New potential buyer, advice needed

D

dessiefitz

Guest
I'm going to be starting a new job soon (July). I've arsed around for a while now, and think that renting in Dublin for much longer is like ****ing money against a wall: sooner or later I'm better off buying. Thing is, I don't have the first clue about buying a house. Hopefully some of the financial bigwigs here can educate me.

Right, I'm 27, single, got €20,000 saved in the bank, and with this new job should be pulling in about €60,000 pa after tax. I've got a pretty secure job, and will be living in Dublin for at least the next 5 years. With promotions etc I expect my annual salary to go up by roughly €5,000pa. So my reasoning is, maybe I should buy.

So how does one get finance to buy a house? A mortgage obviously. But how much does/should one have saved before going to the bank looking for a mortgage? 10% of the price of the house? 5%? I really don't have a clue. And is there a rough guide as to the price of the place you can buy, based on your annual salary? i.e. should I be looking at places that cost roughly my annual salary x 10, or x5 or what - how do people figure this out?

Finally, given the recent tumultuous times we've been seeing in the economy, do you think it'd be better wait a year or two 'till things stabilise out a bit, or would you just go for it in the next six months or so?
 
You have 20k saved.
You will need roughly a 10% deposit so you are currently looking at a property valued at 200k. Mortgage of 180k. On yr current income this is affordable, but can you get what you want in a place you want for 200k? Borrowing 3 - 5 times yr salary would be "Norm". Obviously the less the better.

Bear in mind that this would also take all your savings, having 3-6 months salary tuck away would be wise in case of any troubles you may have.

In my opinion, I wouldn't be in any rush to buying, save up a decent amount and then see what happens in say 1 - 5 years time. Rent is not like ****ing up the wall, in times like these it gives you flexiblity and could be cheaper than commiting to a mortgage for 20+ years. With a mass of rental property out there you could do really well at little expense. As you only plan to be in Dublin for 5 years i really don't now if its worth buying as this is very short time given the current economic mess.

Start now and keep reviewing prices of property in areas you like. Buying a home is a very important decision and there is no need to rush. This web sight is good for tracking trends/asking prices www.irishpropertywatch.com

I would also go to banks and ask what they would lend you so you have a good idea now and what you need to aim for in the future.

Things haven't got bad yet, by July 09 the impact of the extra tax implemented in May 09 will be clear in the numbers. This is another reason to sit out for 2-5 years until you are happy with job security, savings, investments etc.
 

Two things:

1) No matter how secure you think your job is, you can't predict what's around the corner.

2) Banks will probably be reluctant to give out a mortgage to someone who has just started employment in a new job (assuming as you hinted that you have been out of work enjoying life) So you may have to wait a while to buy.
 
You salary is excellent and you have a good saving for one person. I would consider in more detail what you actually want rather than is it simply a good time to buy. I understand your point regarding rental payments but factor into account that if you buy for the sake of it you will more than likely incur stamp duty costs the second time round.
If you are single and have no real constraints I would look at renting a little longer until you can be sure of exactly what you are looking for out of your prospective home. Don't try to time the market, try to find what is right for you.
 
You have €20,000 saved. The banks require 20% deposit currently. So you only can afford €100K property.
You need to educate yourself about the market, and not depend on a single website for opinion. Would suggest you look at the following sites:
www.itsyourmoney.ie Financial Regulators site, with various guides etc
www.irishpropertywatch.com Tracks property asking prices over last few years.
www.thepropertypin.com Bearish forum, but good counter balance to this site. You don't have to believe it, but you should definitely consider what is being said there.

In reality, your deposit is too small. Crazy I know, but asking prices are so high in Ireland, you would need a€60K deposit for anything decent.
I would suggest you start a serious savings plan. e.g. ask for a €150 reduction in your rent, saving you €1800 in 1 year.
With 60K salary, you should be able to save €2,000 a month, giving you €44,000 (added to your €20K) in 12 months, but you won't see the inside of the pub for 12 months, but you will be in a very strong buying position next year, with houses prices continuing to fall.
Good luck, and remember you get nothing without hard work.
 

They don't require 20% deposits and if anything people have been still getting more or less 100% mortgages if they wanted them. If you look around at different developments and the offers they have they basically break down to 100% mortgages.
 
you will need to be in employment for at least 6 months before a bank will lend i would imagine. Ive just gotten mortgage approval, im on 35k, and im getting 92% from them (it's a house Im buying)- and they're lending me 6.5 times my salary-
 
MrMan said:
They don't require 20% deposits and if anything people have been still getting more or less 100% mortgages if they wanted them. If you look around at different developments and the offers they have they basically break down to 100% mortgages.
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Well if that is the case then I really do despair

A That the banks are still giving out 100% mortgages and

B Of the people who are stupid enough to actually go for a 100% mortgage

Have no lessons been learnt in the last few years in this country?
 


Its really down to what individuals want, some would prefer to keep the security of the deposit in their bank account in case the hit financial trouble in the short medium term.
 
MrMan said:
if anything people have been still getting more or less 100% mortgages if they wanted them. If you look around at different developments and the offers they have they basically break down to 100% mortgages.
Click to expand...

Are you sure about this? To which type of customers?
 
I'd be tempted to wait until Spring 2010 before taking the plunge. There are several reasons, some of which have been referred to in other posts on this subject.

One consideration might be that it will allow you to get settled in the new job and develop an earning track record that you can point to for your prospective lending institution.

Another reason might be that there could be limited availability of lending facilities until this current shake-out period passes. Given your age and prospects you would have been classed as a "safe bet" until late last year. These days little is certain, and waiting another few months to see how the world economy settles might be no bad thing.

Finally, yer man on the late late show last weekend was all doom 'n gloom about the further drops in house prices [cannot recall his name]. I would be surprised if things turn out to be as bleak as he made out, but while there are some signs of stability with year-on-year comparisons at the moment, there are little signs of any recovery just yet. Prices may fall further and you might take advantage of this, but beware! When the market does turn [and it will turn eventually] the pick-up could be sudden.
 
dessiefitz said:
and think that renting in Dublin for much longer is like ****ing money against a wall: sooner or later I'm better off buying.
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And how would you describe buying a house that drops further in value after you buy it and sign yourself up to a mortgage?!!
 
itsjustme said:
you will need to be in employment for at least 6 months before a bank will lend i would imagine. Ive just gotten mortgage approval, im on 35k, and im getting 92% from them (it's a house Im buying)- and they're lending me 6.5 times my salary-
Click to expand...
Which bank was that?
 
onq said:
Prices may fall further and you might take advantage of this, but beware! When the market does turn [and it will turn eventually] the pick-up could be sudden.
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Rubbish, there will not be a mad speculative rush for houses as per the last 10 years. If there is we have learnt nothing from the mess we are in today.

In my opinion, once we hit the bottem, (Gods knows when that would be but a least 1-2years) house prices will stabilise and rise with or slightly below infation. That is very optermistic to be honest, look what happen in Japen when the bubble burst.

Employment at 17%, the economy srinking by 10%, taxes going up and up....its going to get a lot worse before it get better.
 
onq said:
. Finally, yer man on the late late show last weekend was all doom 'n gloom about the further drops in house prices [cannot recall his name]. I would be surprised if things turn out to be as bleak as he made out,
Click to expand...


It was great to finally see some one talking the truth on RTE.

There was the estate agent trying to convince people that value was back when an averge person on 35k could only just about afford a 1 bedroom flat!!! What f.....ing a joke.
 
Mr DT said:
It was great to finally see some one talking the truth on RTE.

<snip>
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We seem to be in a Post George Lee mental depression in Ireland.

Don't assume doom and gloom merchants are talking true, never mind sense.

There were several people on the program who had bought recently or were thinking of buying.

The trouble with economic issues is that the mathematicians and pseudo scientists sometimes fail to remember that demand is partly fuelled by an emotional response to circumstance.

Buying something is not an entirely rational process
 
MrMan said:
It's not advertised, but some of the developer led deals are little more than 100% mortgages in disguise.
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And does the bank regulator not now forbid this? That is giving buyers no lee way and possibly negative equity from day one, which furthermore erodes their chances of switching lender if they should wish to do so.

OP - you have no guarantee you salary will go up as we have signs of deflation. Save a good deposit and wait until you are at least six months in the job to see how your spending patterns are and therefore you will have a better idea of affordability.
 
dessiefitz said:
...and think that renting in Dublin for much longer is like ****ing money against a wall: sooner or later I'm better off buying. ....
Click to expand...

Remember, with a mortgage you are paying back to the bank the principal and interest on the principal, the interest on the principal is in essence rent to the bank while you have that loan with them. Compare what your interest repayments will be vs. what you are paying in rent to help you decide if now is the right time to buy for you. Also bare in mind that once your mortgage is variable the interest rate is liable to go up. You could at somestages over the life of the mortgage be paying substantially more than rent. Im not disencouraging you from buying - its just a calculation you should include in your decision.
 
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