# Buying a house - how big to go?



## confused12 (6 Apr 2021)

Age: 32

Annual gross income from employment or profession: 100k

Monthly take-home pay: 5k

Type of employment: doctor, contractor

In general are you:
(a) spending more than you earn, or
*(b) saving?: usually about half my income*

Rough estimate of value of home: nil current home


Other borrowings – nil

Do you pay off your full credit card balance each month? yes

Savings and investments: 200k, cash

Do you have a pension scheme? no

Do you own any investment or other property? No

Ages of children: Nil

Life insurance: Nil


My specific question is about housing. I have 200k and am ready to buy in Dublin. I want to buy a PPOR, with a plan to buy a place with 2-3 bedrooms, renting one of them under the rent a room scheme.

What are the issues with going big - eg buying a place worth 500k? I assume the more I borrow the bigger the repayment and the longer the period of indentured servitude. I also wonder about the lack of freedom of having a large mortgage if I want to travel etc – and I will want to travel

I'm assuming also that I'll be able to cover a lot of the mortgage with rental income alone. And if I change my mind I can always sell the house (provided no massive drop) and dispose of the mortgage.


The other option is buying a place for 200-300k, maybe a small 2 bedroom in a remoteish location. This would mean little to no borrowing but also very little stress and could rent a room also to help with the mortgage.

What are the thoughts?


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## Brendan Burgess (6 Apr 2021)

confused12 said:


> I want to buy a PPOR,



What is a PPOR. You used that in the other post as well.

Do you mean a PPR - Principal Private Residence? 

Brendan


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## Brendan Burgess (6 Apr 2021)

You are young.
You have good savings.
You have a high income. 

Buy a house to suit your needs. 

You can comfortably borrow up to €350k. 

The repayments on €350k at 3% for 30 years would be €1,500 a month.

If interest rates rise to 5%, the repayments will rise to €1,900 a month, still very comfortable.

You are single, so you can rent a room which will cover a good part of the repayment. 

As you are saving half of your income, you can pay capital off the mortgage to bring it down to an even more comfortable level. 

When you have the mortgage down to €250k , then you should start contributing to a pension.

Brendan


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## Brendan Burgess (6 Apr 2021)

You say that you want to travel, but I am assuming that you see Ireland as your long-term home? 

If you are not sure where you are going to settle down long-term, then maybe you should not buy a home at all. 

Let's say you decide to work and do further study in America and then choose to settle in America. It would be handy to have the €200k to buy a house there.   If it's tied up in a house in Dublin and you have a mortgage, it might make it hard to buy there. 

But I don't think that the price of the house in Ireland matters.  If you are not fairly sure that Ireland is your long-term home, then don't buy at all.

Brendan


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## DublinHead54 (6 Apr 2021)

You probably need to decide what area in Dublin you want to live as the type of property 550k (deposit + 350k mortgage) will get you across the capital will greatly vary.


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## confused12 (6 Apr 2021)

Brendan Burgess said:


> What is a PPOR. You used that in the other post as well.
> 
> Do you mean a PPR - Principal Private Residence?
> 
> Brendan



Meant principal place of residence...the one you don't pay CGT on



Brendan Burgess said:


> You are young.
> You have good savings.
> You have a high income.
> 
> ...


Interesting. That's a lot of house. I come from a background where my parents got severely burned in the Celtic Tiger so borrowing that much sounds like a lot..but the maths look okay. Is there any particular reason pension contribs become more worthwhile at 250k


Brendan Burgess said:


> You say that you want to travel, but I am assuming that you see Ireland as your long-term home?
> 
> If you are not sure where you are going to settle down long-term, then maybe you should not buy a home at all.
> 
> ...


I see Ireland as my long-term home, definitely. 


Dublinbay12 said:


> You probably need to decide what area in Dublin you want to live as the type of property 550k (deposit + 350k mortgage) will get you across the capital will greatly vary.


Agreed. I'm looking at blackrock/sandymount/monkstown area


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## Coldwarrior (6 Apr 2021)

confused12 said:


> Interesting. That's a lot of house.





confused12 said:


> I'm looking at blackrock/sandymount/monkstown area


I'm afraid 550k isn't a lot of house in those areas, though you may be able to get a decent 3 bed for that.


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## Brendan Burgess (6 Apr 2021)

confused12 said:


> Is there any particular reason pension contribs become more worthwhile at 250k



It's discussed at length on other threads and my opinion is a minority opinion. 

Your first priority should be to buy a home. That takes priority over starting a pension.

Your next priority is to have a comfortable mortgage - I think that twice your income is comfortable.

When you have achieved that, start your pension.

But others will tell you that "You can't be too young to start a pension" and you should have started when you first got pocket money. I don't agree. 

At 32, you have plenty of time. 

But others would think that a mortgage of €350k on a house worth €550k with a salary of €100k is very comfortable and you should start a pension now.   

As long as you save by one means or the other, you will be alright.

Brendan


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## NoRegretsCoyote (6 Apr 2021)

confused12 said:


> Type of employment: doctor, contractor





confused12 said:


> Do you have a pension scheme? no




I assume you've worked in an Irish hospital at some point, no?

Then you will have built up some public service pension entitlements.


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## SPC100 (6 Apr 2021)

Maybe your should go bigger?

Do you expect earnings to change much over next twenty years? E.g. become a consultant or similar could double earnings?. Your mortgage would look very small if your income doubled.

Your area saving 2.5 per month, which seems that you can easily afford mortgage and pension.

How much (if any) rent are you paying? If you are paying rent that would make the numbers you are taking about even more comfortable.

Any idea on how many kids you might want in the future?


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## bish123 (6 Apr 2021)

If I were you, I would buy an apartment (say 2 bed) and spend no more than 250-300K. Presumably you are single and still want to see the world. A large mortgage might limit options at this stage. A smallish apartment will provide you enough base you can call home and will help you consolidate funds (mortgage instead rent). You can sell this and use it as lump sum when ready for family home..... and a big mortgage..


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## confused12 (7 Apr 2021)

NoRegretsCoyote said:


> I assume you've worked in an Irish hospital at some point, no?
> 
> Then you will have built up some public service pension entitlements.


Yes, I worked for a year in an Irish hospital so that's true, I would have a tiny pension somewhere


SPC100 said:


> Maybe your should go bigger?
> 
> Do you expect earnings to change much over next twenty years? E.g. become a consultant or similar could double earnings?. Your mortgage would look very small if your income doubled.
> 
> ...


I don't expect my earnings to increase, as I'm optimising now for free time and other projects. So I project my earnings will stay the same. But good point. I am paying rent at the moment, about 800 a month. Kids wise, maybe 2-3, but I don't have a partner so that's all speculation, might end up with none. That's part of the difficulty. I think it would be nice to find a middle ground where I got a place that would be nice to live in with a housemate or 2 at the moment, but that could also serve as a 'starter' family house maybe


bish123 said:


> If I were you, I would buy an apartment (say 2 bed) and spend no more than 250-300K. Presumably you are single and still want to see the world. A large mortgage might limit options at this stage. A smallish apartment will provide you enough base you can call home and will help you consolidate funds (mortgage instead rent). You can sell this and use it as lump sum when ready for family home..... and a big mortgage..


This was more or less my original thought. But when I started looking at places in Dublin for 200-300k the value wasn't great. The value isn't great above that either, but the places were more palatable. What's less appealing to me about that also is just the idea of having to go through the process again after selling etc. If I can keep it simple, I will. But the other side of that is I know it's possible to raise a kid in an apartment, but maybe not ideal. Having said that, I think I generally prefer houses to apartments


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## Clamball (7 Apr 2021)

I think buy a house for approx €500K in an area you wish to live in, with a €350K mortgage, using €150K of your savings.  Rent out 1/2 rooms under the rent a room scheme.  According to Brendan’s calculation you will easily afford the mortgage, repayment of €1500-€1900 per month.  If you like the house use it as your PPR until you want to travel, have a family and want to move to a bigger house.

If you want to travel then rent out the whole house while you are away.

If you end up with a partner and family then use the house as your PPR until you decide to move to a larger / different area.

If you work abroad and decide to live and purchase a home there, then you can make another decision to sell the Dublin house or keep it as a place to retire back to if you ever come back to Ireland.


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## Brendan Burgess (7 Apr 2021)

confused12 said:


> I think it would be nice to find a middle ground where I got a place that would be nice to live in with a housemate or 2 at the moment,



Your future is uncertain.
Your present is reasonably certain.

So buy a house in which you wish to live now.  Don't buy a house so that it might be a  good investment.  Don't buy a house because it might be easy to rent if you live abroad.

Your primary objective is to buy a house in which you will enjoy living.

You will regret compromising this objective to allow for some other objective which might not come to pass.

Brendan


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## NoRegretsCoyote (7 Apr 2021)

confused12 said:


> Yes, I worked for a year in an Irish hospital so that's true, I would have a tiny pension somewhere


If you worked less than 24 months after 2013 you don't have an entitlement. You can apply for a refund of contributions which gets taxed at 20%. Better to do this sooner so that you get the benefit of an investment return. If you ask for it in 20 years you'll just get the nominal amount, at best +CPI, I don't know the precise rule.

If you ever intend to work in the public service gain it's worth leaving it there though.

More details [broken link removed].



confused12 said:


> But when I started looking at places in Dublin for 200-300k the value wasn't great. The value isn't great above that either, but the places were more palatable.



If you want to live and work in Dublin long term it makes sense to own a house or apartment in Dublin. You have in your early 30s a net income close to double the average full-time worker. Positionally, you are pretty well placed.

Otherwise I largely agree with @Brendan Burgess - you should *prioritise *getting a property and paying down the mortgage. But I would put at least a *small *amount into an all-equities PRSA right away. You can certainly afford to on your income and you get the benefit of tax relief at the higher marginal rate. There is a lot of potential upside to equities with an untaxed capital gain over the next 40 years.


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## Gordon Gekko (7 Apr 2021)

There are lots of people who bought starter or intermediate homes and got stuck in them after the collapse.

I am a strong believer in buying somewhere that’s somewhat future proofed.

It’s also a hassle and a cost to undertake property transactions, plus once you have more of a ‘forever home’, you become less concerned about wasting money on it.

Imagine all of those people in apartments during lockdown. And imagine if they have kids.

I wouldn’t buy an apartment again even if I had Brendan Burgess’s money; in my view, and speaking as someone who owns one, they’re largely rubbish.


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## PGF2016 (7 Apr 2021)

confused12 said:


> This was more or less my original thought. But when I started looking at places in Dublin for 200-300k the value wasn't great. The value isn't great above that either, but the places were more palatable. What's less appealing to me about that also is just the idea of having to go through the process again after selling etc. If I can keep it simple, I will. But the other side of that is I know it's possible to raise a kid in an apartment, but maybe not ideal. Having said that, I think I generally prefer houses to apartments


Buy a house that would do you for the long term, that you can see yourself living in for 10-15 years at least. Many got stuck in homes that did not meet their needs after the Tiger crashed.  After that follow the advice from Brendan and the others. Pay down the mortgage and invest in your pension. As long as you keep debt levels low and keep earning well you should have the ability to adapt to whatever life throws at you.


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## NoRegretsCoyote (7 Apr 2021)

Gordon Gekko said:


> There are lots of people who bought starter or intermediate homes and got stuck in them after the collapse.



But unlikely to be the case anymore. Ireland 2003-2008 was one of the biggest property bubbles ever recorded anywhere in the world. Lots of my friends bought houses at silly prices. But there is no model that suggests anywhere near the same level of overvaluation today. 



Gordon Gekko said:


> It’s also a hassle and a cost to undertake property transactions


This is overrated. Estate agents, stamp duty, solicitors, removals, etc are no more than 5% of the cost of a house move in Ireland. I'm of the view of "buy what you need now". 5% isn't going to put you off in future if your needs really change.


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## Gordon Gekko (7 Apr 2021)

NoRegretsCoyote said:


> But unlikely to be the case anymore. Ireland 2003-2008 was one of the biggest property bubbles ever recorded anywhere in the world. Lots of my friends bought houses at silly prices. But there is no model that suggests anywhere near the same level of overvaluation today.
> 
> 
> This is overrated. Estate agents, stamp duty, solicitors, removals, etc are no more than 5% of the cost of a house move in Ireland. I'm of the view of "buy what you need now". 5% isn't going to put you off in future if your needs really change.



With respect, I disagree with almost everything you’ve written there.

We have no idea what effect the post-Covid world will have on house prices, particularly for urban apartments if remote working becomes more of an enduring phenomenon.

I also think you’re significantly underestimating the cost and hassle of moving home; it’s very difficult and costly to get tradespeople right now for example. Renovation costs are going through the roof. Banks don’t do bridging finance anymore so some people get cast back into the nightmare that is the rental market. They say that moving home is one of the most stressful things that someone can do.

And as a colleague of mine often says “5% of a big number is a big number”. But even then, if you take the view that property prices will tick up slowly over time, your next house probably increases in value more than the one you’re in now.

Personally, I would look to buy a “Step 2” property, e.g. a 3 bedroom house. Not the “Step 3” final place, but equally not the 2 bedroom apartment that comes with service charges, more potential for dodgy neighbours, and all of the other hassle of shared living spaces.


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## confused12 (7 Apr 2021)

Clamball said:


> I think buy a house for approx €500K in an area you wish to live in, with a €350K mortgage, using €150K of your savings.  Rent out 1/2 rooms under the rent a room scheme.  According to Brendan’s calculation you will easily afford the mortgage, repayment of €1500-€1900 per month.  If you like the house use it as your PPR until you want to travel, have a family and want to move to a bigger house.
> 
> If you want to travel then rent out the whole house while you are away.
> 
> ...



I think this is what I'm veering towards. Is there any benefit to witholding some of my savings from the downpayment, ie spending 150k and not 200k on the deposit?



Brendan Burgess said:


> Your future is uncertain.
> Your present is reasonably certain.
> 
> So buy a house in which you wish to live now.  Don't buy a house so that it might be a  good investment.  Don't buy a house because it might be easy to rent if you live abroad....



I like this approach. I've made that mistake in the past before, of projecting too far into the future.



NoRegretsCoyote said:


> If you worked less than 24 months after 2013 you don't have an entitlement. You can apply for a refund of contributions which gets taxed at 20%. Better to do this sooner so that you get the benefit of an investment return. If you ask for it in 20 years you'll just get the nominal amount, at best +CPI, I don't know the precise rule....
> 
> 
> 
> ...



Thanks very much, I didn't know that about the contributions. It will be modest but I'll look into it.
Re the PRSA, its the age-old question about mortgage vs pension. I'll have to think further about this.



Gordon Gekko said:


> There are lots of people who bought starter or intermediate homes and got stuck in them after the collapse.
> 
> I am a strong believer in buying somewhere that’s somewhat future proofed.
> 
> ...



I think a little bit of future proofing is good for me, but not too much. Veering away from an apartment but towards a house that could be okay for the next 15 years maybe.



PGF2016 said:


> Buy a house that would do you for the long term, that you can see yourself living in for 10-15 years at least. Many got stuck in homes that did not meet their needs after the Tiger crashed.  After that follow the advice from Brendan and the others. Pay down the mortgage and invest in your pension...



As above, I think this is how I am looking. Re the pension mortgage tradeoff, I'll have to look into it.


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## Sarenco (7 Apr 2021)

confused12 said:


> I'm looking at blackrock/sandymount/monkstown area


I think the OP will struggle to find a decent 3-bed house for €500k in these areas that doesn't require a lot of work.

A 2-bed apartment/townhouse/cottage (in "walk-in" condition) seems more realistic to me at this price point.


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## NoRegretsCoyote (7 Apr 2021)

Gordon Gekko said:


> Banks don’t do bridging finance anymore so some people get cast back into the nightmare that is the rental market.


I think this is your best argument. Getting a second mortgage can be an issue too if your circumstances have changed.

Otherwise moving home in Ireland is just not expensive compared to many places where you can lose a double digit percentage on EA fees and stamp duty.

Being under- or over-housed has costs too. 5% over ten years can be far better value than staying put in a house that doesn't suit you.

Otherwise I'm not taking a position on house prices. I think that the Central Bank rules have taken the volatility out of the Irish market though. So timing of first purchase just isn't going to haunt or flatter the OP. 

My best friend bought his first house in 2006, and I did in 2012 and today there is still a big difference in our net wealth as a result. But I feel that property just isn't a rollercoaster anymore.


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## Brendan Burgess (7 Apr 2021)

Hi Coyote

It's not just the 5% for solicitors and legal fees.  

If all houses were ready to move into, that might apply.

But houses inevitably require work and/or decoration and often your old furniture won't do.

But it's also the risk of moving. 

1) You can sell your own house first and then find that prices leap ahead before you buy a new one.
2) You can buy your new house before selling you old house and then find that prices fall before you sell it. 

I wonder if the 5% applies to trading up from one apartment to another?  Where it might be easier to buy and sell quickly. 

Brendan


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## NoRegretsCoyote (7 Apr 2021)

Brendan Burgess said:


> But it's also the risk of moving.
> 
> 1) You can sell your own house first and then find that prices leap ahead before you buy a new one.
> 2) You can buy your new house before selling you old house and then find that prices fall before you sell it.



True, but I think the days of big market price swings are over.



Brendan Burgess said:


> I wonder if the 5% applies to trading up from one apartment to another? Where it might be easier to buy and sell quickly.


Apartments are a bit more homogeneous and easier to price and sell, correct.

A friend of mine bought and sold in Belgium recently and lost north of 15% in notary costs, estate agent fees, and stamp duty. He doesn't plan to move for another 20 years.

The costs in Ireland aren't trivial but are pretty small in comparison.


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## SPC100 (7 Apr 2021)

You have saving power of 2500+800 rent = 3300 per month

You can get tax relief on contributions of up to 20k per year to pension (20% of income), that will 'cost' about 10k/850 per month from your after tax income.

Mortgage 1500
Pension 850
Unused saving power 950 

So basically you can max your tax relieved pension contributions, and easily pay the 350k mortgage, and have another 1k per month to either buy more house/pay more mortgage, pay down existing mortgage faster, invest, save as cash.


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## SPC100 (7 Apr 2021)

Some other small notes based on my life experiences.

Living in an area you really like (by renting or in a cheaper accomodation), makes it easier for you to explore the area (e.g. daily/weekly walk), and figure out which houses/estates are really appealing to you for the future bigger more expensive house.

Buying a home that will work as a forever home ASAP, makes a lot of sense.

If you are not yet coupled, and plan to couple up, your forever home, may not be their forever home. It is much nicer to chooes a forever home together.


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## confused12 (8 Apr 2021)

Sarenco said:


> I think the OP will struggle to find a decent 3-bed house for €500k in these areas that doesn't require a lot of work.
> 
> A 2-bed apartment/townhouse/cottage (in "walk-in" condition) seems more realistic to me at this price point.



Having spent the last couple of days looking on 'Daft' (the irony is not lost), I'm starting to learn that lesson. 2 beds might be more realistic, or 2 bed with a very pokey office



SPC100 said:


> You have saving power of 2500+800 rent = 3300 per month
> 
> You can get tax relief on contributions of up to 20k per year to pension (20% of income), that will 'cost' about 10k/850 per month from your after tax income.
> 
> ...



Makes sense. That's a headache I'll deal with down the line. The last 850 would be cash IMO


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## mtk (8 Apr 2021)

Hi confused ,
I reckon an advantage of a house over apartment is no management company charge . I believe these can be  a few grand depending on what's on offer.

There are definitely modern two beds houses under 500 k in blackrock. I  saw one go sale agree at 450k the other day . 

Mod : Not sure if allowed post link ( no connection ) ? although i guess you will have seen this in your myhome.ie and daft search


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## Brendan Burgess (8 Apr 2021)

mtk said:


> Not sure if allowed post link ( no connection ) ?



Hi mtk

No problem in posting a link.

If it were posted out of context by a new user, we would be suspicious.

Brendan


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## Marine1 (8 Apr 2021)

you wont get much in the way of a house for that kind of money in those locations, personally id be more inclined to get a nice apartment, they do exist, i lived in one in blackrock for nearly 8 years and loved it.

Cant post links for some reason but see below.

Location of this cant be beat really but low ber

7 De Vesci house

Or this as a new option atho location isnt as ideal

Amberley Court Stillorgan park


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## mtk (9 Apr 2021)

This is one I had in mind .... €475k actually


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## presidenttttt (18 May 2021)

NoRegretsCoyote said:


> The costs in Ireland aren't trivial but are pretty small in comparison.


It is not often we get to say that on these boards on these topics in Ireland, but this is true. My experience of taxes and fees when moving property in Europe is eyewatering compared to here, and they can hit the buyer not just the seller.

Turning back to the thread.

OP I am possibly just a few years ahead of you on your journey in life. Skip the apartment. I liked one posters step 1, step2, and step 3 of the ladder analogy. Step 2 seems sensible. Plan on someone renting a room if you want, but probably not two- you have obviously worked hard to get to where you are and there is no point doing that only to have people living in your ear, unless you really love that idea, even your mates can make a house feel claustrophobic. When it is your space, paid for with your own money, renting one room should give you huge breathing space with mortgage and avoid feeling you cant have a scratch in your own home 

I would think long and hard about what you mean by your desire to travel. To what extent? Is it a passion to see nice places? Or a realistic career and life option for you? Is the thirst likely to be satisfied by a few nice long-haul holidays? If you do meet someone what age would you want kids and would you want them close to family from day 1 i.e how big is the travel window? If the travel point you reference is simply more holidays, or jet setting as part of work but based in Dublin, then I would buy the best possible house in the best possible area that you can afford if your job is secure. If you really aren't sure about Ireland then leaving some breathing space will help with any periods of limbo and cost associated with  international moves.


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## jpd (18 May 2021)

mtk said:


> Hi confused ,
> I reckon an advantage of a house over apartment is no management company charge . I believe these can be  a few grand depending on what's on offer



The disadvantage is that *YOU *are responsible for all maintenance and repairs


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