Is dangerous for me to take on this mortage?

[chimpychompy]

Is it dangerous for me to take on this mortage?

Hi,

I'm a first time buyer, buying on my own. I Earn 43k. Have been bidding on a 3 bedroom (cardboard dog box) house, which is the best of bad bunch that I like. The bidding has gone up to 276k and may go a bit further yet. I have 30k saved. I'm mortage approved upto 280k by my bank and I'm told the going rate on a 35yr mortage is 3.9%

With all the initial deductions I figure I have to live on 1k a month. This is for car insurance/tax, house insurance, clothes, food, petrol, bills, socialising (ha!) and whatever "the man" wants to screw me for. Am I'm pushing it too far and getting out of my depth with this one or should I just buy a house in Donegal and commute to dublin?

 

[ClubMan]

Re: Is it dangerous for me to take on this mortage?

I'm mortage approved upto 280k by my bank

You may be approved in principle for €280K but on any specific house the lender will normally only lend up to 92% of the purchase price (some professions qualify for 100% mortgages) subject to income and ability to service the loan.

and I'm told the going rate on a 35yr mortage is 3.9%

Told by whom? 3.9% is an outrageous rate if it's a variable/tracker mortgage but maybe it's a fixed rate mortgage (for how long)? See the best buys list for comparative rates on offer. Also - 35 years is a very long term and the longer the term the more you will pay in cumulative interest charges. Did you shop around directly or indirectly (e.g. via a broker) with several lenders to see what's on offer or just go to one lender?

With all the initial deductions I figure I have to live on 1k a month. This is for car insurance/tax, house insurance, clothes, food, petrol, bills, socialising (ha!) and whatever "the man" wants to screw me for. Am I'm pushing it too far and getting out of my depth with this one or so I just buy a house in Donegal and commute to dublin?

What sort of budget do you live on at the moment?

 

[chimpychompy]

Re: Is it dangerous for me to take on this mortage?

You may be approved in principle for €280K but on any specific house the lender will normally only lend up to 92% of the purchase price (some professions qualify for 100% mortgages) subject to income and ability to service the loan.

I don't qualify for a 100% mortage, I did ask about that. I'm hoping the guts of my 30k is going to fill in that additional 8% !

Told by whom? 3.9% is an outrageous rate if it's a variable/tracker mortgage but maybe it's a fixed rate mortgage (for how long)? See the best buys list for comparative rates on offer. Also - 35 years is a very long term and the longer the term the more you will pay in cumulative interest charges. Did you shop around directly or indirectly (e.g. via a broker) with several lenders to see what's on offer or just go to one lender?

This is the word from a Masons Estates broker I went to see a few months ago and I believe it is a tracker mortage. I got offers back from a few banks (about five) and the largest loan offer was from my own bank (ulster bank) as I've been with them since the days of Henry Hippo. My 'babes in the woods' like innocence tends not to associate dodgy dealing with the professionalism associated with these types but should I ditch this chap? He told me initial his commision is 1% of my mortage, which comes from the bank in question.

What sort of budget do you live on at the moment?

A lavish one, I'm still living with my folks It enables me to save 1k a month with not too much breathing space.

 

[ClubMan]

Re: Is it dangerous for me to take on this mortage?

This is the word from a Masons Estates broker I went to see a few months ago and I believe it is a tracker mortage.

3.90% is ECB + 1.90% - this is a rip-off compared to other tracker rates/margins on offer as shown in the best buys list.

should I ditch this chap?

If he thinks that a tracker margin of + 1.90% is competitive then I would certainly think twice about retaining him. Maybe there is some information missing here or something? Once again I would suggest printing off the best buys list, showing it to the broker and asking him to explain how 3.90% is the most suitable mortgage for you.

A lavish one, I'm still living with my folks It enables me to save 1k a month with not too much breathing space.

You need to draw up a realistic budget so to see if you will be able to live on whatever you have left over after mortgage expenses (repayments, mortgage protection life assurance, house insurance etc.) have been deducted while leaving some room for flexibility just in case mortgage rates fluctuate or financial contingencies arise etc. There are some useful budgeting resources in the Banking, Borrowing and Credit Cards forum that might be of use. If you don't know what it is already then [broken link removed] is useful for working out your net income while Karl Jeacle's mortgage calculator is useful for estimating the repayments on different mortgage packages.

 

[chimpychompy]

Thanks for the advice, Clubman. I've had look through the rates list alright and it does indeed seem to be a rip off. Perhaps I am missing something but I will arrange a meeting with him to get further clarification on it.

To be honest I can't believe I'm talking about these figures without knowing my stuff inside out. Humbling !

 

[Sarah W]

No lender is offering a ECB + 1.9% tracker! Ulster Bank (in most cases) the most aggressive lender in terms of the amount they will advance and their's is ECB + 1.15% or ECB + 1.05% if you open a U First current account - these rates are for loans of over 60% of the property value.

Sarah

www.rea.ie