How much should we borrow?

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Sesed

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Myself and the OH are saving for a house, hopefully to buy the start of 2013.

Aside from whether or not the banks will give us a mortgage, and lets assume they will, how much should you borrow? I think it is foolish to borrow the maximum amount the bank will give you as if circumstances change you can't afford it.
Mortgages.ie estimates we could afford 448k :)eek:) on our income, but it massively over estimates our take home pay giving that we have pensions I presume.

My parents said back in their day it was 3 times one income, plus half the other (presumably half the womans) which would make:
(44k x 3) + (38k/2) = 151k

What is a cautious way to look at this? I would say if you can afford it on one income it's ok? I was thinking 250k max.
 
There is no "hard & fast" rule here. Given the current uncertain economic climte I agree that a conservative approach is best. Firstly look at your current personal financial circumstances & potential for that to change. i.e. Job security, potential increase in family size, increase in tax etc. Sensitise the interest rates by 2/3% to allow for future increases. After that the allowance for contingencies is up to yourselves. Savings record and ability to put aside funds plus current rent paid could be an indicator of what you can afford. Remember, purchasing power is currently good and as buyers you can currently negotiate a better price on a property, that previously would have looked unaffordable.
 
Maybe have a chat with a broker and see what you could qualify for.
How about approaching the problem from the other side? In other words look at what you want in terms of the house / home and see what it will cost... ie where do you want to buy? what size house you will need? are you looking for a place that needs work or is in walk in condition? will this be your forever house etc. Then see what that would cost by looking in estate agents windows, online etc.
If you find that your dream house will cost more than you are happy to borrow then you need to cut back on your dreams.

Do bear in mind that interest rates will only go one way for some time and that would obvously impact on your monthly payments.

I would suggest that you start looking at property about six months before you plan to buy, so that you get a feel for what you like and can afford.
 
I have been looking, it's my new hobby. :D Basic needs are close to the city, 3 bed (just in case it becomes a forever home and we can't move etc, I want the room), back garden (small one is fine), parking.
I don't want a massive fixer upper, but cosmetic upgrading is fine.

Himself wants Ringsend / Irishtown but I don't think we can afford it - and I don't want a two bed that we can't sell in the future. I would ideally like Portobello, Harold's Cross, Rathmines but that's wishful thinking unless 2012 knocks another 20% off even the lowest priced ones!
I am considering Marino as there is great value there.

We are currently paying 800pm in rent. We are only starting to monitor our savings so will try to put away a minimum fixed amount each month - minimum 1000. That said, I wouldn't calculate savings + rent as what we can afford as I think 1800 is much too high for long term. I am trying for a career change so if successful my salary will drop substantially, which is why I think 250k - on a variable it is 812 a month which we would have to pay in rent anyway as we need somewhere to live. That said, his salary may rise substantially in the near future so the two could offset each other, which is another reason we need to wait a year or two.

Edit: it would be 250k mortgage + 40k deposit which I think is plenty enough!
 
You have a good budget so you should be able to get what you are looking for. Once you've come up with an area or set of areas you should look through the Location Location Location section and get feedback on the areas / developments you are thinking of.
You'll need to show your bank a good savings history before you will get approval, so do your best to keep to your targets. You could use the money makeover section to get an idea from others of how much you could afford to save.
Best of luck with it.
 
Check what your Bank is prepared to lend on a LTV basis. I.e. most banks are limiting HL's to a max of 80% of the PP at the moment as far as I am aware.
 
44brendan said:
Check what your Bank is prepared to lend on a LTV basis. I.e. most banks are limiting HL's to a max of 80% of the PP at the moment as far as I am aware.
Click to expand...
Not true Brendan. I'm currently in the process of drawing down from AIB at 92% LTV and BOI offered me 90% LTV. Not sure of any other banks as I only went with those 2 due the interest rates of the others.
 
I spoke with my own bank yesterday (NIB) and they are lending at a LTV of 70% plus you must have stamp duty and fees on top of the remainder 30%.
 
It's good to see max LTVs of 70% and 80% on mortgages - if only banks had acted like this ten years ago.
 
Find a good broker and see what you need to get together for the mortgage application. It could take 3-5 months to get pre approval for a loan these days. If your married it must be a joint loan application for a buy to live in property. It makes very little differance to the interest rate the loan to value of the property. I would always advise maxing the amount of moneys you can borrow and keep some savings you can always top up your VR loan repayments without penalties.
 
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