40 Year Mortgage

T

tweety07

Registered User
Messages
58
Just wondering if someone can help. I am looking to buy a house in the €220,000-€280,000 region and have used a mortgage broker to help me with figuring out the sums as I have no real concept of mortgages rates etc. etc. They have come back to me with rates for 25/30 & 40 year mortgage. Would you think I would be absolutely mad to choose a 40 year mortgage?? Bearing in mind that I don't have a guarantor and won't be coming into money in the near future (although who knows!) so I'm going it alone. My biggest fear is getting onto the property ladder having a lovely home and not being able to go outside the door due to mortgage repayments. Looking to buy a 3 or 4 bed, live in it myself and rent rest of rooms.
 
If a 40 year mortgage gives you affordable repayments at the start, go for it. Then as your circumstances improve, you can always voluntarily pay extra to repay the loan earlier.
 
tweety07 said:
Would you think I would be absolutely mad to choose a 40 year mortgage??
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Well you will pay significantly more in interest over 40 years versus 25/30 years on the same initial amount. And your mortgage protection life assurance premiums will be higher to cater for the longer term. See Karl Jeacle's mortgage calculator to estimate how much more interest is involved.
What percentage of the purchase price are you looking to borrow? What is your gross and net income? What other debts/savings do you have?
Looking to buy a 3 or 4 bed, live in it myself and rent rest of rooms.
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Bear in mind that the owner occupier rent a room scheme allows you to collect €10K p.a. in tax free rental income. If you exceed this then you will be treated as a regular property investor and all rental income will be assessable for income tax and there may be other tax implications (e.g. stamp duty clawback, CGT etc.).

Where are you buying that you expect to get a 3-4 bed house for c. €220-280K?
 
Looking to buy in Limerick and I'm focusing on specific areas. My gross income is €32,000. I have savings of about €25,000.

Have no debts. I would be hoping to borrow €250.
 
€32K p.a. gross sounds like c. €28K p.a. net so you're looking at borrowing up to c. 9 times your net income!!!??
 
Club Man you are confirming my fears!!! The acutal house that I am particularly interested in at this point is in or around €275! What would you do?
 
tweety07 said:
Club Man you are confirming my fears!!! The acutal house that I am particularly interested in at this point is in or around €275! What would you do?
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Well you may have no choice since I wonder if (m)any lenders will advance 9-10 times your net income. Have you sounded out any lenders/brokers yet to see if you even qualify for a mortgage for the required amount? What would I do? I would not get myself into unmanageable debt anyway.
 
Clubman: From mortgage broker

€251,000 over 35 years

€240,000 over 30 years
 
Haggle hard on property prices and thus borrow less. Take an example of €220,000. On a 40-year term this would cost you €1,082 per month assuming a sample 5.15% interest rate. Tax relief would be €166 per month, but insurances would be extra. Think ballpark €1,000 per month.

If you're earning around €2,300 net per month, €1,000 is a fair old chunk.
A 1% rise in interest rates would add about €150 per month to your repayment.

Consider all possibilities before taking the plunge - how would you fare if interest rates go up by a couple of percent? How secure is your job? Will I have a ready supply of prospective tenants in the area?

Liam D. Ferguson
www.ferga.com
 
tweety07 said:
Clubman: From mortgage broker

€251,000 over 35 years

€240,000 over 30 years
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Looks like about €1,300 p.m. to service the loan excluding mortgage protection life assurance etc. Your net monthly take home looks to be c. €2,300. Can you live on €1K p.m. and pay all household bills/expenses, buy food etc.? Sounds tight to me.
 
We have been hearing so many stories about how the lenders are getting very selective on who they give mortgages to, and although your income and savings are decent enough, I can't see how you would qualify for a mortgage on your own in these economic times?

40 yrs is an awful long time to be paying a mortgage - what age are you now?
 
If my rough figures are about right then €1.3K+ p.m. out of €2.3K on mortgage costs doesn't give much room for manoeuvre - especially if rates ever increase. You'd certainly want to be good at budgeting for all expenditure and sticking to a plan. I guess this is why you are looking at 40 years to give more breathing space but I would be more inclined to look at the fundamental affordability issue of such a purchase in your current earning situation. I would also plug the figures into the mortgage calculator as the total interest cost figures can concentrate the mind too.
 
Also bear in mind that there is no point budgeting for a 40year spell if you need tenants to pay for it.

What is you meet someone and they decide to move in? You probably won't want to be living with 2 other people, so that now 2 potential people paying the loan as opposed to 4 if it was just you and 3 tenants.

Also think about times when you might not have all the rooms rented out. There is a glut of rental accommodation out there and it is conceivable that there will be times when there are 0 tenants in your house and you have to foot all the bills for periods of time.
 
I'm in my late 20's. Thank ye all so very much for ye're wonderful advice. I'm really glad I posted here now it's been extremely helpful and has put my mind at ease alot. And yes I am struggling a little as it is finacially altough I do save 600-800 pm but I want to be able to live aswell as have a house.

Re. Affordable Housing Scheme I haven't opted for this as I hope that by the time that would come around I may have other options i.e. build with someone
 
tweety07 said:
has put my mind at ease alot.
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Really? I must be losing my touch so. That's precisely the opposite effect that I thought I was aiming for. Based on the info you have posted it sounds to me like you would be stretching yourself (too much) to afford the sort of purchase outlined on your own and over the terms mentioned.
 
Clubman you have put my mind at ease in that, I have been putting serious pressure on myself house hunting, rattling figures around in my head etc. etc. and now from reading all of your advice I have changed my mind on the idea of purchasing a house as I am not going to tie myself down financially or emotionally and not be able to go outside the four walls with repayments afterwards. I guess what I needed was someone to agree with me, as other people around me had been telling me to go for it and not seeing the implications.
 
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