Need sensible advice on buy vs rent

A

autumnleaf

Registered User
Messages
38
Hi all,
I’m new to the forums so apologies if I’m asking something that’s come up before. I did a search but may have missed something!

I’m currently trying to make a decision about buying vs renting long-term. Unfortunately, there seems to be little coherent advice in this country; it’s all “buy, buy, buy” and “rent is dead money” and “property never decreases in value”. My parents are desperate to see me “settled” and my friends and work colleagues seem to be moving heaven and earth to get on the “property ladder”. I’m trying to make a decision based on logical and economic criteria, but the current property mania makes it really difficult!

Anyway, rant over. This is my current position:

Single, early 30s, no kids
Living in Galway
Income E30k pa
Rent E270 pm
Savings E10k + E20k due later this year from SSIA
No current debts

I’m only after starting to look at estate agent windows and the prices scare me already! Let’s say I could get a place for E300k: either a 2-bed apt near the city centre or a 3-bed house out in the far suburbs (but not so far that I have to spend half my day commuting). I plan to stay in Galway for at least 2 years, not sure after that but I could always rent the place.

Don’t know if I’ve missed anything. I’m pretty green and just starting to research this. Thanks in advance.
 
Be aware that if you buy now, you use your first time buyer stamp duty exemption. You won't necessarily have to pay stamp duty if you buy elsewhere later on, that depends on the value, age (new or second hand) and size of any house you buy subsequently.

Any stamp duty exemption availed of on purchase will also be clawed back if you rent out the property within 5 years of purchase.

My advice-don't buy in Galway if you feel that you are only going to be there for another 2 years. Don't go beyond your means just to satisfy your parents and keep up with your peers. If prices are scaring you, stay away.

How much do you realistically think you can borrow on a salary of €30k, and savings of €30k? For a €300k property, you would need a €270k mortgage, which is around 9 times your current annual income.

I would adopt a 'wait and see' approach. You have a fair bit iof savings-continue the good habits for a few more years and then see where you want to settle.
 
Hi there autumnleaf,

Not sure whether you're in Galway City or County.

There would definitely be a problem getting an adequate mortgage, based on your income, regardless of what multiple you can swing.

Have you thought about affordable housing, as per the info shown [broken link removed], or the shared ownership option, mentioned [broken link removed].

Unable to get into http://www.galway.ie/ , which is the County Council web-site.
 
In oder to borrow that amount of money even with a deposit you've still a shortfall of about 40k.

However you're also buying into a market that might be overheated. If you're unsure of whether you're going to stay more than 2 years, and at your current income, if it was me, I'd stay renting, but continue to save and invest.

The home is only worth as much as you are willing to pay for it, so if I was in that situation I would certainly think twice before buying.
 
Thanks for all the sensible advice :)

Just to clarify things: I’m living in Galway city. I might stay here for 20 years (it’s a nice town) but it’s too early to say. My parents have said they’ll “help me out”, but I don’t want to put their retirement savings at risk either.

I guess I’m worried that the prices will continue to rise and I’ll be left behind, no matter how much I save or how much my salary increases. But I don’t want to buy some shack out past Maam Cross just to be on the property ladder, either.

[As an aside, how do people afford homes here? I used to think a mortgage was 3.5 times your income, so where are all these 80k jobs? In Galway?]

Anyway, will continue with my 20 min commute and look into affordable housing (thanks for that link).
 
autumnleaf said:
I guess I’m worried that the prices will continue to rise and I’ll be left behind, no matter how much I save or how much my salary increases. But I don’t want to buy some shack out past Maam Cross just to be on the property ladder, either.
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I wouldnt worry sure you have you're freedom and the house prices are highly unlikely to keep rising forever. The reason prices are so high is after all because people are/were all worrying about getting on the property ladder, the minute this panicking (to get on the ladder) stops demand will fall and will and supply will outstrip demand its simple economics. I dont understand why people are dying to live in cities as an aside sure there is no quality of life in Dublin anymore in the city centre the streets are like copper face jacks on a Saturday night (well any night really) you can barely breathe its so congested! Its just like London I dont know how anyone could want to live in London city either its nice to have a bit of space imho. Rant over! :)
 
The €270 per month you spend on rent - are you sharing?

Unless you specifically want to change your living arrangements, you'll find that you'll be paying about 3 times that on interest alone on a €270k mortgage. In fairness, paying interest is just as "dead money" as renting in the first place.
 
Yes, sharing with 2 others. Luckily enough I get on with my current flatmates, altho I've had some bad sharing experiences in the past.
 
conor_mc said:
In fairness, paying interest is just as "dead money" as renting in the first place.
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This is spot on. I'm renting at the moment as the interest I'd paid back on a mortagage for a similar place would be about 12% more than my rent. So this !2% and the remainder of the capital I would have to pay are building up in my deposit account (making 3.5%) for a deposit on a house. Eventually prices will stop increasing and possibly fall and I'll buy when the interest I'd pay on the house is less than my rent. This only works over a short period (5 years).
 
If your happy where you live at moment and your happy with the people you share with I think you should try and find a place nearby suitable for 3 people and use your flat mates to help pay for your own place,it still should not cost you's anymore than you pay now and everyday the place is becoming your own,and this way your own rent wont be dead money
 
I've been doing a lot of research! Finally found out what "stamp duty" and "equity" really means (i know i must sound like an idiot, but this is all new to me, honest). My parents have offered to "help out" but since i'm the eldest of 5 and they've just started retirement i don't want to start too much of a precendent.

Leaving aside (for the moment) the issue of whether any bank would give me a mortgage, i checked out some repayment rates on the
http://www.jeacle.ie/mortgage/ie/ calculator (thanks to the link on this site).
One imaginary scenario:
- Mortgage 270k
- Years 30
- Interest rate 4%
- Annual inflation 2%
- Total interest % 41.82%

This gives me a monthly repayment of 1289. 1k more than i'm currently paying in rent :eek: Assuming i got a 3-bed house and assuming i could rent out both spare rooms at 300pm and assuming the rate remained steady, that's still 400 pm extra i'd have to find. Gulp. And that would probably be in a less-nice area than i live now (where i'm living the prices are closer to 500k).

So here's what i'm thinking about doing:
- Hold off on buying for now.
- When my SSIA matures, transfer the money into an easily-accessible savings a/c. I'm thinking Rabo Direct but i'm open to suggestion.
- Continue to save, increasing the amount to 350 pm (which i can comfortably do).

OK, i know i'm gambling on prices not going up too much (and yes i have read all the debates on this site and elsewhere). I can't work out how much of my monthly repayment would be interest. But apart from that is there anything i've missed? (Don't be afraid to call me clueless!)
 
autumnleaf said:
I can't work out how much of my monthly repayment would be interest.
Click to expand...
jeacle will tell you this....select the amortisation option and you'll see how much of the initial capital sum is being repaid each year (the rate of repayment obviously increases in inverse proprtion to the size of the remaining balance), divide that by twelve and subtract it from the monthly payment.
 
I was just in the chipper, and the woman was asking me about work, I said it was going grand except for the commute, she said would you not think about buying in Dundalk ( I'm from monaghan) I said i couldn't afford to, I might have to rent - as quick as lightning she said it's wasted money - I said so is the interest you pay to the bank, you won't bring the house with you, I said. It even makes the whole thing seem alot peculiar, that she has just finished buiding 3 town houses to rent out??? So I now believe when people say that, it is just a reflex saying with no actual thought gone into it...
 
Is there a rent vs buy calculator somewhere that takes into account
irish average insurance cost, cost of buying a home, property tax, homeowner's tax saving, and rent increases etc....
 
Autumnleaf

based on the details provided in first post, your salary allows you to raise a mortgage of €210,000 over 35 years assuming you have at least one spare room to rent out, so that leaves you with a requirement for a deposit of €90k should you wish to buy for €300k in Galway, if you opt for the 3 bed house, that mortgage figure could rise to €225,000

a €210k mortgage would cost approx €1000 per month not including your Tax Relief at Source or the cost of insurance products that you will have to take out

regards
DeirdreL

www.rea.ie
 
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