Buying a House - how much to borrow v how much should we keep in our savings?

[nomoney123]

My partner and i are looking to buy a house in Dublin, and are trying to decide on how much we should spend in total, and how much we should borrow, and how much to leave in our savings.

We are in our early 40's with no kids. We both have jobs with pensions (one defined benefit no avc's, the other one is defined contribution, but not maximising contributions). Our combined income is €117k. We have combined savings of €380k (on deposit, no return on it currently). House prices for the type of property/area we would like are in the region of €500k-€550k. As we currently rent, we would also need to purchase furniture etc for our new property, and keep some money for potential home improvements on our new house (likely to be a second hand property)

How much should we leave in our savings after the purchase of the property? We are both conscious that we are older now, and looking at a mortgage term of somewhere between 20-25 yrs, but job security may be an issue as we get older and as the workplace changes, so conscious of the need for a rainy day fund.

Thanks

 

[PGF2016]

Calculate how much you need for process of buying the house (solicitors etc). Calculate how much you'll need to furnish the house. Leave an emergency fund to one side (6 months living expenses or 1 year if you are very cautious).
Take all the above from your savings and use the rest for the house purchase.

Suggestion (based on gut feel, not real numbers)= 380 - (5k + 40k + 30k) = ~305k

 

[Brendan Burgess]

Here is the first stage of the decision making process

1) Borrow as much as possible on a variable rate mortgage
2) Get yourself sorted in terms of furniture and home improvements
3) Then pay off any surplus against your mortgage

Do these figures, and move to the second iteration.

1)What Loan to Value does that leave you with?
2) Would the rate be lower if you borrow less.
3) Can you still do Stage one and then avail of the lower LTV rate after paying down the mortgage? ( You should be able to do so with Ulster Bank, KBC and

 

[skrooge]

Here is the first stage of the decision making process

1) Borrow as much as possible on a variable rate mortgage
2) Get yourself sorted in terms of furniture and home improvements
3) Then pay off any surplus against your mortgage

Completely agree. It's what I did 2 years ago. Think of the the higher interest repayments as insurance for unforseen issues that may arise over year one. Also top up mortgages later down the line tend to be more expensive of available at all. In the context of banks offering % cashback deals it can also make sense.

You could consider locking in the balance in a fixed rate of you were planning on staying with the same lender but you are probably better off looking to switch (plenty of discussion on here about that).

Another approach would be pick a repayment level that would be close to your current rent. It keeps your day to day living expenses similar while presumably keeping a large fund on hand to use when needed

 

[Cervelo]

What a great place to be in, early forties, no kids, nice income, lots of savings, what's not to love about that situation. Enjoy
Like the other posters, borrow as much as you can, buy the house you want, use your savings to finish to the standard you want and if you've anything left pay off some of the mortgage or put it away for a rainy day
But there is a question that keeps popping up for me, is it wise to have that much money(650K+) tied up in an asset that you probably won't be able to realise but will most likely be passed on to someone else.

 

[nomoney123]

Thank you all very much for your advice.

We hadn't considered maxing borrowing and repaying early like that.

As we are not married, and our incomes and savings contribution are not equal, we'll need to look at this to see would it be an option for us, while still allowing us to set % ownerships for tennents in common agreement, and keeping mortgage manageable for both of us.

thanks alot!

 

[Leo]

Some banks will not like taking on a larger risk when you have access to significant cash, so you may need to tell them of your extensive refurb plans so as they don't insist you put up a larger stake.