Can we afford to buy a home now?

S

sask

Guest
Age: 27
Spouse’s/Partner's age: 26

Annual gross income from employment or profession: Unemployed (currently looking for work in the IT industry)
Annual gross income of spouse: 46500

Type of employment: Private sector IT industry

In general are you:
(a) spending more than you earn, or
(b) saving?
We are saving

Rough estimate of value of home : No Home
Amount outstanding on your mortgage: N/A
What interest rate are you paying?

Other borrowings – car loans/personal loans etc
No loans, (Car fully paid off)

Do you pay off your full credit card balance each month? YES
If not, what is the balance on your credit card?

Savings and investments:
100k savings

Do you have a pension scheme? No but my partner has

Do you own any investment or other property? No

Ages of children: None

Life insurance: No but my partner has


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

Hi
My B/f and I recently moved home from working abroad. I quite my job to relocate home. I have started looking for work in the IT industry but i have no idea how long it will take me to secure another job.

My B/F has been working in the same job for 5yrs, and at the moment his job seems secure but who knows.
We would like to purchase our first home. I have spoken with the bank and they have said we will have no problem getting a mortgage of 250K.
Which would have a repayment of about 1100 a month if we end up taking the full 250k over 30yrs. The house we are looking to purchase would be our long term home.

I would like your opinion on our situation, would be be silly to purchase a home now with one of us unemployed? or are there lots of familys out there that can comfortable survive on one salary and meet the mortgage repayments.

If we don't purchase we will be renting a 2 bed apartment paying aprox 800-900euro on rent. We will be looking to buy in Cork.

All opinion welcome
Thank you in Advance
Sask
 
You should make sure you have stress tested your repayment capacity by assuming interest rates of 5-6%.
 

It would probably be risky to buy something for 250K I reckon thats a lot of debt with one income myself still over 5 times the sole earner (at the moment)... I wouldnt be in any rush especially at your young age why not wait and see for a while maybe? Even in 2 years things might be a bit less volatile?
 
Ultimately this is something only you can decide. I think there are a few elements to making this decision. Here's my tuppence worth........

1) From the income figures above, I guess you net about €2800 per month.According to your figures, you'd have about €1600 to live off after paying a mortgage (you need to add at least 100 to your mortage repayment to cover life assurance, house maintaince). Could you both live happily off that? Maybe it might be good idea to live off that amt. for the next few months to see "how it feels"?

2) While nobody knows exactly what will happen with interest rates over the next few years it's likely that they are only going to go up. As a previous poster suggests, you need to stress test your payments to take into accout an interest rate hike.

3) Think about how are you getting on with the job hunt. From what I read and hear from friends in the IT sector, things are "beginning to turn". Many of my friends in this sector who were made redundant are beginning to get interviews and jobs. What is your perception? Are there jobs advertised in / near Cork that fit your skillset?

4) Think about what you guys plan to do in relation to kids. If you do buy a house for life and have a few kids in the near future would you be able to afford a house, kids etc. on one income?

5) You have a great deposit WELL DONE ON THAT! Have you to about buying a run down house in the area you want to live in and doing it up with your savings?My understanding is that these types of houses are now selling well below their guide prices, as banks are slow to lend money to buyers to cover the renovation costs, so that the demand for them is reduced. Doing this would reduce your mortage amount.

As you ask for an opinion, I think the house is affordable - you would survive with the current situation, but it would (assuming no increase in income) mean you have less spare money per month. How would you feel about this? Would the security of having a home for life compensate for the loss of spending power. Best of luck with it
 
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