Save for Mortgage

Discussion in 'Money makeover' started by kappar, Jan 4, 2017.

  1. kappar

    kappar Frequent Poster

    Currently living with parents hoping to start saving for a mortgage.

    Age: 30
    Spouse’s/Partner's age: N/A

    Annual gross income from employment or profession: 80k + 15% bonus
    Annual gross income of spouse: N/A

    Monthly take-home pay c. 4k + 5% pension

    Type of employment: e.g. private

    In general are you:
    Generally neither overspending or saving.

    Rough estimate of value of home 0
    Amount outstanding on your mortgage: 0
    What interest rate are you paying? 0

    Other borrowings – car loans/personal loans etc
    3.5k Credit Union

    Do you pay off your full credit card balance each month? No
    If not, what is the balance on your credit card? 3k

    Savings and investments:
    1k Credit Union
    4k Savings

    Do you have a pension scheme?
    Yes. Personal 5% Employer 10%

    Do you own any investment or other property?

    Ages of children: N/A

    Life insurance: No but have employer 4x salary if I die and 66% income protection if I'm sick
  2. aprentice

    aprentice Registered User

    Youll need to save at least what your morgage will be each month ,how much are you hoping to spend on a house .
    Personally if i was living at home i would be making each month count where i had low enough outgoings.
  3. kappar

    kappar Frequent Poster

    Looking for a 2 bed apartment in Dublin so I think a 300k budget. I also think 300k is the top end of what I would get for a mortgage I think.
  4. PaddyBloggit

    PaddyBloggit Frequent Poster

    You have little in savings at the moment.

    You're on a good salary & living at home. You should be able to save a large percentage of your salary over the next few years to build up a mortgage pot.

    Your spending will have to be curtailed a lot if you expect to be able to purchase a new home in the foreseeable future.
    Connard likes this.
  5. trasneoir

    trasneoir Frequent Poster

    First of all congrats, that's a wicked salary. Making that kind of money is hard. Keeping that kind of money is easy, you just need to learn how.
    Based on what you've posted so far, I can't see any reason why you couldn't be in a 300k 2 bed in early 2019.

    You're paying €45 a month in interest to pretend that you've got savings. You've got debt. Let's get rid of it, fast.

    I'd take 3k from savings and eliminate the credit card debt today.
    The remaining 1k is your emergency fund. If that that makes you nervous, good. Urgency is good. You are going to be out of debt in february, and the emergency fund will hit 10k this summer.

    Can you run us through your outgoings? Let's start with rent, monthly/annual bills, gifts, and motors.
    If you find yourself scratching your head about where the rest goes, will change your life
    Connard likes this.
  6. SBarrett

    SBarrett Frequent Poster

    You are on a great salary but seem to be spending every penny. A bank wants to see people who can live within their means. You need to look at saving for a mortgage as a trial run for when you actually get it. Your monthly repayments for €270,000 will be about €1,200. The bank want to see that you can repay the mortgage if interest rates go up by 2%, so that's €1,500 for you. Open a regular savers account and have a standing order in place so that the day after payday, €1,500 is transferred from your current account to the saving accounts.

    This is your mortgage account. Do not take anything out of it, it will count against you when showing the bank your savings. You will have your deposit saved in about 2 years (you also have to show you have money for stamp duty, solicitor fees etc).

    If you aren't intentional with your savings, it won't happen.

    Good luck!

  7. PGF2016

    PGF2016 Frequent Poster

    Excellent advice but given the salary and the fact the OP is living at home I don't see any reason why they couldn't save €2,000 a month.
  8. Brendan Burgess

    Brendan Burgess Founder

    Absolutely agree with trasneoir - clear your credit union loan immediately. You are probably paying them €350 a year in interest for no good reason.

    While the principle here is correct, be careful not to do stupid things like going into an unauthorized overdraft or bouncing a Credit Card direct debit as a result.

    Is your pension contribution mandatory? If not, then stop making it and keep the money available to buy a house. If your employer matches your contribution, then keep it up.

    SBarrett likes this.
  9. SBarrett

    SBarrett Frequent Poster

    Agree, but the OP is bringing home €4k a month and has a €3k credit card debt and credit union loan. Clearly not living within their means. They need to get into the habit and then up it. Baby steps...

    PaddyW, gnf_ireland and PGF2016 like this.
  10. gnf_ireland

    gnf_ireland Frequent Poster

    I agree 100% with what everyone says above.
    The first step is to clear the credit card debt - probably paying 15-18% on from your savings. This should be done immediately.

    Next step is to set up a regular savers account (or two since most have a 1k cap on them) and put 1,500 a month into them. This is the cost of your mortgage as stated above + stress test and will need to be accounted for each month by the bank. Showing you can do this over an extended period will count massively towards your application. This should be done as part of your January 2017 pay cheque, and you will have 36k in January 2019.

    Next is to understand what you are spending your money on. You need to track spending for a Quarter, using an app or contactless or whatever. There is absolutely no reason you should not be able to live on 2500 excluding rent/mortgage each month. You will have to once you have purchased the place. This is key to getting your finances under control.

    It is really the big jump most people have to go from their 'studenty' and free-spending 20's to the more mature outlook in your 30's, when you are looking at buying a house, settling down etc. You more than likely had a fantastic time in your 20's, but if you want to buy a place of your own, this is where maturity will need to start kicking in ! Use an app, track the expenses and report back occasionally on it. It would be good if you would consider doing a 'blog' on your 'transformation' journey from spender to saver - others may find it inspirational.

    Other than that, good luck and enjoy your 30's. I also agree you can save more than 1500 a month, and should, but you might want to use that for a holiday or whatever. I am just saying 1500 is the minimum !!

    PS re pension, I would not reduce it if the employer is linking their contributions to yours. You have plenty of money without it !
  11. trasneoir

    trasneoir Frequent Poster

    I don't disagree with the maths behind this suggestion.

    I think it's a reasonable option - for somebody who's ready to throw available cent at the mortgage and own outright in 10/15 years.

    For the majority who save/invest begrudgingly, I'd worry that pausing the pension would hurt their overall savings rate.
    If payroll taxes were collected by direct debit, there would be riots. We would all lose our minds about the price of taxes. There's a universal cognitive bias which amounts to "if you never see the money in your account, it isn't real".
    Pensions take advantage of this psychological blind spot to make people save more.