Looking to buy house in Tipperary - How much deposit should we pay

M

Monte2014

Registered User
Messages
41
Age: 43
Spouse’s/Partner's age: 44

Annual gross income from employment or profession: €85k
Annual gross income of spouse: €48k

Monthly take-home pay: €7,625

Type of employment: e.g. Civil Servant: self-employed I work as a Construction professional and my wife works in Insurance.

In general are you:
(a) spending more than you earn, or
(b) saving? We are saving circa €2k/mth

Rough estimate of value of home: We are currently renting
Amount outstanding on your mortgage:
What interest rate are you paying?

Other borrowings – car loans/personal loans etc: No loans.

Do you pay off your full credit card balance each month? Yes.
If not, what is the balance on your credit card?

Savings and investments: €340k in cash & deposit and €100k in stocks and shares.

Do you have a pension scheme? Yes.

Do you own any investment or other property? I also own 8 acres of land which had planning for 12 houses which has since expired. Current agricultural value is €80k.

Ages of children: 12, 10, 8.

Life insurance: Yes


What specific question do you have or what issues are of concern to you? We are currently looking to purchase a house in Tipperary for €450k. It is 2,600 sq.ft with a 500 sq.ft studio and is on 2 acres. It has a high level of finishes. This might sound expensive for Tipperary but the price reflects the type of house, quality of finishes etc. We intend to rent the studio on short term lets / homestays as it is close to a tourist town (Cashel). We both work in Dublin and we both work from home 2 days a week (so there is someone at home 4 days a week to collect kids etc). We have mortgage approval of €430k over 20 years. My question is how much deposit we should pay taking into account the cash we have available? Some of my friends are saying to only pay a 20% deposit and invest the remaining cash into other medium risk investments. Others are telling me to pay circa €200k deposit to keep the loan to value (LTV) close to 50% due to our age etc. All advice welcome!
 
I’m not sure I’d listen to your friends! There is no point borrowing at circa 3% and having investments which, at best, might make 3% or less after tax and costs.

Are the stocks and shares sitting on large gains? If €100k can be realised (or thereabouts), you should probably pay cash for the house.

A sensible alternative might be to take the mortgage, and then repay most of it; reason being that banks typically have minimums. Presumably you’ll have to buy furniture etc? Then just clear the rump of the debt with your €2k a month savings.

You work in a cyclical industry to state the obvious so a cash buffer is important. Even though it flies in the face of logic, I’d consider keeping €45k (i.e. six months’ worth of income) in cash even if it meant still having a mortgage of €45k.
 
I don't see the logic in borrowing 430k when you 340k in the bank. You're paying 2.5 - 4 interest for no reason.
Investing in Ireland with post tax money is not easy. My approach would be borrow as little as you need, you could almost buy outright in cash if you wanted.

However with 3 kids most would suggest keeping decent cash on hand at least 20k. That way you're covered in emergency. As you can't get say 50k mortgage (the are minimums) hence you could get a larger mortgage but pay 90 percent of it off right away with your savings. This leaves you in control of how much and when to pay, but with that much cash you should pay a huge chunk.

What's the plan with the 80k land then?
 
Last edited:
You don't say what interest rate your mortgage will be at. Or what you will do with the money left over if you take a large mortgage, "invest the remaining cash into other medium risk investments" is more a vague notion rather than a proper plan.

If it were me I would borrow the maximum, I see a long term loan at mortgage rates as a valuable asset, and I would have lots of ideas how to invest it. For example will you look again at the planning situation.

The question you need to focus on is not how much to borrow, but what to do with the cash pile I will have if I borrow the max.

Finally you can always pay a lump sum off your mortgage at any future point, you will probably not have an opportunity to borrow so advantageously again.
 
€450k sounds expensive for Cashel, you might get a lot cheaper there.
You mentioned commuting to Dublin so Cashel would be beside the motorway for driving. Limerick Junction is a bit of journey from Cashel for rail commuting but there's also the option of rail from Thurles. Same trains as Limerick Junction I'd imagine and a bit closer to Dublin. But Thurles is also a bit of a drive from Cashel.
You say self employed so you mightn't have to be at work at a particular time. On the train you could be working as you journey along.
Are you renting in Dublin at the moment, how much rent do you pay. How much would commuting to Dublin by train or car cost.
 
Thanks for all the replies. Some of the clarifications to your questions and my further comments are as follows:
  • Shares - the current value is €100k. I bought a portfolio of shares 4 years ago with €70k in cash and they are now worth €100k so there would be a tax implication if I sold shares where I have made gains. However, I set up this portfolio with the intention of using it for the kids education in the future.
  • Cash - Yes, I am not sure what to do with this cash so I intend to get some financial advice from an independent financial adviser as I need to get my pension sorted as well. I have buy out bonds from previous employments but I need to get a pension back up and running as my company have said they will contribute 5% into a PRSA and I can contribute also.
  • I should have mentioned that the house comes fully furnished where about €50k of fitted & loose furniture, decorative lighting, white goods etc is included in the sale. All very good quality.
  • The mortgage interest rate is 2.95% variable but this will reduce to 2.75 if the LTV goes below 50%.
  • Yes, €450k does some expensive for Cashel and indeed Tipperary. However, I know if I were to build the same property it would cost circa €530k. Also, the quality of housing stock in Tipperary is not great at the moment so it is difficult to compare.
  • I am a PAYE worker as is my wife. Both of our employers encourage flexible and remote working. We both get the train from Limerick Junction which will be a 15 minute drive from the house. Thurles is 30 minutes away. Our employers pay for our annual travel rail card (€5K each). I have no intention of driving to Dublin as the 1.5 hours each way I spend on the train counts as work as I am working on the train.
  • Yes, my industry is very cyclical but I am hoping that by living in Tipperary I am close to Dublin, Limerick, Waterford, and Cork for work. My employer is happy for me to go self employed if I want (paying my current salary), which will allow me to take on other work with other developers (he is happy for me to do this).
  • We are renting in Tipperary at the moment. If there is ever a need for us to stay overnight in Dublin we just book a hotel.
 
In relation to the 80k land. It is in 2 parcels. The first parcel consists of 1 acre and has planning permission for a house which is due to expire in 2021. It is located in a rural area about 8km from the house we are looking to buy (on N74). I am considering selling it but this might be a contentious matter as it was gifted to me by my parents and it is on their family farm!

The other parcel is located between a national school and a village (population 200 people). Someone bought it for €350k in the last boom and I bought it at auction for €70k. It had planning for 12 houses but this has since expired. It is zoned low density residential. I am told it might be suitable for a residential nursing home or for social housing. It is 8km from Tipperary and 12km from Cashel.
 
You must log in or register to reply here.
Back
Top