# Advice on how much of a mortgage to get



## Dublin106 (14 Apr 2014)

Hello

Starting process of looking at perhaps looking at houses next year, to buy in 2015 or 2016 and not sure how much to borrow - what is prudent, what is over-extending ourselves. Somer personal details:

Both 34 years old, no children yet, married
Both professionals in finance
Man on 72k pa and wife on 70k pa
Net joint income is about 7,300.
paying 1,200 per month in rent currently
have 40k saved for deposit
have another 40k rainy day savings (not to be used for house purchase or anything else)
no loans or other debts
Currently saving about 2,500 per month towards deposit.

Plan would be to buy in south dublin a house built in 40/50s - average 3 bed semi D with garage but in need of renovation.

Want to borrow for house and pay for renovation in cash.

What do you think is a prudent amount to borrow?

Was thinking of:

House to buy price 525k
borrow 483k
so online that would suggest mortgage of 2,400 per month which is about 33% of net monthly income (we both plan to work)

we have deposit saved already and over next year or two will have renovation month saved.

So if that far too much or prudent? dont want to borrow too much, want to have kids so will have creche fees hopefully one day also could have long-term sickness etc so want to be prudent but also the house we buy will mostly likely be forever, don't plan on trading up or anything.

Any advice? Crux is 7,300 net monthly income, 2,400 mortgage payment - too much?


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## niceoneted (14 Apr 2014)

Personally if it was me I would be aiming to have as much cash saved as possible. Why not try to gave a frugal year or 18 months and try to save 3.5k a month. Start a spending diary to see where all your money is going. Are your jobs permanent? Have you pension funds or is that why your holding back with the other 40k.


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## Dublin106 (14 Apr 2014)

We are saving as much as possible, pension is fine just want to keep the 40k as rainy day savings. jobs are permanent yes.

by the time we do buy say in 2016 we'll have about 120k saved - 50k for deposit/fees and 70k for rennovation.

Just want to know what's prudent proportion of your take home pay to pay out in mortgage. Is 33% of joint income mad. is 480k mortgage for 2 earners on 140k mad?


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## michaelm (14 Apr 2014)

Seems like an awful lot of money to me.  I'd be considering how secure the two jobs were and doing the numbers to see if I could pay the mortgage if one job was lost or if one decided to give up paid employment to care for a child or due to illness.  And what if interest rates spike?  My mortgage is roughly 20% of total net income, I find that a comfortable level.


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## ebs_customer (15 Apr 2014)

Absolute insanity IMHO.
At current rates you're looking at approximately €1900 a month in interest payments alone on that kind on lending.
Now add to that €80 a month in property taxes and all the other associated costs of home ownership - TV license, bin charges, insurance, maintenance etc and you're well over €2k a month in costs.
Now this is all before you start paying back the half a million in capital!
Over 20 years you are looking at approximately 740k in repayments at current rates, 900k on the 30 year term you're looking at.


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## Importer (15 Apr 2014)

I would be inclined to base my projected borrowings on one income and not two.
You really do run the risk of painting yourself into a corner with that level of borrowing.
Your entire landscape could change rapidly when kids come along. I know, mine did.


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## Dublin106 (15 Apr 2014)

I don't want to live in a half a million house but unfortunately in south dublin that's the cost of an average 3 bed semi d and that's ideally where we want to live. And if a couple on €142k can't afford these houses who can.

Given our level of earnings what do you think is an appropriate mortgage?


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## Delboy (15 Apr 2014)

I'd defo look at your spending....me and my OH earn about 10% less than you both but save nearly 1k a month more (and thats with 2 kids in childcare!).

And we're in the market for the same-ish type of house as you in SCD (we want a 4 bed), but have managed to build up a large deposit over the past 5 years meaning a much smaller mortgage is needed (or that was the plan before house prices went nuts again in SCD).

Personally I would'nt be comfortable with a mortgage over 2k a month (and thats with interest rate rises built in), and even then, I'd overpay the mortgage in the 1st few years to get it down.

The way I look at it is - how much of a mortgage could you afford on your own salary only? When the kids come along, the other salary will go for childcare (or perhaps 1 of you will want to give up work and stay at home for the early years - kids change your mind on a lot of things!)


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## Bronte (15 Apr 2014)

Well if two people on the guts of 140K cannot afford 480K mortgage who can. 

Currently they are paying rent of 1200 and saving another 2500. So 3700 out of their income of 7300K. So about 50% of their income is capable of being used for mortgage. But they don't want that much they want to spend about 33% which would seem reasonable. Being about 2400 a month. Which gives lee room for a good stress test. And still leaves some for creche fees later if required.

Plus he'll have the cushion of the renovation money if needed.  Not allowed to talk about property prices though.  I see there are hints the ECB are going to lower interest rates, might be an idea to fix if as a first time buyer you get a good deal.


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## Butter (15 Apr 2014)

On the face of it, I don't think it's an outrageous amount for a couple on good salaries to borrow. 
But the questions I would ask myself would be:
Is maternity leave paid at full salary? For how long? How long would your wife like to take out of work after a baby? 
Crèche fees of around €1000 a month. Work that into the equation. Now work twice that in for two babies. 
Work out what the mortgage would be if interest rates go up by 1%, 2%, 3%. 
Could you overpay for the first couple of years until babies come along? That builds in a bit of slack? 

Do a budget spreadsheet & account for every bit of expenditure.


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## wbbs (15 Apr 2014)

I would base it on one salary if you really want comfort, with the best will in the world anything can happen to one job or read the parenting forums, the amount of people who no longer want to work outside the home or want to work part time to bring up their children is huge.

No matter what you might think now when children arrive it could be very different.


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## Janet (15 Apr 2014)

Isn't the conventional wisdom that your accomodation should cost no more than one-third of your take-home pay? You just have to remember two things. That when you own a house, the cost of the accomodation is not just the mortgage repayment cost. And that one-third is a limit, not a goal (just 'cos you _could_ be paying e.g. 3,000, doesn't mean you would't be just as happy, if not happier, in a place that only cost 2,000).


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## sadie (15 Apr 2014)

A mortgage of 2400 a month is absolutely ludicrous. 
If you have kids and one parent wants to give up work for a few years, wouldn't it be nice to be free to do that?
People don't realise when they have kids that even if they are at school, there are afterschool activities and homework etc. It's a fulltime job. 
So you either end up trusting the afterschool people/childminder/au pair to do the homework with them, or you come in hassled after work, make the dinners, then are sitting down to do homework after dinner at 7.30pm when they are tired and you are even more tired and short on patience with people getting spellings wrong.
I guess if you have willing grannies and the like that's fine, otherwise factor the childminder's salary in there.


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## docker (15 Apr 2014)

Hi, if this is the area where you want to live go for it, why are you waiting until 2015 or 2016? You are keeping 80K for emergency & renovating. I would use approx 60K of this towards the payment of the house, this will bring the mortgage down to approx €2,100. Then I'd save like hell (minimum keeping the 2,500 per month) giving you back the 80K for emergency & renovating in two years time, so you would be in a good position here!


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## LilyAllen (15 Apr 2014)

Butter said:


> On the face of it, I don't think it's an outrageous amount for a couple on good salaries to borrow.
> But the questions I would ask myself would be:
> Is maternity leave paid at full salary? For how long? How long would your wife like to take out of work after a baby?
> Crèche fees of around €1000 a month. Work that into the equation. Now work twice that in for two babies.
> ...



Dublin106 on the face of it your figures add up and I don't think there is anything particularly ostentatious about your figures. But…. please listen to the advice above. Children change everything. Particularly if you have two. It's a different ball game. It's all very well now calculating projected incomes on 2 full salaries but you may not want to but a baby in full time childcare when the time comes.


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## Bronte (16 Apr 2014)

Janet said:


> Isn't the conventional wisdom that your accomodation should cost no more than one-third of your take-home pay?


 
That's a general rule but it doesn't always apply, particularly where people are high earners.  That's because if their living expense are say 10% of salary they can afford to pay more than a third on mortgage.  

Agree that borrowing the max is not a goal, but the OP seems like a sensible chap.


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## Bronte (16 Apr 2014)

LilyAllen said:


> Dublin106 on the face of it your figures add up and I don't think there is anything particularly ostentatious about your figures. But…. please listen to the advice above. Children change everything. Particularly if you have two. It's a different ball game. It's all very well now calculating projected incomes on 2 full salaries but you may not want to but a baby in full time childcare when the time comes.


 
And the worst think he could probably do is buy a too small place that he hates.  Better to buy something that will be suitable.  And the market for decent family homes, semi detached 3 to 4 beds is a very strong market, always, in Dublin.


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## Dublin106 (16 Apr 2014)

Thanks for the advice all.

Quick question - if a finance couple on 142k pa can't afford a 3 bed semi D in south dubin for 0.5m who can? who is buying all these houses? in the likes of ballinteer, rathfarnham, dundrum etc?

everyone here saying shouldn't get a 0.5m house effectively meaning i cant live in these places (or haven't saved enough) but who can afford to then?

I'd think at 142k pa we'd be in the top 5% of earners, maybe top 10%? so top 10% should still be able to afford to live in those areas as there's literally thousands of the same type of house -standard 3 bed semi D with garage to the side.....


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## Bronte (16 Apr 2014)

Dublin106 people are not saying not to buy, they are saying to be careful. But you can also be too careful. 

As to who is buying, people like you of course. If you've two secure jobs what is the problem. Let's say one of you lost a job, then it could be a problem, but it's not a problem if you can sell.

And the most important thing is location location location. A 3 bed semi D in a good Dublin suburb, hard to go wrong there.


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## Delboy (16 Apr 2014)

Dublin106 said:


> Thanks for the advice all.
> 
> Quick question - if a finance couple on 142k pa can't afford a 3 bed semi D in south dubin for 0.5m who can? who is buying all these houses? in the likes of ballinteer, rathfarnham, dundrum etc?
> 
> ...



There has been indepth conversations around this over on thepropertypin. It's a mystery to me where all these folks that can afford 500k+ houses are coming from...a lot of professional people are getting their income from Govt supported schemes such as NAMA. There there are inheritances, transferring of homes through the generations etc


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## Bronte (16 Apr 2014)

Delboy said:


> ...a lot of professional people are getting their income from Govt supported schemes such as NAMA.


 
They are?  Where?


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## Delboy (16 Apr 2014)

Bronte said:


> They are?  Where?



Legal, consulting, accounting, property mgmt etc....I think I recall a figure of a 2.6bn budget for NAMA's costs in these areas.
So a lot of folk that made money on the way up in the bubble, are now making it on the way down also. And I'd guess a lot of these live in the utopia that is SCD!


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## Bronte (16 Apr 2014)

Delboy said:


> Legal, consulting, accounting, property mgmt etc....I think I recall a figure of a 2.6bn budget for NAMA's costs in these areas.
> So a lot of folk that made money on the way up in the bubble, are now making it on the way down also. And I'd guess a lot of these live in the utopia that is SCD!


 
That's very funny Delboy, I like it.  No wonder Noonan wants property prices to keep on rising.  It's practially government policy.


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## ebs_customer (16 Apr 2014)

I don't doubt that you or couples like you can afford to pay for these houses, clearly you can.
I'd just question the whole scenario.
The house you're buying is basically going to be a shack like all the homes built in that era, if it were to be built today to it's current condition it might cost 50k to throw up.
That means you're paying 0.5M for the site basically.

I just question whether the whole SCD thing is worth signing a large portion of ones life away for.

Before I would agree to this kind of indebtedness at your age I would take a huge step back and have a serious think about the big picture around why it is so important to live in this area.
Could you get work in other areas or do you have family ties that are drawing you in?
You have good incomes and a lot of options but paying down that kind of debt is going to take up a big chunk of your lives for what at the end of it all is going to be a very run of the mill home.


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## Janet (17 Apr 2014)

ebs_customer said:


> I just question whether the whole SCD thing is worth signing a large portion of ones life away for.


While I agree with you on the quality of some of the housing built over the last ten or fifteen or more years I can completely understand the SCD thing. If it's where your family are from, where you grew up, where a lot of your friends are living and so on, then why would you want to be elsewhere? I have a lot of friends who are now stuck in what they thought would be their "starter" homes in places like Clondalkin, Swords and Lucan and not one of them doesn't wish they were closer to "home".


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## Dublin106 (17 Apr 2014)

ebs_customer said:


> The house you're buying is basically going to be a shack like all the homes built in that era, if it were to be built today to it's current condition it might cost 50k to throw up.


 
Why would it be a shack? Houses we're looking at were built in 1940s and 50s and are fine homes. Just need updating and insulating.


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## Dublin106 (17 Apr 2014)

ebs_customer said:


> I just question whether the whole SCD thing is worth signing a large portion of ones life away for.
> 
> Before I would agree to this kind of indebtedness at your age I would take a huge step back and have a serious think about the big picture around why it is so important to live in this area.
> Could you get work in other areas or do you have family ties that are drawing you in?
> You have good incomes and a lot of options but paying down that kind of debt is going to take up a big chunk of your lives for what at the end of it all is going to be a very run of the mill home.


 
All our friends & family live in SCD, it's where i currently live and results in a 30min commute to work. And if work changes we can still get anywhere in dublin in 30-45mins.

I don't want to live west of the m50, i don't want to live on the northside and i don't want to live in North Wicklow. Hence SCD is the default and with literally thousands of houses i can't understand how we can't seem to comfortably afford to live there when so many others can.

Even at €150k joint income we can't afford a €0.5m home yet thousands upon thousands of others can. I just don't get it. Everyone seems to believe they won't come down but a 3 bed semi D in ballinteer for €450k just seems outrageous to me. Hoping it was a cash bubble but due to lack of supply and government interference i suspect they'll only go up....it's depressing.


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## Jim2007 (17 Apr 2014)

Dublin106 said:


> I don't want to live in a half a million house but unfortunately in south dublin that's the cost of an average 3 bed semi d and that's ideally where we want to live. And if a couple on €142k can't afford these houses who can.
> 
> Given our level of earnings what do you think is an appropriate mortgage?



Well if you go back to before the madness, the usual numbers used were like: twice your annual salary plus once your partner's salary and spend no more than about 25% of your monthly salary in repayments, oh and 25 years was considered a long mortgage.  As far as I know, these are still the numbers used today by German, French and Austrian banks for one thing.

I would think that going beyond those sort of figures could have a negative impact on your other plans and dreams if things should go wrong... We're coming out of a recession right now, but no one can tell how far off the next one is nor how well this recovery pan out.


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## Jim2007 (17 Apr 2014)

Dublin106 said:


> Even at €150k joint income we can't afford a €0.5m home yet thousands upon thousands of others can. I just don't get it. Everyone seems to believe they won't come down but a 3 bed semi D in ballinteer for €450k just seems outrageous to me. Hoping it was a cash bubble but due to lack of supply and government interference i suspect they'll only go up....it's depressing.



But you have no idea how those people live, you don't get to see their bank accounts nor sit at the breakfast table when they sort out their finances... But if we are to believe what we read, people have over stretched themselves with mortgages they are now struggling to meet.

Assuming you can get a mortgage, you too could have that live style, if that is what you are willing to risk in order in order to achieve your dream.


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## stonecoldk (17 Apr 2014)

Jim2007 said:


> *Well if you go back to before the madness*, the usual numbers used were like: twice your annual salary plus once your partner's salary and spend no more than about 25% of your monthly salary in repayments, oh and 25 years was considered a long mortgage. As far as I know, these are still the numbers used today by German, French and Austrian banks for one thing.
> 
> I would think that going beyond those sort of figures could have a negative impact on your other plans and dreams if things should go wrong... We're coming out of a recession right now, but no one can tell how far off the next one is nor how well this recovery pan out.


 
Out of curiousity when exactly was that? The madness ended summer 2006 but when did it start....... 1998??  16 years ago??


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## chig (21 Apr 2014)

I saw a post on the pin linking to this and thought it was interesting but a lot of the replies to date are a bit one sided.

As a couple myself and my wife bought a house for just under 500,000 (or "half a million" which has extra shock factor) in Rathfarnham 18 months ago. We sold a house nearby and after paying off the mortgage had €120,000 in cash. With some savings we took out a mortgage for €340,000 over 25 years, fixed for first ten at 5.05%. The monthly repayments are just under €2000. Our joint income is similar to your own but higher percentage on my side. I don't see the big issue paying €2000 a month in a mortgage. Our old mortgage was €1000 but we felt obliged to save all the time as we knew we wanted to move one day. Now that I feel we no longer have an obligation to save or hide personal loans/gambling from the bank that we have more financial freedom. If the mortgage is paid and you still have €5000 a month to live on whats the big deal, that's €2000 more than we need to live on a month. My wife is currently on unpaid leave with our first child but we are not on the breadline yet and childcare is for 5 years not for life. 

In Wexford or Mayo a joint income of €150,000 and buying a house for €500,000 might seem outrageous but thousands of people in Dublin have this type of income, working in financial services, IT, medicine, education, semi-states etc. You don't have to be a lotto winner or have some inheritance.

In my opinion for a joint income in that region I can't see how a mortgage for €2000 is not affordable.


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## millieforbes (21 Apr 2014)

I don't think the income multiples are a huge problem or the monthly payments, I'm surprised at the low level of deposit, I think that  may be the difference between you and other high income couples buying half a million euro houses.

About half of my friends in the same age and income bracket are stuck in negative equity but the other half have positive equity or approx break even but have built up a lot of savings so they would be looking at lower LTV purchases


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## Drakon (21 Apr 2014)

Dublin106 said:


> I don't want to live in a half a million house but unfortunately in south dublin that's the cost of an average 3 bed semi d and that's ideally where we want to live. And if a couple on €142k can't afford these houses who can.
> 
> Given our level of earnings what do you think is an appropriate mortgage?



Mine was valued at €195k only six months ago.  It didn't even cost €350k in 2005, not to mind €500k.



Dublin106 said:


> Quick question - if a finance couple on 142k pa can't afford a 3 bed semi D in south dubin for 0.5m who can? who is buying all these houses? in the likes of ballinteer, rathfarnham, dundrum etc?



People that already have houses.  You're coming from a position where your deposit is less than 10% of your supposed house price, and you've no existing property.  Most of these people will be selling their current houses, probably worth €200k or €300k.  They've got a significant head start on you.  Probably half the salary but twice the buying potential.  Note, this is my opinion; it's not advice.


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## Bronte (22 Apr 2014)

ebs_customer said:


> The house you're buying is basically going to be a shack like all the homes built in that era, if it were to be built today to it's current condition it might cost 50k to throw up.
> .


 
I'll hire you if you can build a house for 50K !  And I'd most certainly buy a decent, even if run down, well built older Dublin house instead of most of the new ones.  Particularly if it was in a great location such as SCD.

Personally I don't actually see the attraction of SCD, but I do know that is the best location, in general, when one is talking about location location location and keeping values.  I'd probably go for somewhere like Malahide on the North side myself.  But I've no intention of living ever in Dublin.  But it's the place to be for jobs.


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## Bronte (22 Apr 2014)

Belton said:


> Mine was valued at €195k only six months ago. It didn't even cost €350k in 2005, not to mind €500k.
> 
> 
> .


 
Are you saying that the house he's planning on buying was worth 350K at most at peak of the boom?  And that currently they are worth 195K?

Dublin106, what would the proposed house fetch in rent?


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## Drakon (22 Apr 2014)

Bronte said:


> Are you saying that the house he's planning on buying was worth 350K at most at peak of the boom?  And that currently they are worth 195K?



No, I'm saying that close to the peak of the boom I bought a 3 bedroom house in South County Dublin for less than €350k.  Six months ago it was valued at €195k.
What I'm saying is there are plenty of houses in, say, Dublin 16, for between €200k and €450.  I don't see where this average of halfamil is coming from, tbh.


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## leonmahon (5 May 2014)

Whether we realize it or not, everyone has a choice about what we spend our money on.

OP, I'm sure your monthly expenditure of 3.5k+ seems normal to you, but my family's (similar age, 1 child) monthly expenses come in at around a third of that figure. 

This is the reason you are struggling to afford the house you want in the current climate. Either cut spending and buy the house, or keep spending and buy a house in a cheaper location.


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