"Choose a home you can comfortably afford"

Brendan Burgess

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This is from an article in today's Indo.

Michael Houghton: Five easy, everyday habits that helped me move towards financial independence

We often associate wealth with what we see – flashy cars, big houses, luxury holidays. But the truth is, real wealth is often invisible. It’s less about what you buy and more about the life you can build when money no longer controls you.
www.independent.ie

Michael Houghton is the host of The Irish FIRE Podcast

3. Choose a home you can comfortably afford​

The dream home can quickly become a financial prison. Mortgage stress, high utility bills and never-ending maintenance costs can turn what should be your sanctuary into a source of anxiety.

Instead, consider buying a smaller, more manageable home to start. Not only is it cheaper to run, heat and furnish, but it leaves you with more flexibility – financial and otherwise. You can always upgrade later, but starting smaller gives you breathing space to build wealth first. Real comfort comes from knowing that your home doesn’t own you.
 
I don't agree with this.

Obviously you shouldn't buy a house you can't afford with a massive mortgage.

But aiming for something you can comfortably afford seems wrong to me.

high utility bills and never-ending maintenance costs

I doubt that there is much difference in a more expensive house than a cheaper house. And if you are paying extra to live closer to where you work or socialise, you are probably going to save a lot of money and a lot of stress from less commuting.

Or if you are buying a bigger house than you need, then maybe you can take in a lodger.

Many people trade up after a few years.

But "you can always upgrade later" suggests that it's an easy process. Trading up is a very risky and very expensive process. You should stretch yourself when buying your first home knowing that it is going to be a bit uncomfortable for the first few years.

I am a huge advocate of having a comfortable mortgage and have been criticised for being too conservative. The banks won't give you 5 times your income and a 100% LTV mortgage. You should buy within the Central Bank guidelines and then spend the first few years paying down the mortgage to a comfortable level.
 
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I agree. I think it applies more to people with good incomes.

Say you have a couple who earn 75k each. Let’s say outside of Dublin. They have maybe a 50k deposit saved. They could buy for €650k of €500k.

Both get you a decent house that you probably don’t need to upsize.

A lot of people will look to the 650k as their budget.
 
@faketales

OK, I suppose I am Dublin centric.

If you can buy a perfectly good home which you will not need to trade up from for €500k , then I agree you should not spend €650k on a trophy home just because the bank will give you the money.

Brendan
 
Brendan Burgess said:
high utility bills and never-ending maintenance costs
Click to expand...
I would say these should be a consideration, but they are not necessarily linked to the price of the house you buy. A small easy to maintain property in a good location can cost more than a larger one in a worse location. A newer larger house can cost less in both bills and maintenance than a older smaller one.

This is just one aspect, among many, to consider of course.
 
Brendan Burgess said:
high utility bills and never-ending maintenance costs
Click to expand...
And on this one an apartment can easily fall into this category with limited options to change your heating system / insulation and then the....never ending and often dreaded - management fees which lets face it, seldom go down in price.
 
Hello,

Having seen numerous people buy small "starter" homes in locations that they didn't want to live in, thinking that they could later "trade up" to other locations, or from 1-bed apartments etc., but instead become trapped in those homes when the economy collapsed in 2008, I'd also disagree with the article.

Difficult as it is for people to get on the property ladder, these days, my view is that it's better to stretch, as best you can, to get a home that you are relatively happy with.

Possibilities such as being able to rent a room out, install solar panels and /or heat pumps, possibly being able to cycle or walk to work etc. can help will future costs, as can potential for pay increases etc.
 
The concept of spending less from a purely financial point of view is fine, however the vast majority of people buying houses in Ireland are using the maximum mortgage central bank will allow just to get a foot into the property ladder. They don’t have an option of cheaper houses as they don’t exist, or not without adding in massive commutes etc.

It’s a real Viz top tip, what next:

Save a fortune on expensive carpets by simply cutting two squares of carpet the the size of your feet, and tie them to your feet to have that luxurious carpet feeling wherever you go in the house.

Don't waste money buying expensive binoculars. Simply stand closer to the object you wish to view.

DON'T waste money on expensive ipods. Simply think of your favourite tune and hum it. If you want to "switch tracks", simply think of another song you like and hum that instead.
 
I think it’s important to come up with a list of what’s essential and what’s a nice to have. It will be different for everyone, it’s probably worth it to max out to cover essentials but not for all the nice to haves.

For us it was:

Essentials:
Location (distance from family and work)
3 beds
Semi d at min.
A garden
Living area off kitchen or room to extend
Option to add a 4th bedroom (attic conversion)
Parking

Nice to haves:
Premium location
4 bed
Second living room
Utility
Bigger garden
Detached
South facing garden
Front garden

We got the essentials and two of the nice to haves. Felt like the nice to have were around €50k a pop.

It’s tempting to move more of those nice to have into essentials as your max borrowing allows. None are exactly luxury.
 
We moved up once. When we bought, I knew I could see us there for 5 years, my husband thought we could stay there indefinitely. It was a small 3 semi d. No utility, no downstairs toilet, no extra... At the time, our finances were stretched to the limit. Moved after 4 years and 11 months. Could have stayed there, could probably have extended but would have been less comfortable.
Moved to a bigger house, but at that point we could offer it. We would not have been able to buy it 5 years previously. Considered moving again after 15 years for bigger. Didn't. No mortgage, no real regrets.
I think it's difficult to know how your needs and expectations will be on the future when you are in your late 20s. Didn't know if we would want kids, didn't know how our career would change.
When I moved in early 30s, I never thought I would think about moving again. However, with more money available... Kids... I thought about it.
However, I never really consider moving location.
I know people who focus a lot about to heir house... That's just not us. Having a house we could easily offer means I could reduce my hours when children came along and my husband should be able to stop working in his early 60. We have an apartment near our house, sometimes I see is retiring and deciding to move there to free extra cash...
 
I have recently gone sale agreed on our family home and am downsizing to a more popular area as it is beside nice walks and essential facilities for getting older. I can buy, without mortgage, a small semi-detached house in good condition, or, with a manageable mortgage a small detached house, in awful condition but with a bigger garden. I'm torn, head says semi-d, everything else says detached. I think there is a bit of The Bull Mc Cabe in many Irish people and we just want that detached with garden, no matter the sacrifice. Downsizing does not fit the Irish psyche.
 
Premos said:
I think it's difficult to know how your needs and expectations will be on the future when you are in your late 20s. Didn't know if we would want kids, didn't know how our career would change.
Click to expand...

I thought the idea of starter homes was kind of gone given the age people are now buying at.

I imagine a good percentage of couples buying either have kids or plan to have them with in 1-3 years of buying. Or don’t plan on ever having them obviously.
 
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