# 30 yr mortgage for one-off tax payment



## Bongo (29 Jun 2006)

Must say I liked this David McWilliams quote in last Sunday's SBP.

[broken link removed]

_"as long as credit is cheap and house prices keep going up, there will be no problem. If I were part of the state apparatus, I probably wouldn’t be worried either. Just think about it. Close to 50 per cent of the cost of a house from green field site to new-build goes to the state in taxes. So what is happening? The government - under the watch of the ‘‘tax-cutting’’ PDs - is giving all of us a chance to borrow for 30 years to make this one-off tax payment. What a scam!"_

He's 100% right & this sure ain't sustainable in the long run.

Beware of property ....


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## ClubMan (29 Jun 2006)

Not everybody buys a new property so not everybody is paying this supposed "50%" in tax (how did he calculate that anyway?) on a property purchase. Don't let the facts get in the way of a good soundbite - especially when you can work a little populist _"rip-off Ireland" _slant into it too.


> Maybe the PDs could, in their next manifesto, stop worrying about income tax cuts and focus on the housing scam in an effort to get prices down for the average young worker.


 Oh dear...


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## room305 (29 Jun 2006)

Typical McWilliams soundbite. I wish people would stop acting as though house prices are rising independent of those doing the actual buying. If you think houses are too expensive, then don't buy one!

As soon as the majority of people believe houses are overvalued, _actually_ believe it rather than simply moaning about it but really willing them to continue on an ever upward trend, then the price will fall to meet the market expectations.

The worst thing any political party could do at this stage is to introduce measures to try and lower the price.


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## ClubMan (29 Jun 2006)

[broken link removed] anyone?


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## Guest107 (29 Jun 2006)

I find his brand of pop economics is annoying  and overdone and every bloody where at this stage and I strenously avoid listening to him because he is 20% gems and 80% turnips. Hector is worse I'll admit  .


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## funky girl (7 Jul 2006)

I find it hard to feel sorry for first time buyers, as a lot of them seem to have very high standards of living compared to myself and i bought my first property eight yrs ago.


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## ClubMan (7 Jul 2006)

It is indeed surprising the number of _FTBs _who want - nay, expect - to move into house that is finished, fitted and furnished to only the highest of standards and can't/won't countenance the idea of incrementally sorting things out over the first few years and within budget.


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## liteweight (8 Jul 2006)

ClubMan said:
			
		

> It is indeed surprising the number of _FTBs _who want - nay, expect - to move into house that is finished, fitted and furnished to only the highest of standards and can't/won't countenance the idea of incrementally sorting things out over the first few years and within budget.



I agree. Had occasion to go to an apartment block the other night. While chatting with friend (FTB) I casually looked up at all the windows. I was amazed at the amount of giant LCD tvs hanging on the walls of tiny one bed apartments. They might have been able to afford 2 bed if they'd cut back on some of the luxury items!!


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## bearishbull (8 Jul 2006)

liteweight said:
			
		

> I agree. Had occasion to go to an apartment block the other night. While chatting with friend (FTB) I casually looked up at all the windows. I was amazed at the amount of giant LCD tvs hanging on the walls of tiny one bed apartments. They might have been able to afford 2 bed if they'd cut back on some of the luxury items!!


Yeah i've seen all these giant tv's! people living rooms are too small for them! youre supposed to sit several metres back from a 42 inch screen for proper effect.


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## Purple (10 Jul 2006)

ClubMan said:
			
		

> It is indeed surprising the number of _FTBs _who want - nay, expect - to move into house that is finished, fitted and furnished to only the highest of standards and can't/won't countenance the idea of incrementally sorting things out over the first few years and within budget.


Oh that's like, so oldfashoned ClubMan!
FTB's are, like, buying a life-style.
There should be no tax in plasma screen TV's as they a necessity, not a luxury. Just 'cause old farts (like me) did things like sell their car and go back to cycling to work and accept hand-me-down furniture when they bought their first home it doesn't mean that today’s first time buyer is not entitled to walk into the perfect pad... and still go on sun holidays as well (another necessity).  
Didn’t you know that it’s OK to borrow for life style spending, I mean what do you think credit cards are for (like)?


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## mf1 (10 Jul 2006)

You know folks that we have now officially turned into our parents...................

Young people of today...........

mf


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## ClubMan (10 Jul 2006)

Yeah - and they were right all along too!


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## Persius (10 Jul 2006)

room305 said:
			
		

> As soon as the majority of people believe houses are overvalued, actually believe it rather than simply moaning about it but really willing them to continue on an ever upward trend, then the price will fall to meet the market expectations.


As a potential FTB, it's hard to _believe_ that properties are overvalued after losing out on a number of bidding wars. Especially when you hear the oft quoted mantra that "the market sets the price". I'm just back from a few years in Munich (similar size to Dublin) where property prices averaged about 3000 EUR per square meter in reasonable to good locations. In Dublin inside the M50 you're looking at asking prices of around 5500 EUR per square meter for end of terrace houses in Crumlin. I thought that was very expensive, only to experience bidding wars which show people prepared to pay much more again.
Having looked at some of the arguments and figures presented on this board - especially the number of completions expected for 2006 and also the number of vacant properties - as well as the cost of renting vs buying and the impending interest rate rises, I am beginning to think that properties are overvalued. However it's easy to see why other FTBs complain about the _cost_, but still think the _value_ is there. 



			
				liteweight said:
			
		

> I agree. Had occasion to go to an apartment block the other night. While chatting with friend (FTB) I casually looked up at all the windows. I was amazed at the amount of giant LCD tvs hanging on the walls of tiny one bed apartments. They might have been able to afford 2 bed if they'd cut back on some of the luxury items!!


In fairness, I imagine lots of electrical and white goods are much cheaper, relative to net income and morgage repayments, than they were 15 years ago. Also furntiture is cheaper in real terms. All this due to a combination of technology improvements and cheap supply from China etc. What %age of your net income did an old fashioned 4:3 CRT TV cost when you bought your first house?
Two other things to consider
1) They may be rental properties, and the landlord provided the plasma TV to attract tennants
2) Banks are offering a morgage holiday for the first three months once you purchase your new property. This gives FTBs the chance to kit out their new house with the money "saved".


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## room305 (10 Jul 2006)

Persius said:
			
		

> As a potential FTB, it's hard to _believe_ that properties are overvalued after losing out on a number of bidding wars. Especially when you hear the oft quoted mantra that "the market sets the price".



The person who is willing to pay the most sets the price. That's how a market works. _You_ clearly believe the market is overpriced, however it is also clear many others don't. Markets are not necessarily efficient, so don't be tempted to believe that the valuations other people put on something reflect a fair price.


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## sonar (10 Jul 2006)

Perhaps that can be altered to "The person who is willing to borrow the most sets the price" as evidenced by the jaw-dropping growth in personal debt. 

And with interest rates in the region of 2% for over three years coupled with loose credit we have ourselves one big distortion.

These distortions should be removed as interest rates return to neutral or even perhaps beyond the neutral level.

I personally would not be surprised if in years to come, people look back at today's house prices and be flabbergasted in much the same way as we are today when we look back at what people payed for .com stocks in 2000.


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## liteweight (27 Jul 2006)

Persius said:
			
		

> In fairness, I imagine lots of electrical and white goods are much cheaper, relative to net income and morgage repayments, than they were 15 years ago. Also furntiture is cheaper in real terms. All this due to a combination of technology improvements and cheap supply from China etc. What %age of your net income did an old fashioned 4:3 CRT TV cost when you bought your first house?
> Two other things to consider
> 1) They may be rental properties, and the landlord provided the plasma TV to attract tennants
> 2) Banks are offering a morgage holiday for the first three months once you purchase your new property. This gives FTBs the chance to kit out their new house with the money "saved".



Can't remember what % tv was but I know it was too much so borrowed old set.

I am a landlord and wouldn't dream of supplying plasma tv (too expensive despite glut on market due to over production at mo).

Is the interest charged by them included in this holiday?


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## MissRibena (27 Jul 2006)

Lots of my friends are first time buyers.  I bought my first property nearly seven years ago and I really find the difference in attitude amazing.

Two of them were weren't available to collect their keys as they were on holidays (in lovely expensive destinations).  Holidays! Bah Humbug! I didn't have any kind of holiday for about four years.  I didn't go out either but there's no curtailing of that now.  I thought I was the luckiest person in the world when I managed to buy a house and spent the first while sleeping on concrete floors on my little sofa bed.  But now nobody moves in until the places is fully kitted out to 4 star level.

But then again, best of luck to them because I won't be happy until I get rid of my mortgage (which is now "small" relatively speaking) and as debt is a fact of life to a certain degree, I would make my own life easier if I could learn to live with it more comfortably as others seem to be able to.  

Rebecca


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## Glenbhoy (27 Jul 2006)

Maybe we should deny the right to purchase property from the under 30's, they're clearly irresponsible.


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## autumnleaf (27 Jul 2006)

Funny how people are using "going on holidays" as a sign that someone must have money to burn. Even when I was a broke student I always managed to go somewhere every year, whether it was camping in Kerry or the bus to London to stay with friends. Nowadays with cheap flights it's even easier. If you can travel off-season, you can have a nice 2-week holiday in somewhere like Portugal or Bulgaria for about E750 (incl transport, accomodation and food). That's 62.50 a month. Or staying in one weekend a month, getting clothes in Pennys rather than Brown Thomas, buying black shoes that go with everything instead of loads of different-coloured pairs, keeping the car (or bike) for another year, finding the best phone tarrif, walking everywhere rather than joining a gym, etc.

I'd never go so far as to say a holiday was a "necessity", but it's always nice to have something to look forward to, and it's hardly the gold-plated indulgence some people seem to think!


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## MissRibena (27 Jul 2006)

Nope, I was a long way under 30 when I bought.

I don't envy them the "stuff", I just envy their attitude.  I think it's a sign of feeling confident enough to live for now, carpe diem and all that.   Are you not better off being 28 with a massive mortgage on a tiny home and perceiving yourself to be free than being 28 with a small mortgage on a large home and perceiving yourself to be "tied down" by debt?  They don't feel lucky to buy a home like I did, so aren't intimidated by the debt.

Rebecca


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## MissRibena (27 Jul 2006)

Autumnleaf
My friends are not going off-season to lower-cost destinations. These are Dubai and New York shopping trips and three week two-destination holidays in Thailand. 

I don't understand the defensive side to this. Maybe the FTBs aren't half as comfortable with it all as they seem to me.

Rebecca


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## Contrarian (27 Jul 2006)

When mortgage rates are 6% a la the US, we'll see how comfortable they are.


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## mell61 (27 Jul 2006)

Well just think of them as the L'Oreal generation, after all 'they are worth it'!

I'm flabbergasted also by the money being spent by people just getting onto the property ladder, new kitchen, new car, plasmas, big holidays.... It's gotten so those purchases are 'normal' in the first year of a mortgage, mostly paid for using unsecured credit.     

I would agree that no-one wants to make do any more, they want to move straight into the 'House and Homes' ideal abode...   
I recall recycled tables, chairs, appliances... and I'm none the worse for it (I hope ;-)


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## Persius (27 Jul 2006)

liteweight said:
			
		

> Can't remember what % tv was but I know it was too much so borrowed old set.
> 
> I am a landlord and wouldn't dream of supplying plasma tv (too expensive despite glut on market due to over production at mo).
> 
> Is the interest charged by them included in this holiday?


 
The interest keeps building up. However the FTB has three months when they're neither paying morgage nor rent. So they can use this money to kit out the house.


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## liteweight (27 Jul 2006)

Persius said:
			
		

> The interest keeps building up. However the FTB has three months when they're neither paying morgage nor rent. So they can use this money to kit out the house.



But the three months is added on to the terfm of the mortgage right?


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## Persius (28 Jul 2006)

Sure, you get the loan on day one and the bank starts charging interest. After day 90 (or perhaps 120 if at end of month) you start making your first payments. Whether the, say 30 year, term starts from day 1 or day 90 I don't know. It should be obvious to potential borrowers that you are paying for the privilege of a three month repayment holiday as the interest due is greater due to no repayments in the first three months. However I suspect some people think that they are getting a bargain from the bank.


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## jammacjam (28 Jul 2006)

I think a major problem is that people don’t know what they are getting from the bank, I don’t think anyone is told the difference in paying for a 35 year over a 25 year mortgage for example; they may understand that they will be paying more but not how much more. Nobody is looking at it beyond the monthly amount that they can pay back; the whole attitude towards money has changed. I had a difficult time trying to explain to one of my friends why she shouldn’t remortgage to pay off her debts, she couldn’t understand that even though she was paying less monthly she would be paying more because she would be paying for her holiday and nice clothes for 25 years.


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