# Can I handle a mortgage?!



## acorn1984 (24 Aug 2009)

*Need some help as friends/family are clueless about money/mortgage matters!!

Age: 25
Spouse’s/Partner's age: 26

Annual gross income from employment or profession: €44,000
Annual gross income of partner: c €25,000

Type of employment: Public sector

In general are you:
(a) spending more than you earn - no trouble controlling spending or the minute anyway
(b) saving? - save €400 pm since Nov last year

Rough estimate of value of home- do not own a house
Amount outstanding on your mortgage: n/a
What interest rate are you paying? n/a
Currently renting at 700 pm between two of us.

Other borrowings – car loans/personal loans: €200 pm on a small car loan - will be fully paid in June '10.

Do you pay off your full credit card balance each month? No, but used interest free overdraft (Graduate account - legend) to pay it off in full this week - thought that was sensible but we'll see...

If not, what is the balance on your credit card? 0  

Savings and investments: €4000 - in AIB Online savings a/c - not really happy with interest rate...

Do you have a pension scheme? Yes - a work thing - i have no idea how much I'm paying/have paid.

Do you own any investment or other property?* No.

Ages of children: None

Life insurance: None

*Additional Info:* Even though I'm including some partner info, I will be buying independently. However they will be paying rent when living with me.


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

Basically, I feel I am in a good position to buy at the moment. I have a secure  job, decent (enough) wage and no dependants. However, I intend going back to college next year (Sep '10). I would not be giving up my current job to do this, but would take advantage of a career break, meaning I can keep my position and return after a few years in case the career change doesn;t work out! My college course would last a minimum of 3 years and would involve moving away from home. 

Am i ridiculous to consider buying a house at the moment? I am looking at a property that would cost c 170,000 (mortgage of 145,000 - would have to borrow most of the deposit). If I lived there for the next year, I would save money on my own rent, and would let it for the time I am away at college. If the future rent were to cover at least some of the mortgage, I don't see why I shouldn't buy. The last thing I want, however, is to be tied down to paying a mortgage and thus unable to continue study and/or travel. I essentially want to have my cake and eat it. Is there any way I can make this work? I am really excited about returning to college, but if that doesn't work, I can always return to my job.

Nobody in my family is in anyway knowledgeable about mortgages and investments. I'd really appreciate any advice at all so I can put this idea to rest for good!! Thanks


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## PaddyBloggit (24 Aug 2009)

Madness buying if you are taking a career break next year.
And you'll not be living there when at college.
(You want to take out a mortgage to house others while you'll be paying rent elsewhere ... )

Save .... save .... save .... go to college and see where you stand after you complete your course.


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## so-crates (24 Aug 2009)

I'd have to agree with Paddybloggit. Basically you don't have the deposit saved, are planning to lose your earning potential for three years, have an outstanding loan to clear (plus that dratted if cheap overdraft!). Renting may or may not cover the mortgage and you would have to shoulder the full burden for any times when the property is empty. If you rent it you would be deemed an investor rather than a FTB so the mortgage offers you would have available would not be the same. The taxation situation would not be the same. 

It isn't something I would undertake lightly, especially as you are going back to college. If you weren't I would suggest save, save, save and clear the loan before looking for a mortgage but since you aren't going to be earning - it would be wrong to advise you to saddle yourself with such a debt.


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## Paulone (24 Aug 2009)

+1 to all of the above. If you are planning a career change, then your mobility might also prove to be very important. Houses & apartments are many things but they are not mobile and represent a significant investment in an area and a community (even if you don't live there).

It would be very unfortunate to find yourself either unwilling or unable to live in the place where you bought if, for example, you got a job elsewhere?

As it stands, with a market looking the way it does, the prices seem very attractive compared to a couple of years ago, and you may well get your loan, but don't be lured in. Everything is different now and buying a place will not be IMO a particularly good use of your resources at the moment. 

It would perhaps be different if you had a family and needed a place, but then you mightn't be taking that career break or going back to college should that be the case?


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## chlipps (24 Aug 2009)

I agree with the others above.... You need an income to pay the mortgage. 3 yrs without mortgage is too long. Even if you rent it out and the rent covered the mortgage..what funds have you got for repairs if there is a problem with the house? Best you save for a future mortgage when you have career change completed and know where your work is and get house to suit.


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## acorn1984 (24 Aug 2009)

Thanks for the feedback - I really appreciate it! What you are saying makes absolute sense to me - maybe if it was a few years ago (pre-credit crunch!) I would be given more frivolous advice but I prefer to err on side of caution anyhow. 

Yes, I will continue saving and maybe now isn't the time for me to buy. It's very true what was said about houses not being mobile (well, any of the ones I am interested in anyway) - the fact is I really don;t see myself in my current job in my current city for the long-term. However, from an investment perspective, it would be nice to have a property to let that would be, for the most part, paying for itself. But then there's always risk...

Perhaps I should have mentioned that the course i am hoping to do, if I were to get a place in the UK, comes with funding of between 15 and 25 k sterling pa. Sure, that would prob just cover my living expenses as a student, but it still represents an income. 

At the end of the day, there's no guarantee I will be accepted onto one of these courses next year; or any guarantee it will be a funded one. In light of this uncertainty, I guess the best option is to put my ambitious house plans to sleep for a few years  It is tempting though, with the current interest rates. I'll have to block daft.ie from my browser!!

Thanks again for all replies!


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## foxylady5160 (24 Aug 2009)

Hi,y dnt u buy sum where near t college nxt yr.@least u hve rent free+ud b live in landlord.ud b surprised,plus ud b able 2take control+mind t house!in 3yrs a lot can happen.


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## PaddyBloggit (24 Aug 2009)

foxylady5160 said:


> Hi,y dnt u buy sum where near t college nxt yr.@least u hve rent free+ud b live in landlord.ud b surprised,plus ud b able 2take control+mind t house!in 3yrs a lot can happen.



huh? 

(There's no limit to the number of characters you can use in your reply .... no twittering or text speak needed here.


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## acorn1984 (24 Aug 2009)

Yes I have looked into the idea of buying wherever I end up next year, but most likely will be the UK and that's a whole other ballgame... Might be a bit too complicated for me to consider!


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## coin (25 Aug 2009)

Your best option at the moment would be to clear the car loan if you have enough savings and try to save a bit more than €400 a month. From other outgoings rent is a little high but not excessive. 

Also to add, the property market is in a dire state at the moment, so in 3 to 4 years time you could see the price of the property you are currently looking at decline in value by 50%.


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## VOR (25 Aug 2009)

I agree with Coin about clearing the car loan. However, I would clear it by increasing the monthly repayment as opposed to using the  savings you have. Best to keep the €4K for a rainy day. You never know when that will come.
Try to increase the car loan repayments to €350/€400 per month. That will clear the loan much quicker and allow you to continue to build up your savings.

As you have €4K in savings and the banks want a minimum of 8% deposit you would most likely not be in a position to get the mortgage anyway.


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## so-crates (25 Aug 2009)

While you may feel in a reasonable position at the moment to *pay* the monthly cost of a mortgage you are not realistically in a position to take one out (leaving aside the considerations of a college course). The reason you are not in a position to buy are that you do not have the deposit (_and 8% in today's market is likely to be wishful thinking - it is more likely to be a minimum of 10%, both here and in the UK, even more if it is an investment property_) and you have outstanding debts. Clear the debts build up your savings, those are the two standard, sensible things that anyone considering a mortgage would need to do BEFORE looking for a mortgage. 

FoxyLady5160 - it would be preferable if you would deign to use English. But translating that string I would only see that as an option IF Acorn1984 was already in a position to buy a mortgage. Their feeling is that they are but the truth is they aren't.


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## deeheg (25 Aug 2009)

HI acorn, The price seems reasonably however, its still a mortage and you will be tied to it, if you are planning to rent it out, location and closeness to dart, luas will be the deciding factor these days as so many properties empty. I think with you age and going back to college and may travel i would not make ties, go and enjoy yourself get your degree and then think what you want to do. You may not be able to sell on for a very long time. Although I love my house, i am in fixed mortgage and feel trapped I wanted to take career break but no way would the rent cover all my mortage life assurance, house insurance, and any other loans have, including pension payments so I dont loose out on my years. Sorry if that sounds gloomy for you but your lucky you have choices, best of luck with whatever you choose


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## acorn1984 (25 Aug 2009)

VOR said:


> Try to increase the car loan repayments to €350/€400 per month. That will clear the loan much quicker and allow you to continue to build up your savings.



I could do this, but the increased loan repayments would not allow me to save more - I think the way my finances are balanced at the moment is fine. It's a low interest Tesco loan that will be paid off very soon - then I can work on growing my savings. True, I could pay it off early penalty free, but I personally don't see the advantage.




so-crates said:


> While you may feel in a reasonable position at the moment to *pay* the monthly cost of a mortgage you are not realistically in a position to take one out (leaving aside the considerations of a college course).



I would be borrowing the outstanding balance for the deposit from family. Despite this, I agree I am probably not in a position to buy at the minute.


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## coin (25 Aug 2009)

VOR said:


> As you have €4K in savings and the banks want a minimum of 8% deposit you would most likely not be in a position to get the mortgage anyway.



I agree. Even if you have the money for a deposit it would be good to also have a lump of savings just in case your circumstances change ie. job loss. 

At the moment I have enough for a deposit for a mortgage but I want to save probably 4 times what I have and its a no brainer to wait for house prices to bottom out in 3 or 4 years time.


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## Bronte (25 Aug 2009)

In addition to the above posts recommending you not purchase now...

You are going to move to the UK but your partner will pay you rent. In a relationship scenario where there is not a marriage it is not best advice for one person to purchase and the other to pay rent. Legal minefield.

Paying off your credit card is excellent even if it was zero interest. A good habit to begin is in keeping your credit card balance at zero (repaying when the bill comes). Keeping a balance even at zero lulls you into debt. 

Your savings should be in the highest interest bearing account that is secure.

You should know how much, to whom and for what benefit your pension is. 

Is it wise to give up a job in this economic climate, you may have no job to come back to? Could you not work and do an evening course instead.


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## acorn1984 (26 Aug 2009)

Bronte said:


> In a relationship scenario where there is not a marriage it is not best advice for one person to purchase and the other to pay rent. Legal minefield.



I agree but if we are both clear about the terms and it suits us both I don't see a problem. 



Bronte said:


> Paying off your credit card is excellent even if it was zero interest. A good habit to begin is in keeping your credit card balance at zero (repaying when the bill comes). Keeping a balance even at zero lulls you into debt.



Done! Just changed my DD to 100% of the balance - can't believe how much I was paying in interest!



Bronte said:


> Your savings should be in the highest interest bearing account that is secure.



Unfortunately using AIB Online regular saver - 2.25%. Going to wait it out until the yearly interest is paid in April and then consider moving.



Bronte said:


> Is it wise to give up a job in this economic climate, you may have no job to come back to? Could you not work and do an evening course instead.



Well I wouldn't actually be giving up a job - that would be too scary! A career break allows me to continue further study, with the option to return to my job in the future.

Thanks for the feedback anyhow!


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