Own 1/3rd of my home - planning to buy on my own.

T

The_Verve

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Long time lurker, first time poster - thoroughly enjoy the threads on here!

Age: 26
Spouse’s/Partner's age: n/a

Annual gross income from employment or profession: €37,000
Annual gross income of spouse: n/a

Monthly take-home pay: €2,400

Type of employment: Civil Servant



In general are you:
(a) spending more than you earn, or
(b) saving?
Saving, €400 p/m salary deduction, though I do dip into this at Christmas etc. I will be upping this to €600 p/m from next week onwards.

Rough estimate of value of home: €75,000 (One third share in home worth €225,000) - can be bought out when the time is right.
Amount outstanding on your mortgage: n/a
What interest rate are you paying? n/a

Other borrowings – car loans/personal loans etc. n/a

Do you pay off your full credit card balance each month?
Yes, though I think I should cancel it after the next statement in anticipation of a mortgage application in the next year or two.
If not, what is the balance on your credit card?

Savings and investments:
€4,000 in the credit union.

Do you have a pension scheme?
Member of the Single Public Service Pension Scheme, one year in.
€500 in AVC PRSA with Davy - new venture, not a particular priority but something I’d like to be adding a little to whenever I have spare cash, I buy Vanguard S&P500 etf units 0.07% ongoing charge, 0.75% amc.

Do you own any investment or other property?
One quarter share in a property, about to be sold, valued at €45,000.

Ages of children:
None

Life insurance:
None, though death in service benefit as part of SPSPS.


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

What should I do with the money I get from the forthcoming sale of the share in a house (valued at €45,000) in the medium term? Eventually I will put this towards my own house, but I’m worried about inflation in the meantime.

Overall I’m trying to position myself to apply for a mortgage as a single person in the coming years, bolstered by the equity in both properties eventually being converted to cash to put towards any purchase.

Am I stupid to be putting money into AVC’s before having my own mortgage started? Should I be saving much more cash from wages into an emergency/house deposit fund before even thinking about mortgages?

It’s an unusual situation as I’m very much at the start of the financial/career ladder but have property assets due to family bereavements, and want to get things right from the start as regards pensions/savings to set things up for the next few years.
 
Where are you living at the moment? Are your paying rent or living with your parents?

What is your salary outlook? I presume that as a public servant, your salary will steadily increase, but is unlikely to dramatically increase in the way a newly qualified accountant or IT person might expect.

How much would a house in your target range cost?

What is your timescale for buying a house?

Brendan
 
You have a deposit equal to €120k at present.

You can borrow about another €120k.

Can you buy what you want for €240k?

Brendan
 
The_Verve said:
What should I do with the money I get from the forthcoming sale of the share in a house (valued at €45,000) in the medium term? Eventually I will put this towards my own house, but I’m worried about inflation in the meantime.
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What's your timeframe? Cash on deposit will likely lose to inflation but other investments have plenty of downside risk too.

For anything less than five years I would keep it on deposit. With state savings you get some interest and can cash in at any stage (losing most of the interest of course).
 
Brendan Burgess said:
Where are you living at the moment? Are your paying rent or living with your parents?

What is your salary outlook? I presume that as a public servant, your salary will steadily increase, but is unlikely to dramatically increase in the way a newly qualified accountant or IT person might expect.

How much would a house in your target range cost?

What is your timescale for buying a house?

Brendan
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Hi Brendan, thanks for your reply. I'm currently living in the first property mentioned above with siblings, so no rent to pay but I don't want to go about selling this until I have gotten approval in principle for the other 140k.

Spot on in terms of salary, the scale I am on will rise to 65k over the next ten years, so hope to overpay as the years go on. I will also be happy to let out rooms in the house through the rent a room scheme - this seems to be a ludicrously good way to supplement your income tax free if your personal circumstances suit.

Brendan Burgess said:
You have a deposit equal to €120k at present.

You can borrow about another €120k.

Can you buy what you want for €240k?

Brendan
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It's right on the line of affordability for three bed semis in my area, it's just that supply is so tight at the moment, there's very little comes up. I think with an extra 10-20k saved over the next year or two, it should be enough.

I see ICS mortgages allow you to take two points up the scale if you're in the public service, coupled with the 1.95% rate for those with lower LTV, they look very attractive.

NoRegretsCoyote said:
What's your timeframe? Cash on deposit will likely lose to inflation but other investments have plenty of downside risk too.

For anything less than five years I would keep it on deposit. With state savings you get some interest and can cash in at any stage (losing most of the interest of course).
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Hi Coyote, thanks for your reply. While I have a decent deposit to put towards a mortgage, I think the bank will still need another year or more of evidence of ability to pay e.g. saving 600/700 p/m into savings untouched. On that basis, I'm aiming to apply in a years time but wouldn't be surprised if it was two years away. I'll look at the state savings options so, definitely want to be buying within three years anyway.

Inevitably wary of buying after ten years of rises in the housing market but I suppose you have to bite the bullet at some stage.
 
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OK, so you are living in a property which you own jointly with your siblings.

1) You have a stake in the property market as you own 1/3rd of a house
2) It seems that your current accommodation requirements are well catered for.

I am not sure that you need to rush to buy. By all means, position yourself to buy, but there is no hurry.

If house prices rise, your stake in the property market rises as well.
If house prices fall, you can buy a bigger house.

Could you buy your current home from your siblings over time?

Are you sure that when you want to sell your 1/3rd, they would willing and able to buy and that the price would be agreed?

Brendan
 
The_Verve said:
On that basis, I'm aiming to apply in a years time but wouldn't be surprised if it was two years away.
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In that case you need your funds liquid and you will have a low risk tolerance.

Deposit account or state savings only is my recommendation!
 
Brendan Burgess said:
OK, so you are living in a property which you own jointly with your siblings.

1) You have a stake in the property market as you own 1/3rd of a house
2) It seems that your current accommodation requirements are well catered for.

I am not sure that you need to rush to buy. By all means, position yourself to buy, but there is no hurry.

If house prices rise, your stake in the property market rises as well.
If house prices fall, you can buy a bigger house.

Could you buy your current home from your siblings over time?

Are you sure that when you want to sell your 1/3rd, they would willing and able to buy and that the price would be agreed?

Brendan
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This is the nub of the issue, I'm quite happy with the accommodation situation but feel the sooner I get buying the better from a financial standpoint, particularly the idea of renting out two rooms effectively paying the mortgage. I should probably relax a bit seeing as I have a foot in the door as is.

I don't have a desire to own the current home and one of my siblings does want to, so I'm happy to work on that basis. We have an explicit agreement that I can buy out if I'd like to, and both have money to buy me out at current rates from the proceeds of sale of the other property. We have agreed to get an independent valuation of the property and go off that. The risk is that property prices rise significantly and they can no longer afford to buy me out, or eat away at their money over the next few years and then I can't access my share when I am ready to buy.

From the above advice I'm inclined to make no move on the home house share for the foreseeable, put the proceeds of the upcoming sale into state savings, inflation be damned in the short-term, and save away for another while. A lot of it seems to come down to crystal ball gazing on timing.

Any advice re: AVC's also welcome - the potential of 35 years compounding growth of small amounts now is hard to get away from.
 
The_Verve said:
Any advice re: AVC's also welcome - the potential of 35 years compounding growth of small amounts now is hard to get away from.
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You pay compound interest on your mortgage as well! Your house will increase ( or decrease) in value at compound rates also. So that is not an argument for making AVCs.

At your age, your priority is access to cash so you should not be making AVCs. You should be saving the money in your house deposit account instead.

Brendan
 
The_Verve said:
We have an explicit agreement that I can buy out if I'd like to, and both have money to buy me out at current rates from the proceeds of sale of the other property. We have agreed to get an independent valuation of the property and go off that. The risk is that property prices rise significantly and they can no longer afford to buy me out, or eat away at their money over the next few years and then I can't access my share when I am ready to buy.
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Is this in writing?

People fall out or change their minds or misremember what was initially agreed.
And as you say, they might not be able to pay you the money when you need it.

So based on that, I think you should buy sooner rather than later.

Brendan
 
Brendan Burgess said:
Is this in writing?

People fall out or change their minds or misremember what was initially agreed.
And as you say, they might not be able to pay you the money when you need it.

So based on that, I think you should buy sooner rather than later.

Brendan
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It's a verbal agreement but we've talked it to death over the past two years reiterating the same points of view/understanding, if anything they are keener to buy me out and are planning for that eventuality more so than anything else. Changing priorities and circumstances on their part is certainly a risk to bear in mind though of course.

Thanks for your thoughts Brendan. Please god it all falls together over the next few months!
 
There are a number of issues that need to be addressed before you consider buying a property:

Savings: You only have €4k savings so you have no real saving history. There may be valid reasons for this e.g paying rent, paying student loans, only recently employed at that salary etc. However if you have been earning for a while and living at home rent free, you need to seriously address your spending habits

Affordability: You are living rent free and only saving €400 (which you dip into) while living rent free. You need to up this way beyond €600 to meet affordability criteria and it needs to be real savings (i.e. no dipping in). You should be able to save €1k comfortably at your age with no rent. €1400/month still leaves you with a lot of disposable income

Access to cash: This will be your biggest problem. You will soon get €45k, are you getting all of this or is it being sold as part of an estate and you will be liable to CAT? The other €75k may not be as easily accessible as you assume. Are you expecting 2 of your siblings to buy out your €75k or just one? What if they decide to buy a brand new car a few weeks before you announce your intention to buy your own place? Or they decide to buy a bigger place themselves with a partner? It may not be ideal but you should consider selling your share now when you know they have the money and paying a nominal rent to your sibling (eg. €200/month) so that you have a guaranteed deposit.

You have a decent income for your age but you are at a major disadvantage as a solo applicant for a mortgage. I think you should definitely speak to or use a broker to ensure you are in the best possible position to get a mortgage. If you plan to buy in 2/3 years, you will be further up the pay scale and as you mentioned, the likes of ICS will go another 2 steps up. This could be 45-50k x 3.5 or 150-175k that you could borrow. A broker may even be able to help you go above the limits if you intend to rent.

And finally, don't forget that there are a lot of costs to buying and furnishing a new home and you should always have a buffer/emergency fund. If you can add €24k over the next 2 years to your potential €120k that you have tied up in existing properties, then you should be comfortable to use €120-130k as a deposit
 
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