# Savings - Clear Car loan or House deposit - FTB



## Tester123 (10 Jul 2008)

*Age:* 31
*Partner's age:* N/A
*Annual gross income from employment or profession combined:* 74K
*Type of employment:* US multinational
*In general are you spending more than you earn or are you saving?* Saving - Approx €900 PM
*Rough estimate of value of home: N/A*

*Amount outstanding on your mortgage: *No mortgage yet - €550 on Rent per month
*What interest rate are you paying?* 

*Other borrowings:* Car loan, €14k remaining. 1.5 years in to a 5 year loan. Not sure of the interest rate - repayments of €350 per month
*Do you pay off your full credit card balance each month? *Yes

*Savings and investments: *€18k in Savings

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

*Ages of children:* None - 

*Life insurance: *Work insurance 

*Question:*
I am a first time buyer considering getting on the property ladder in South County Dublin. I have savings of approx €18k and am saving approx €1000 per month. I have a car loan of €14k which I am paying back at €350 per month. 
Do you think it is better to use my savings to clear the car loan and up my savings by the €350 per month. 
Which does banks look on more favourable when looking for a Mortgage, savings for deposit or more disposable income to make repayments?


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## deedee80 (11 Jul 2008)

The fact that you are paying out 350 per month on the car loan will have quite an effect on the amount of mortgage you will be approved for.  I would pay off the car loan firstly.  Could you not save more that 1k per month on a salary of 74k.  Thats a very good income and you appear to have very little outgoings.  Whats the max you could save while still living quite comfortably?


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## PM1234 (11 Jul 2008)

Reducing your outgoings will increase your NDI which should mean the lenders will look more favourably on your application.  

However make sure you explain your lack of savings by showing your savings account records and telling the lender you used your savings to clear the car loan.  

Have you worked out your potential mortgage repayments taking into account rising interest rates?  You need to show your ability to repay the mortgage.


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## Gus2008 (11 Jul 2008)

Use your savings to clear your loan asap, then use the loan amount of €350 to increase your savings to €1,350 per month. I'd recommend focusing on building your savings over the next 6 - 12 months. 

Within the year you should have a sizeable deposit (at least €20K, based on your savings of €1,000 x 12 months, your "saved" loan repayments of €350 x 12 and €4,000 remaining of exisiting savings having paid off loan) and should also end up getting better value on property given the rate that South Co Dublin property prices are dropping!


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## Tester123 (11 Jul 2008)

Thanks All for the feedback. I felt clearing the car loan was the best option but wanted to check out other opinions. I should be able to up my savings more. Normally I would save more that the $1k per month but this is the value that gets direct debited each month.


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## dem_syhp (11 Jul 2008)

I'm no expert on this, but one to keep in consideration is my understanding is that regardless of your income, you will only get a mortgage for say 92%.    So if you were looking at a property of say 300k, this would mean you need 24k savings.  

I'm not saying don't pay off the loan - it's probably what I would do and then save again, including the extra 350 plus a bit more.  If you save 1500, you'll have this in 16 months.  

There is an assumption in paying off early that there aren't any big penalities?

Dem


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## niceoneted (16 Jul 2008)

Have you an idea of how much you could borrow or the house price range your looking at. If so check out what the possible repayments on this would be. I suggest you try and save that amount every month and see how you get on. I know your paying rent but I would try not deduct that as you will have a fair few expenses to a house once you get one so this will allow for that. 
As another poster suggested could you not save more. I have a mortgage and manage to save almost 2k per month and I am on less money than you. I eat out quite a bit and travel alot. give it a go. Good luck.


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## Tester123 (22 Jul 2008)

I am hoping to buy in the Sandyford area and looking for a two/three bed apartment (approx $330k). Although in the current market I will hold off for a while and just save like crazy.


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