Buying a House

L

LadyG

Guest
Hi All,

I need some advise. I hope I've posted in the correct spot!

Myself and partner have just sold a house. We have a good deposit (approx €70k) to put down on a new house and want to keep repayments to €1200-1400 per month. So we are looking at houses in and around the 360k-370k. Everything seems great! However - Partner has a big loan around €360 per month - would he be advised to clear this before we get new mortgage. He is also nearly always overdrawn on his account due to unneccessary spending and im getting worried that we are taking on more that we should.

Any advise?

thanks
 
Whose is the 70k, yours or his? If it is his why doesnt he pay off the loan? If it is yours and he is in debt and you are worried about his spending maybe you should be careful buying a house with him. AT the very least maybe see if he can keep a spending diary for a while and try to cut down on unnecessary spending. Also make sure to protect yourself by having a legal coownership agreement before you buy. Finally maybe consider setting out your incomes etc in the money makeover section to see if that advice can help.
 
You are looking at a €290k mortgage give your €70k. This over 30 years will cost 1400-1500 per month. I would argue that a mortgage over 30 years is too long and very expensive, spreading it over 20-25 year makes more sense financially.

You haven't mentioned your ages, salaries, employment so its difficult to give advise. If you add on the payment for the loan of €360per month then your cost to service debt would be €1860 per month. What is that as a percentage of your net take home pay? If its more than 35%, you could argue you could be spending too much on debt.

Given those assumptions you should be bring home around €5300k per month after tax.......but thats for a 30 year mortgage.

This doesn't take in to account that your partner is always overdrawn which means he is living beyond his means already
 
I don't think there's anything wrong with a 30 year mortgage.

It's probably not a bad idea though to pay off more when you can afford to e.g. put half of each pay raise towards upping your repayments and shortening the term as you go along.

I'm always wary of looking at total cost of credit over the lifetime of the mortgage as a measure of the cost as €1000 in interest in 2008 is not the same as €1000 in interest in 2038.
 
LadyG said:
Hi All,

I need some advise. I hope I've posted in the correct spot!

Myself and partner have just sold a house. We have a good deposit (approx €70k) to put down on a new house and want to keep repayments to €1200-1400 per month. So we are looking at houses in and around the 360k-370k. Everything seems great! However - Partner has a big loan around €360 per month - would he be advised to clear this before we get new mortgage. He is also nearly always overdrawn on his account due to unneccessary spending and im getting worried that we are taking on more that we should.

Any advise?

thanks
Click to expand...

In the present day, you have a very good deposit but that is not the problem. You have a partner who has difficulty handling money and has a big loan. Use your head and not your heart.Why is this? Are you prepared for the misery this WILL cause in the future if not dealt with now.

Before you even think about going into another arrangement with him, he must clear his loan and start saving . If necessary send him to MABS for advise. You can rent easily in the meantime, there is no rush as the property market is stagnant.Put your share of the money in your name in a high interest deposit account . His debts are his business, any other action on your part enables him to continue with his spending habits.

Act now and protect yourself; if he manages to get sorted, you could have an even bigger deposit with a smaller morgage in a years time, or continue on and failure on his part to deal with his spending will cause both of you heartache in the future.
 
30 year mortgages just provide the bank with more of your hard earned cash!! If you have to do this to finance the purchase of a box then fine, but it might not be finanically wise to do so.

Your idea of take out a longer term and pay bits off when you can is a defense often used...all well and good if it happens.

BUT how many people are actually disciplined enough to do that? How many people we be getting bonuses/ large pay rises in the next 5 years given the economic climate?

You are always wary of looking at total cost of credit over the lifetime of the mortgage as a measure of the cost?? No wonder we are in the mess we are in today then.

Comparing apples with apples a 30 year mortgage cost a hell of a lot more than a 20 year mortgage.....FULL STOP....its got nothing to do with inflation.

Yes a 20 year mortgage has become too expensive to service monthly for most.....due to the fact they need to borrow more, due to the price of houses. So people have started to justify the 30-35 year mortgage. Who knows this may all change in the next 5 years.

OP, just be wary that the longer the mortgage term the more money you pay in interest and you are talking 10s of 1000s of euros not a few cent!!
 
Building on what Brianne says, I'd rent for a year and put your share of the money in a high interest account. Not sure where you're living, but even in Dublin, I would expect you could rent for less than your proposed mortgage repayments and save the difference.

You could agree with your partner to buy a house in, say a year, once he's got his loan paid down. So you're not deciding not to buy a house, just deferring it a little.

Don't want to go all Oprah on you; but buying a house with someone who's under a lot of financial pressure isn't good for your relationship (or your wallet !).

Streamer
 
Mr DT said:
30 year mortgages just provide the bank with more of your hard earned cash!! If you have to do this to finance the purchase of a box then fine, but it might not be finanically wise to do so.

Your idea of take out a longer term and pay bits off when you can is a defense often used...all well and good if it happens.

BUT how many people are actually disciplined enough to do that? How many people we be getting bonuses/ large pay rises in the next 5 years given the economic climate?

You are always wary of looking at total cost of credit over the lifetime of the mortgage as a measure of the cost?? No wonder we are in the mess we are in today then.

Comparing apples with apples a 30 year mortgage cost a hell of a lot more than a 20 year mortgage.....FULL STOP....its got nothing to do with inflation.

Yes a 20 year mortgage has become too expensive to service monthly for most.....due to the fact they need to borrow more, due to the price of houses. So people have started to justify the 30-35 year mortgage. Who knows this may all change in the next 5 years.

OP, just be wary that the longer the mortgage term the more money you pay in interest and you are talking 10s of 1000s of euros not a few cent!!
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The reality has always been that money today is worth more than money tomorrow and so people are willing to pay interest to spend now and pay back later.

The only valid cost comparison I see is how the interest you pay on a mortgage compares to the rent you would otherwise have had to pay, and even at that you'd expect long term growth in rents so it's perfectly acceptable for interest to be higher than rent in the initial years.

Expressing total cost of lending in terms of payments in 2008 added to payments in 2038 is not adding apples and apples. €100 in 30 years time is not comparable to €100 now. If you feel that it is there would be a lot of people willing to do business with you!!
 
Thanks all for the advise. Its a serious issue alright, MABS might be able to help him realise the seriousness of his careless daily spending and how important it would be to clear his other debts. The 70k is his from the sale of his first house. Im trying to convince him to pay off his debts with some of his profit and we would still have a fine deposit on a house. He is resisting and i was trying to get a good enough arguement from some of you guys who are experts in this domaine to convince him! As so far mine are falling on deaf ears.

On the mortgage issue, I suppose I'm trying to aim to keep the monthly repayments down to a managable portion of income (we both take home approx €2300 each a month after all deductions). Hence the 30 years. As I am a 1st time buyer we will try for a mortgage with me in the title where I am entitled to avoid the stamp duty on a 2nd hand house. Dont know if anyone has advise on that?

The rent in the area we are looking (Kildare) would be about 1200 per month for a house. I'd be happy to rent in the current market but if we did find somewhere to buy that we thought we could be for years it would be ideal.

thanks again for all the posts.
 
I don't understand why you refer to the deposit as ours when it is his. Before you both purchase anything you need to decide who owns what of whatever you purchase. If you are not contributing to the deposit it would seem that he will own a greater share of the property. It's impossible to give debt advice until you tell us how much they are and what they were for. If his income comfortable pays his loans I don't see any problems especially if the 70K covers the amount of those loans.
 
DerKaiser said:
Expressing total cost of lending in terms of payments in 2008 added to payments in 2038 is not adding apples and apples. €100 in 30 years time is not comparable to €100 now. If you feel that it is there would be a lot of people willing to do business with you!!
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Example: A mortgage for 100K at 5.2%

20 year mortgage you pay 61k in interest to the bank. (I understand that 61K now is different in the future)
30 year mortgage you pay 97k in interest to the bank. (I Understand that 97k now is different in the future)

You're saying 36k more in interest doesn't matter because of the time value of money? I'm interested, please explain further. A 20 year mortgage is less expensive over the term than a 30 year mortgage by 36k. This may not be 36k actually due to the time value of money, but it's still more expensive isn't it?

Mod's if i need to move this to another thread please advise but I would like to get my head round what DerKaiser is saying.
 
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