# Use 200k to trade up to bigger house or rent and never buy property again?



## skenny (3 Feb 2010)

Age: 36
Spouse’s/Partner's age: 34

Annual gross income from employment or profession: *85k self-employed* 
Annual gross income of spouse: *30k private sector*


In general are you:
(a) spending more than you earn, or
(b) saving?

*Saving*

Rough estimate of value of home *400,000*
Amount outstanding on your mortgage: *420,000*
*What interest rate are you paying? Tracker 1.59%*

Other borrowings – car loans/personal loans etc
*Car loan 25k over 5 years* 

Do you pay off your full credit card balance each month? *Yes*
If not, what is the balance on your credit card? 

Savings and investments: *200k* in various high interest deposit accounts

Do you have a pension scheme? *No, no faith in pensions & distrust most schemes*

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

Ages of children: *One on the way this year*

Life insurance: *Mortgage Life Cover 800 per year*
*VHI 1200 per year*


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

Due first child this year and wife will be giving up work to look after it. We currently live in a two-bed townhouse with no garden so we will need to move to a bigger house within the next year or so. 

We bought current house in 2006 for 660k including stamp duty, and since then through a combination of overpayments and some lump sum bonuses have managed to bring the amount we owe down to 420k. When interest rates went lower than deposits we decided to save instead.

Problem is that all we have done is kept pace with the negative equity and while we hope to sell our own house this year, we know we may need to take even more of a loss than the 240k we have already lost (contrary to some people’s belief that neg equity is only ‘notional’ this is real money that we will never get back)
My income is solid for the next four years at least (contracts secured) and should continue thereafter particularly if economy starts to improve, so despite loss of my wife’s income we still have a reasonable amount to live on.

My question: Because of the huge loss we have already sustained, we are reluctant to risk our 200k in another property (we would need close to 650/700k to buy even a 3-bed in good area in South Dub) which is why we are considering giving up on buying altogether and just renting instead, given our first foray into the market was so badly-timed and a huge loss-maker. 
That way we get to keep our nest egg and perhaps rent an even nicer/bigger place in a better area but without the 30-year commitment and the risk of losing more of our hard-earned money. 

What do posters think of this strategy? Is it a good/bad idea considering our circumstances and are there any pitfalls that we may have overlooked? Besides the Irish psychological attachments to property which given our recent experience, we can certainly live without.
Thank you


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## Firefly (3 Feb 2010)

Not wanting to do a moderator's job, I think this thread could very easily head into a discussion on property prices. 

All I'll say is that given the large 200k deposit you have then if you decide to rent you will be in a better position than most to get a mortgage in the future if you want to buy. Just out of interest, why do you keep a carloan with this much cash in the bank - surely the interest on the carloan is > you deposit interest (which is taxable)?


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## skenny (3 Feb 2010)

Hi, opinions on property prices is not at all what I'm asking. The car loan exists because I feel its just one of those things you are always paying for and also because we don't want to use up any more of our cash at the moment until we decide what we're doing.


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## giles (3 Feb 2010)

You paid 660k for a 2 bedroom house with no garden! Am I the only one who thinks this is crazy. Don't get me wrong I understand that you want to raise your family in a nice area but seriously, for that kind of money you could easily get a nice 3 bed-semi with garden in a nice area. Maybe not the most prestigious post code but pretty close. 

Renting can have a lot of benifits - no negitive equity, the landlords responsible for maintaining the property so you save money, move easily and you can build up your savings. Your right about Irelands obsession with owning property and you'll get dozens of people telling you "rent is dead money". Its not. Renting gives you the joys of having a nice home without the responsibilities. I would suggest trying it out for a year and sure you can always change your mind sometime down the line.


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## skenny (3 Feb 2010)

giles said:


> You paid 660k for a 2 bedroom house with no garden! Am I the only one who thinks this is crazy.
> 
> Yep, I certainly realise that now, but was one of the many who got sucked into the property craziness and just at the wrong time too! Actually paid 620k but by the time you add in stamp duty it was over the 660k. We're both from the area in question and was all we could afford there at the time - locality would have previously been considered a 'safe bet' but as we all know now, there's no such thing!


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## chlipps (3 Feb 2010)

I think if you can sell your house for 400K and clear your mortgage that would be good move. But if you are offered much lower then you may want to consider staying there for few years. I know many with large family in 3 bed houses so why do you think a 2 bed is too small with 1 child. Yes kids and all the gear take up alot of space but space can be controlled, with many compact storage systems available nowadays. In few years you could re-consider rent vs. purchase at that stage. You wont need the garden for few years.

I would clear the car debt asap as you are probably paying 8-9% interest on same. You still have 175k left over which covers alot of repayments should you incur issue with work


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## skenny (4 Feb 2010)

Thanks for replies. Know that we won't need to think about it seriously for the first year or so but wanted to throw the 'stay off ladder forever' idea out there to get people's take on it


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## Firefly (4 Feb 2010)

I'd reckon of you paid 620 + stamp for a house with only 2 bedrooms and no garden, then it's probably in an excellent area and could be a great renter in the future. With 200k in the bank I'd probably rent for the next year or so in a bigger house and wait. 
Personally, I'd also ditch the carloan. I think having a carloan can promote the more frequent changing of your cars - when the loan is paid off you are more likely to take out the same size loan and buy a new car. Since I paid off my carloan I couldn't justify spending more money to replace a perfectly running car.


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## Complainer (4 Feb 2010)

skenny said:


> My question: Because of the huge loss we have already sustained, we are reluctant to risk our 200k in another property (we would need close to 650/700k to buy even a 3-bed in good area in South Dub) which is why we are considering giving up on buying altogether and just renting instead, given our first foray into the market was so badly-timed and a huge loss-maker.


Perhaps we have very different opinions of what constitutes a 'good area', but it looks to me like you are all set to vastly overpay for your next property. I know of one roomy 4-bed that sold for about €520k in a nice part of Ballinteer in recent months, so your estimate of a price for a 3-bed seems way off.


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## Saudi (4 Feb 2010)

I don't think we need to get in to a debate as to what is a good area and whether buying in what one person considers to be a better area is another person's idea of vastly overpaying for a property.

Firefly's idea of renting out your own property (provided their are no stamp duty implications for doing so) and renting a larger house while taking a wait and see approach seems to make an awful lot of sense.  You might have to make additional contributions to cover the mortgage but it least you will be continuing to pay down your loan.  You also don't lose the opportunity cost of the lump sum, you never know what is around the corner.

Makes sense to ditch your car loan as well.


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## skenny (4 Feb 2010)

Complainer said:


> Perhaps we have very different opinions of what constitutes a 'good area', but it looks to me like you are all set to vastly overpay for your next property. I know of one roomy 4-bed that sold for about €520k in a nice part of Ballinteer in recent months, so your estimate of a price for a 3-bed seems way off.


 
I get what you're saying Complainer but we're currently near the coast and would prefer to stay around the same area, so most 3 beds in this catchment are priced higher. Would feel even worse about using lump sum to buy in area that's not our preference. This is why we were thinking seriously about the rental option.

We could consider renting our existing place out but not sure I would be cut out to be a landlord as have read some of the posts on the awful experiences people have been having with tenants and not sure I could cope with all that. With the additional tax burden, and all the assoc regulations it seems like it might be a major headache. And that's before we even consider the possibliity of further decline in asset value.


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## hiagain (5 Feb 2010)

My only issue with renting is that you don't get to keep that house while your children are growing up.  You are at the whim of a landlord.  I am in the same position myself.

Personally I think that you don't need a garden until the child is 2, so there's no rush if you like the house and the area.

That said you could rent another house until the child is 2, because they don't make many attachments with local children, local school etc and then think about whether you want to buy something more permanent or continue renting if it suits you.


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## mustang01 (5 Feb 2010)

Yes, I think the lack of security is your biggest concern, although not sure its enough to warrant parting with 200k either!


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## regvw (5 Feb 2010)

skenny the one sure tip I can give you to save a few pound is to clear that car loan asap. You have 200k in the bank .........


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## mtk (5 Feb 2010)

our neighbour's house 3 bed ( smallish) is for sale for 475 in very salbrious south dublin area... so maybe you are overestiamating cost of trading up...?


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## busyboy (5 Feb 2010)

I know it's early days yet,but if you rent for the rest of your lives, your children will never have to pay any inheritance tax on a property you might otherwise own. Plus there'll be no fighting over any property when you're gone, something us irish are famous for.


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## MelF (10 Feb 2010)

Can understand you not wanting to throw more money after bad as the money you've lost in neg equity is the very definition of 'dead money'!
Only prob I could see with renting out your existing house and then renting a bigger one is the tax you have to pay on the rent earned as well as having to pay your own rent. Think I would wait to pay off the car until you decide if you are going to stay in the property market. Good luck with new baby.


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## rgfuller (11 Feb 2010)

I would also throw this into the mix - how do you plan to pay for your retirement ?
Purely from savings and the state ? This is a tax-inefficient way of saving for retirement. You should really plan for this.
Many people believe owning property outright at retirement gives them the opportunity to live rent free (hence cheaper) and could allow them to 'trade down' releasing equity to finance their retired lifestyle - if you rent - you can only trade down to save on rent at this point, but bear in mind that you'll alway have to plan to pay rent.
Also you may want to pass on an inheritance to your children when you die (in the form of property) - if you own nothing you can pass on nothing.
Just some things to think about.


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## olddog (13 Feb 2010)

skenny said:


> Age: 36
> Spouse’s/Partner's age: 34
> 
> Annual gross income from employment or profession: *85k self-employed*
> ...



You are young(ish)

Sell up!

Move to a lower cost & lower wage area where the value of life and education for the next generation have not been eclipsed by property values and looking in the financial rear view mirror.

Sorry if this is not what you want to read. 

Please think of your kid (s  )

Regards & good luck


Olddog


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## Bronte (15 Feb 2010)

What rent would your current house achieve (to see if it's worth holding onto).  

What rent are you thinking of paying?  

Based on what you've posted so far the sell, rent for a couple of years and then buy sounds like the best strategy.  

The loss of your wife's salary is going to be a bit of a hit.  Your self employed business sounds good but any self employed person needs to have something should ill health or a down turn mean they lose their earning potential.  You need to think about this.  200K whilst a nice cushion would only amount to 2 years of your current income (and spending)


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