taking on a bigger mortgage - should we or shouldnt we?

M

mrsmouse

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My husband and I found the absolute home of our dreams recently and are now considering bidding and/or making a purchase. However, it comes at a time when we could least embark on it ... yet we feel an opportunity to get such a house with all that we want, may not present itself again for a long while.

Anyway our current house once sold will provide us with a little under a quarter of the total cost of the new house which we would put down off the house at purchase. The rest would have to be a mortgage. We would be looking at borrowing in the region of 650,000 which seems a frightening amount to us in many ways. Repayments would be approximately 2,800 to 3,500 per month depending on interest rates.

My husband is a self employed professional who is trying to get established in his field of business. His income can fluctuate and waiting to be paid can sometimes be an issue. He would, however, command a high salary should he choose to work for a private company and he has said he would be willing to do this to get this house for our family.

We have two small kids (under 2) and will be possibly having a third in the next 2 years. Childcare costs etc. make it not worth my while returning to work as I would effectively be working to pay for the care of the children with little over really.

Our thinking is that we will be fairly strapped on the disposable income side of things once the mortgage comes out each month ... but there again my husband's salary is likely to increase and I will be able to return to work in the next few years once the kids are in school.

Are we right to take on such a big financial commitment ... will it be worth it long term? Or are we better off to either stay put (where we are financially comfortable) and either opt for something more modest for now .... or wait until we are in a better position to do it?

Also ... do people generally borrow as much as this to finance a property or are they coming at it with more money to put down? And, are mortgage repayments of 2000-3000 euro becoming the norm now with such high house costs or are we deluding ourselves?

Advice much appreciated.
 
It's simple-don't buy what you can't afford.

I would certainly wait and see what happens with regard to your husband's income, childcare costs, interest rates etc. over the next few years.
 
i second that, self employed is just too unsecure, god forbid he got sick, just think you have a nice home now your health and 2 kiddies, and you aren't crippling yourselves feeding the fat cats (very anti banks at mo as we had to get a bridging loan!).
It might be your dream home - but remember bricks, walls and motar don't make a home its who and whats in it that do :)
 
There is always a temptation to do this but it sounds like there is a bit of an impulse buy involved. Think, Do you really need this house or is it a case of " I want this house" . If you are not working is it really fair to put your husband under this much pressure. My brothers brother in law was in a similar circumstance and ended up with a heart attack at 40 years of age. The wife put him under subtle pressure and he felt he had to stretch himself. I would wait a year as house prices are beginning to stabilise but if a 3500 euro mortgage is manageable and you have at least 2500 euro disposable income after mortgage repayment then go for it. Just don't forget that you should go back to work too and not leave it all up to hubby.
 
I hear what you are all saying. It certainly would be tight going ... but at a stretch we could do it and this is what we have been deliberating over, would it be worth it eventually. I wouldn't say it is impulse buying though ... as it is in a location we have always said we want to ultimately live in and houses here come up very rarely. The house has been finished off to an extremely high standard and has huge development potential which also appeals as we could possibly build an area behind the house where I would run a business. I plan to return to work most definitely when the kids are in school but realistically that won't be for another 4-6 years (especially if we have another child). Also if anything my husband is more keen to do this than me ... I am certainly not putting him under any pressure whatsoever to do it and would be the more cautious of the two parties. The house quite honestly is worth more than it is on the market for and I honestly believe that pound for pound it is good value for the potential purchaser. Do we really need 'the house' or do we just 'want' the house. In truth we probably dont need it as our current house has enough rooms etc. for our family size. That said, privacy and outdoor space are hugely important to us as a couple rather than the size of the actual property we live in. Yes, the house is spacious but it is the privacy the location provides and the land that the house sits on that is really attractive to us.

Would any of this change your views ... or do you still say we should stay put/wait?
 
mrsmouse said:
We would be looking at borrowing in the region of 650,000 which seems a frightening amount to us in many ways. Repayments would be approximately 2,800 to 3,500 per month depending on interest rates.
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According to Karl Jeacle's morgtgage calculator €650K @ 5% over 30 years would be €3,500 p.m. Obviously this would change if rates changed (unless you are on a fixed rate). Owner occupier mortgage interest tax relief would reduce this slightly (by a maximum of €267 p.m. as long as you qualify for joint FTB rates of relief and a maximum of €100 p.m. thereafter - assuming that each of you became FTBs at the same time). Mortgage protection life assurance premiums would be extra. As would home insurance. Have you ascertained if this property would be liable for stamp duty and, if so, at what rate? Have you thought about the ongoing costs of running (heat, light, service charges etc.) and maintaining the new property?
 
If you would be stretched, then you might do well to consider a fixed rate mortgage for, say, 5 years. At least you will know your repayments and can then budget accordingly.

However, the repayment amounts mentioned still seem (to me anyway) on the high side for what will be a one income household-depending on the income of course.
 
what percentage of your husband's net take home pay would this mortgage be? also, bear in mind that you can expect at least one more rate rise of 0.25%. how certain are you that you will be able to sell your current house given that the market is very slow at the moment? what type of professional is your husband as it is a much abused term nowadays. i appreciate your dilemma but it does not look like you can afford to do this as you admit that you will be 'financially strapped'. with almost evenyone acknowledging that Irish house price inflation has slowed you have more to gain by waiting for your hubby to establish himself both professionally and financially.
 
mrsmouse said:
It certainly would be tight going ... but at a stretch we could do it
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Usually those words come from strapped first time buyers not 2nd time buyers.

Maybe you need an acceptance that, at the moment, the house is outside your reach.

What a difference 12 months could make. When I was house hunting I saw my dream house (different one each time) come on the market every 6 months or so.
 
Just to thow something extra into the mix to think about: is the house an old one by any chance? Sounds like it might be. Consider what would happen (as it inevitably will) when you have to shell out a few thousand (or few tens of thousand!) on keeping it in a liveable state....

Speaking as one with bitter experience!
 
You sound a bit like me - I am an emotional house buyer and look for any excuse to justify what I know to be a financially unsound decision. I have to be very careful to try and be logical about money as my daydreams can run away with me.

What is the hurt in waiting, in a falling market, for your husband's salary to pick up, to have that 3rd child etc. Houses in desirable areas are like busses, nothing for ages, and then 3 or 4 at once, mark my word. I live in a sought-after residential area in South Dublin and it is scary how many for-sale signs have sprouted up since the lull in the market. I think this is only the tip of the iceberg as many seemed to have waited for the property peak until putting their property up for sale.

You say it is your 'dream house' but what kind of dream would it be if you were strapped for cash just to pay the mortgage? Sounds more like a nightmare to me. Especially as this would be a "want" house, not a "need" house, if as you say, the one you are currently in satisfies your needs. I say bide your time. Have another kid and concentrate on that. When that last one is in school and you are back to work and earning and your hubby's income is steady and stong, then buy the big dream house. This isn't the right time for you.
 
I believe, if you can manage in the short term (including Interest rate increases), I would go for it, as things will get easier. Though having said that we have just taken on a 800k mortgage, and have worried about it. But when we took out our first mortgage of 200k we were absolutely strapped, but every year our disposable income increased... and things did get easier.
Some people may say it is only bricks and mortar - but its more than that - its your living environment. Think of how much of time as a family you spend in the house.

If you think it is a good investment, and you can improve the property even further, then go for it..
 
Thanks to everyone for your replies and unbiased advice. After a big heart to heart last night my husband and I have decided to sit it out and wait. We are disappointed but we know it's the most sensible thing to do. We acknowledge that the timing just isn't right for us and we don't want to do anything that might put our relationship under serious pressure because of the financial pressure of a huge debt. Our children are still very young and they are happy if we are happy ... we don't need the dream house just yet. So for now we shall sit tight - take care of our family and each other and bide our time for the right move some time further down the road. Thanks again folks, you really did help to clarify so many things in a hugely emotional decision.
 
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