165,000.

Other borrowings – car loans/personal loans etc
No debt.


Buy to let properties

Other savings and investments:
Single pension with HSE. Only been contributing since Dec, 2022

Do you own any investment or other property? No, but I'm considering buying as an investment.

What specific question do you have or what issues are of concern to you?

I've been declined a mortgage and can't afford a family home in an area we want to live in. I have €165,000 in cash that's just sat in a current account earning nothing. I'm considering whether to invest in a buy to let as a cash buyer. Apartments around Waterford City are between €120k to €140k and rental return is still quite high. I'm wondering might this be a good investment for a couple of years to allow me to save more and increase my budget for my own home.

Or would I be better investing in something else?
Click to expand...
May i be so bold to ask why you did sell?
 
Thanks everyone for your input. My partner is self employed and although not running at a loss he's not earning enough to make it worth while him being a joint applicant on the mortgage. But if he has weeks where he's earned more he'll also save.

I'll look into my options for decent savings accounts and use Raisin as a starting point. If I use a high rated country (Latvia maybe?) do I still need to be conservative with how much I save with them?

@moneymakeover - We sold because we weren't happy with the area (lots of changes, never enough parking, nuisance neighbours with very loud dogs!).

Thank you all, much appreciated.
 
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