# How can I bump up mortgage amount?



## Niamhy27 (11 Feb 2008)

I'm 27 and looking to buy in the Autumn on my own.

I earned €35 k last year including bonuses and I am on an incremental salary and in a secure job. 

I have my eye on a 2 bed apartment in Maynooth that costs €280 k but I will be buying to rent it out and dont plan on living there myself. I plan to have my loans cleared by then and can get a loan from the credit union for the deposit.

I have no-one else to buy with me and no-one to go guarantor either.

Am I dreaming or will the fact that im going to be renting it out go in my favour?

Im desperately trying to get on the ladder!!!!

Any advice appreciated


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## ontour (11 Feb 2008)

If you are buying to rent it out, then you will also have to factor in stamp duty as an investor as part of the initial costs


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## Niamhy27 (11 Feb 2008)

thanks for your reply but (I'm not to well educated!) could you explain in a bit more detail?

I thought as a first time buyer I didn't have to pay stamp duty.

Is it because I am renting both rooms?


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## ontour (11 Feb 2008)

It is because you are buying the property as an investment rather than to live in. You are an Investor rather than a 'first time buyer' when it comes to tax.

Stamp Duty details can be found [broken link removed]:

From my reading of it your stamp duty would be:

Price - exemption = taxable amount
(280,000 - 125,000) = 155,000 *.07

So you would need to pay 10,850 in Stamp Duty


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## ClubMan (11 Feb 2008)

Niamhy27 said:


> I thought as a first time buyer I didn't have to pay stamp duty.


First time buyer owner occupier - not _FTB _of an investment property!

Since this is a surprise to you you really should consider getting independent professional advice on the investment and tax issues involved! At the very least you should read the key posts and _FAQ _in this forum to get some idea of these, your responsibilities etc.


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## Niamhy27 (11 Feb 2008)

I do realise I have a lot to learn which is why I logged on here

I will be going to a professional but thought I would start somewhere to begin to get an idea.


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## moneygrower (11 Feb 2008)

Maybe you should be looking at living there to benefit from the tax relief of being an owner occupier and you can use the rent a room scheme to get additional income. 
Why are you so anxious to get on the ladder if it's not a home for yourself?


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## rmelly (11 Feb 2008)

You're effectively looking for a 100% mortgage in all but name. You would be well advised to think carefully about the possibility of negative equity in these circumstances and given current economic climate and outlook. Ensure you understand this and it's implications when you get your 'independent professional advice'.


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## ClubMan (11 Feb 2008)

Aren't 100% loans harder to get these days? Even before recent events in the lending markets I would have assumed that few lenders would be jumping at the chance of lending 100% to a first time buyer whose first purchase was an investment property?


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## Niamhy27 (11 Feb 2008)

I will definitely go with that after hearing your advice...living there myself and renting out the other room.


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## ClubMan (11 Feb 2008)

Just to note that under the rent a room scheme you can collect a maximum of €10K p.a. tax free. If you exceed that then the rent a room scheme conditions no longer apply and you are back into normal investment property territory.


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## Niamhy27 (11 Feb 2008)

Thanks ...that's good to know..more than i had originally thought!


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## The Edge (13 Feb 2008)

Hi Niamhy27,

On the basis of your post, you are planning to borrow an extremely large sum of money relative to your income in order to finance the purchase of an investment property in a commuter town. Among the factors which you should consider include the following:-

(1) Property prices have declined by 5%-20% in the past year or so (depending on which survey you believe). Someone who took the view that they 'had to get on the property ladder' in, say, Jan 2007 and then purchased an investment property would have lost 5%-20% on their investment. (Paper money, granted, but that would be cold comfort, I'd imagine.) Are you satisfied that property prices will have bottomed out by the time you plan to buy? If not, be aware that you may lose money on your investment, at least initially.

(2) Do you expect the rental income to meet the proposed repayments? If not, are you comfortable with meeting the monthly shortfall.

(3) Have you assessed the state of the rental market for this kind of property in Maynooth? What is your expected monthly rental income? 

(4) You should also consider that property is a relatively illiquid, long term investment.


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## oceanclub (14 Feb 2008)

Niamhy27 said:


> I'm 27 and looking to buy in the Autumn on my own.
> 
> I earned €35 k last year including bonuses and I am on an incremental salary and in a secure job.
> 
> ...


 
Hi Niamh, 

Based on the asking prices, and the fact you're basically getting a 100%, a quick calculation suggests that - even with a 40 year mortgage - you'll be paying 60% of your salary  - €1500 a month - for what is currently a depreciating asset. 

Rents for 2 beds in Maynooth start at around 850 and go up to 1100, according to DAFT. That's not taking into account the doubling in rental properties in the last few months.

P.


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## BudaRich (14 Feb 2008)

Always difficult to judge the market at a time like this ...... property always increases at the rate of inflation - (if you iron out all the property booms and busts).  Therefore the way I look at it .... if I wait until property falls (over corrects) to below the rate of inflation then I will be getting a good buy. Potentially that equates to at least a 20-30% fall depending on the market you are looking at and the area you are look at.

Consider also the timing of the property cycle ...... we are probably 1 yr into a 5 yr fall / static senario thus .... buying now is like putting your money into a current account rather than a savings account (in capital appreciation terms) - at a time of growing inflation!

All in all ...... a bad time to buy - rents are likely to FALL not rise = bad investment all round for at least 4-5 years.


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## Kemo_Sabe (14 Feb 2008)

including bonuses in your salary calculation is not particularly sensible either

many people working in banking will have been getting used to nice bonus cheques for the last few years but an awful lot of them will not be getting one this year (due to sub-prime crisis losses)


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## xman (14 Feb 2008)

Niamhy27 said:


> I have my eye on a 2 bed apartment in Maynooth that costs €280 k but I will be buying to rent it out and dont plan on living there myself.
> 
> Any advice appreciated


 
It's going to cost you about €1,500 every month for the mortgage and there will be other costs. How much rent do you think you will get for it?


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## whizzbang (14 Feb 2008)

A quick question for you, why are you in a rush to get on the property ladder? You are still below the average age of a FTB. Maybe giving yourself a bit more time to get your finances in order would be a good idea before making this huge financial commitment?


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## Debtwish (14 Feb 2008)

It's a tough decision Niamhy27 and I wish you luck with it. I understand your desperation to "get on the ladder" - rent is dead money after all!

On the one hand some Economics Professor egg-head from DCU says that buying now is a sure fire way to lose a fortune. It's something to do with asset bubbles and credit crunchies apparently???!!!

On the other hand - and whilst it is said that prices have eased back a bit from their peak - I know an estate agent who tells me that they will rocket again when interest rates are cut a little, and he's worked in the industry for three years now, so he ought to know! 

The arguments are finely *balanced.*


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## BudaRich (14 Feb 2008)

Renting is not DEAD money when the interest on the mortgage is MORE expensive than the monthly rental amount.

Right now it is CHEAPER to rent.


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