Risks with buying a house now

Status
Not open for further replies.
K

kitog

Guest
I need to make a decision within a week as whether I go ahead and purchase a house but I'm not sure what to do because of all the economic trouble at the moment. I'd like to get your opinion on what the risk are with buying at present.

Some background info:
- I have mortgage approval from AIB
- I'm buying the house to live it, not buy to let.
- My loan to value ratio will be relatively low.
- I currently have permanent job but my position isn't very safe, there have been layoffs and I know I'm at the top of the list.

Thanks,
Kitog.
 
kitog said:
I currently have permanent job but my position isn't very safe, there have been layoffs and I know I'm at the top of the list.
Click to expand...

I think this statement alone would answer the question for me....if this is on the horizon don't buy .....simple as...
 
kitog said:
- I currently have permanent job but my position isn't very safe, there have been layoffs and I know I'm at the top of the list.
Click to expand...

Do you have a Plan B for if you get laid off?
- Is there a very good chance of you getting a similarly paid job within a few months?

- Do you have another source of income?

Have you looked at what the repayments will be if/when the interest rates rise?
 
I'll take your question at face value ;)
- I would be getting mortgage protection which would allow me time to look for a job
- I would also have enough deposits for about 5 months
- There are some jobs around in the area I work in (IT) but nothing so far that I have applied for.
 
kitog said:
I currently have permanent job but my position isn't very safe, there have been layoffs and I know I'm at the top of the list.
Click to expand...

That sentence certainly set off some alarms and flashing lights !!
 
QED said:
Do you have a Plan B for if you get laid off?
- Is there a very good chance of you getting a similarly paid job within a few months?

- Do you have another source of income?

Have you looked at what the repayments will be if/when the interest rates rise?
Click to expand...
More than likely I will have to take a significant (> 10%) pay cut, but I'm not cutting it that fine on the monthly repayments. I've allowed for this expected pay cut.

I don't have any other source of income.

I'm looking at getting a mixed Fixed Rate (75%)/Variable Rate (25%) mortgage, maybe with a fixed term of 5 years. I expect the interest rates to only go up from here on so I can still afford it at 6%.
 
Kitog

We don't allow speculation about house values on askaboutmoney, so please don't ask this aspect of the question.

There are many factors to consider and balance.

Do you really need the worry about your mortgage and being unemployed at the same time? The simplest thing would be not to buy.

How likely are you to get another job if you lose your job? If you are very employable, it could be worth taking the risk.


If you decide not to buy, lose your job, and get another one, then it will be at least two years before you will be able to get a mortgage again.

Might you have to relocate to get another job? If so, owning a home can be a big barrier to relocating. If you are renting at present, you can presumably just rent closer to your new workplace.

If you can't afford your mortgage repayments, how lettable is the house? If the LTV is low, it's possible that the rental income will exceed the mortgage repayment, so you may be ok.

On balance, I think that your reasons for buying would have to be really overwhelming to overcome the reasons for not buying.
 
Brendan Burgess said:
Kitog

If you decide not to buy, lose your job, and get another one, then it will be at least two years before you will be able to get a mortgage again.


If you can't afford your mortgage repayments, how lettable is the house? If the LTV is low, it's possible that the rental income will exceed the mortgage repayment, so you may be ok.
.
Click to expand...

Thanks Brendan,
Can you explain why I wouldn't be able to get a mortgage for another 2 years after changing job?
When I applied for the mortgage I needed 3 months payslips and a cert from my employer to say that I was permanent. I was hoping that I would be able to look at the market again within 6 months assuming I had sorted out a more stable job.

The house would be lettable - its in very good condition and is a 'desirable' suburb.
 
I know a couple who is buying a house at the moment, they have mortgage approval with several banks, deposits paid etc. But the BOI/AIB bank cannot come up with the cash! For the last week or two they have been coming up with excuses to hold up the issuing of a cheque. They have now got approval from KBC, in the hope they have money to lend.
 
Hi kitog,

It is difficult to get mortgage approval at the moment, thinking you can reapply and gain approval after 6 months in your new job is highly optimistic.

The fact that you were made redundant will highlight to the lender that your area of work is not very secure so you could easily be made redundant again. As a result you might struggle for approval, lenders are only advancing loans to the most risk free applicants.

I would agree with the advice here, don't do it. Why not rent, wait a year and then reapply - unless it is imperative that you buy now, you should hold off.

Final point - you say

I would be getting mortgage protection which would allow me time to look for a job

Do you mean mortgage repayment protection? You will not be accepted for this as you know your position "isn't very safe".

www.moneybackmortgages.ie
 
QED said:
That sentence certainly set off some alarms and flashing lights !!
Click to expand...

I had made an offer on the house when the company I work for let go 2 people (out of 20). I also saw a document which had my name on it when they were considering who to layoff- hence why I'm looking around.
 
Brendan Burgess said:
If you decide not to buy, lose your job, and get another one, then it will be at least two years before you will be able to get a mortgage again.
Click to expand...

Brendan - how do you know this? It seems speculative, given that banks aren't really undertaking much lending activity at the moment.

Surely a number of factors come into play: LTV, number of years previously in continuous employment, income level, appetite of the bank on a particular day..... Why would one particular factor, such as length of time in most-recent position, veto all others? Also, given the nature of the private sector, surely this would then rule out a huge percentage of people as the churn rate is quite high?

Also, even it were true for an individual, how about couples - what if the spouse/partner continued in secure employment?

Bob
 
Bob_tg said:
Surely a number of factors come into play: LTV, number of years previously in continuous employment, income level, appetite of the bank on a particular day..... Why would one particular factor, such as length of time in most-recent position, veto all others? Also, given the nature of the private sector, surely this would then rule out a huge percentage of people as the churn rate is quite high?

Bob
Click to expand...

I rang up AIB mortgage center today and asked about changing employment. They would see a 'short' (less than 6 months according to them) gap between jobs as continuous employment and that it wouldn't affect my current mortgage approval or my ability to apply. I also asked if being made redundant would make a difference and it wouldn't, as long as I got another job quickly enough. Saying all that, it might be a different story when it comes down to it.
 
kitog said:
I rang up AIB mortgage center today and asked about changing employment. They would see a 'short' (less than 6 months according to them) gap between jobs as continuous employment and that it wouldn't affect my current mortgage approval or my ability to apply. I also asked if being made redundant would make a difference and it wouldn't, as long as I got another job quickly enough. Saying all that, it might be a different story when it comes down to it.
Click to expand...

In any case make sure to get this in writing - banks will promise the sun, moon and stars verbally.
 
If you are buying the house to live in it this is a big factor. Also,you said that you could rent the house should worst come to worst.

Congratulations on getting mortgage approval. If the house is in an area you want and at a good price, I would say go ahead.
 
Susanna said:
Also,you said that you could rent the house should worst come to worst.
Click to expand...
As a single f.t.b. you would be then liable for the extra stamp duty if you rent the house within the first two years. I am reading from the original post that this person is a ftb.
 
Most people live in the scenario that they may lose their jobs, this may go on for one two or ten years. You can't put off life indefiniately. If you've factored in a paycut or two or three, plus tax hikes, property taxes and mortgages increasing then I don't see why you shouldn't buy. Other considerations are if the property is in a good location that will always be a good location. Can you rent a room if you had to. I hope your mortgage term is no longer than 20 years, this gives you lee room.

Would the house right now rent for more than a mortgage repayment is another important question.

Banks are only giving out money to the few and with proper checks these days so I'm sure they have decided you can afford it.

If you lose your job the government will pay the mortgage interest which is a buffer between jobs.

I would consider the mortgage protection you refer to as a waste of money, far better to have say 6 months mortgage payments saved.
 
Bronte said:
If you lose your job the government will pay the mortgage interest which is a buffer between jobs.
Click to expand...

For now, will the IMF be so kind?
It shows the craziness of the situation this country finds itself in where you can factor in free money from the government when you find yourself in a situation created entirely by yourself.
If you have to rely on handouts then you should not be buying.
 
NorfBank said:
It shows the craziness of the situation this country finds itself in where you can factor in free money from the government when you find yourself in a situation created entirely by yourself.
Click to expand...
So the 400,000 people on the dole are in situations created entirely by themselves?
 
Status
Not open for further replies.
Back
Top