Should we borrow €460k on an income of €84k ?

B

burger1979

Registered User
Messages
142
Age: 28
Spouse’s/Partner's age: 28

Annual gross income from employment or profession: €44,505.00
Annual gross income of spouse: €40,000.00

Type of employment: e.g. Civil Servant, self-employed: I am a quantity surveyor/partner is a structural engineer.

In general are you spending more than you earn or are you saving? Saving

Thinking of buying a €500k home with a €460k mortgage
Rough estimate of value of home €500,000.00
Amount outstanding on your mortgage: €460,000.00
What interest rate are you paying? 5.6%

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

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: CU €3000.00 Me, CU €20,000.00 Her, Joint Savings account €15,000.00

Do you have a pension scheme? No.

Do you own any investment or other property? No.

Ages of children: None.

Life insurance: None.


What specific question do you have or what issues are of concern to you?

I am looking to buy ahouse with my finace and we have seen a house over the weekend that we are going to make an offer on. the asking price of the house is €500K. I want to know what people would make/think of our finances if we were to get a mortgage of €460K at a rate of 5.6%. This, according to Karl's calc, give us a repayment per month of €2500.99 (loan startedin June 2008 and runs for 35yrs). I dont know if the calc takes into account TRS. If not i work out that our repayments would drop to €2166.67 after TRS is deducted (i could be wrong on this, i got the info off revenue.ie). Our net income per month at the moment is €5625.00. If we were to pay the full €2500.00 p/m month on the mortgage that would mean we are paying 44% into our mortgage which i think is a bit high, however at €2166.67 p/m that is 38.5% of the net income which is not too bad and really manageable.

So my questions would be:

1. does Karls mortgage calc take into account TRS?
2. if were to pay €2500.99 p/m do people think we would be stretching ourselves too much?
3. when i entered our incomes in to Karl Grabes tax calc for married people our net income per month didnt go up i thought it would increase when we get married?

I appreciate that this info/situation is hypothetical and might not happen but i would really appreciate any suggestions people might have.

thanks in advance for the replies.

burger1979.
 
Re: New Mortgage Situation - Hypothetical

1. does Karls mortgage calc take into account TRS?
No. It's a generic calculator that covers all countries and not just Ireland.

3. when i entered our incomes in to Karl Grabes tax calc for married people our net income per month didnt go up i thought it would increase when we get married?
No, your tax won't be reduced when you get married. If one spouse has no income or a low income, then the other spouse can benefit from their tax credits and tax bands.

2. if were to pay €2500.99 p/m do people think we would be stretching ourselves too much?

Probably. It's cheaper to rent than to pay a mortgage. Why not save for a bit longer and build up a bit more of a deposit? If house prices fall, the same house will be cheaper later. If house prices rise, it will cost you more to get on the housing ladder, but you will probably have higher incomes and higher savings.

Brendan
 
It’s not one of your questions but even on your LTV of 92% can you not get a rate better than 5.6%. A rate of 5% would save you nearly €179 monthly, that’s a lot of money over 35 years.
 
You should also take into account that you may have children in the future, I know at 28 that may not be top of the agenda at the moment, but long term if you are paying nearly half of your joint income out per month for a mortgage and then kiddies come along you may need to either pay fulltime childcare fees (can be up to 1000pm) or one of you may need to give up work for a while.

You probably should take this into consideration before committing to such a large mortgage. Personally I would continue saving and rent to see how the market plays out.
 
Also consider the fact that your income will continue to rise. What kind of offer on the house are you going to offer? I would go as low as I possibly could if your dead set on buying. Although like LUlu123 I would also consider holding off for a while yet and monitor the market a little more.
 
Its not just the mortgage you need to consider. As Lulu pointed out you may have future draws on your income that you have no factored in yet. E.G Self-Employed, have you considered any income protection, pension etc. Sounds like a long way off now I know but extra payments like this could put you under pressure.
 
Twofor1: that interest rate is something that i came up with. i was aiming for the high end to see what the repayments would be and i know that i can get better. i am going to talk with my broker tomorrow and see what rates/quotes he can get me on that amount.

lulu123/television/laura333: yeah kiddies are going to be coming along in the future. i am working out at the mo how much expenditure we are going to have after mortgage repayments. we have not other major commitments at the moment other than health insurance roughly €50pm each. we are currently living in both of our respective parents houses whilst getting the deposit together (38K at the moment so not bad) but we are getting married in september and want to get the house before the wedding. our hand is kinda being forced a bit as when we went to see the house on saturday the agent also had 2 investors looking to buy the property also. we overheard the investors offering €480K for it and the agent saying that that would be rejected. personally i would offer a bit less maybe 465-475 at the start and see what happens. if we submit an offer the agent said that he would keep us in the loop if another offer is bid.

as for other expenditure of course that will always be there, bills/pension/life insurance/car/kids...etc etc.

Anyways thanks for the advice and if anyone else wants to throw their 2 cents in please do so.

burger1979
 
There are lots of houses out there, don't get hung up on a particular one. If you were buying a ford fiesta, would you only buy from a particular salesman a particular car with a specific registration number?

Rent in the area you think you want to buy in before you buy. This will give you an idea of whether you really want to live there or not. Remember, you should be looking at 5-7 years living in a particular property when you buy (otherwise you are too exposed to needing a rising property market to cover moving costs/stamp duty etc.).
 
Anyone else conscious of the fact that both the OP and the OP's partner both have jobs related to the construction industry?

If things do get bad, then being in an industry which will be first against the wall might not be too good...
 
Hi Superman

Well spotted. This is a very relevant factor which would swing it for me against buying a house at this stage.

Brendan
 
Hi Superman,

yeah both jobs in the construction industry, but both are 'office' jobs in construction. both companies that we work with are quite big and even with the downturn in the industry the 2 of us have not been affected nor have people around us in similar jobs/positions. we feel that both our jobs are quite secure in the long term future. we had thought about it when applying for pre mortgage approval.

yoganmahew: we are not trying to get hung up on one particular house, we have our eye on a few other houses as well. point about the fiesta well put. as for renting i live close to the area at the mo (raheny) so i know it reasonably well and we are buying to live in a house for over 10 years.

thanks for the replies again

burger1979.
 
Hi Burger, have you been approved for the 460k mortgage? This seems to me very high considering your salary. You presently have no car loan, when you move out of home will either/both of you be needing a car. This can be a big strain on resources. Myself and my partner have joint earnings of circa 100k. Our mortgage is only 368k but we have very little to play around with at the end of the month. Our mortgage costs us 1500 after tax relief and we have another loan worth 350 pm. Car loan is 500pm which I know is steep. Petrol and other car expenses also add up. Bills and food ususally comes to around 400 per month. Since we moved into our house we have spent a lot of our wages doing it up but even if your house needs no work doing to it, there will always be something that crops up or needs replacing. We like to have a social life, ie the odd night out or weekend away, trips to the cinema and are also saving for our wedding. As you seem to be in a similar position to myself I just wanted to point these things out so that you are not overstretching yourself.
 
Hi Deedee,

yeah we have approval of up to 560K from a broker. now we would go no where near that amount in fact i was shoked when the broker gave me the figures,but i think he was trying to wet my palette so to speak. i was also told that the lowest maximum we were offered through the broker was 450K. i currently have no car, finace does but owes no money on it. we have no other loans on our finances at present. the wedding is being taken care of already. i know what you mean about hidden extras in terms of spending and we have done out what are costs would be if were to pay the full amount on the house. interestingly out of curiosity i rang the broker this morning and asked about getting a 3yr fixed on principal of 460K and she said 4.79 with ICS which gives €2258pm with no relief taken into account!!! (again could be to wet the palette so to speak) going to check that out now on karls calc and ics website.

thanks for the reply.
 
Oh my goodness 560k seems like an awful lot. Well I guess one thing I would advise is to go for the best house you can get for your money. It would appear that stamp duty is not an issue for you and so you want to buy a house you will see yourself in for a long time, not having to trade up in a few years and forking out a fortune on stamp. If you are both secure in your jobs (which I note you are), you can currently afford the 460k and have been given approval for this then I would go for it. It may work out expensive to start with but will be worth it if this is your long term house and as your wages go up repayments will only get easier. Best of luck, this is a very exciting time for you!
 
hi Deedee,

yeah we are first time buyers and this will be the house for a very long time hopefully. the 460K would be worst case scenario at the moment also but sure we'll see. the heart is kinda ruling the head at the minute and thats not a good thing. sure it might not even get off the ground!!!!

thanks again

burger1979
 
hi i live in similar area and just wanted to mention that you would qualify for the affordable housing scheme as a couple you can earn up to 100.000 and you are ftbers....you would have a good chance of getting a house as a couple with your incomes and your morgage would be alot less than the one you are suggesting,if you have reasons for not wanting to persue this area please disguard,but i dont think people realise that the affordable housing scheme is for people in your exact situation so you wont be crippled with such high morgages... i know loads of friends who got great properties in robs wall malahide and they have managed to have families and sustain any money pressures giving them a chance to have a secure life...they bought their house 5 years ago for 300.000,and it is now worth 600,000........... they cant sell for 20 years but they dont want to and they have a relatively low morgage and a property worth double what they paid for in 20 years time.... worth a mention i thought
 
burger1979 said:
our hand is kinda being forced a bit as when we went to see the house on saturday the agent also had 2 investors looking to buy the property also. we overheard the investors offering €480K for it and the agent saying that that would be rejected.
Click to expand...

There is something wrong there. Have a look on daft and see what sort of rent the house would generate. If it's less than approx €2500 per month then what in the name of all that is good about being a landlord is an investor looking at it for.
 
excellent point Davidoco. It sounds very fishy to me. If I had half a million to invest would not even think about investing in property now.
 
5.6% is too high a rate, there are much more attractive rates out there, you’re not taking into account Mortgage Int Relief which given the size of your mortgage you would qualify for the full amount of 333.33,
perhaps you could consider a bank that is willing to go Interest only for the 1st year to give you a chance to get on your feet.
 
Brendan said:
2. if were to pay €2500.99 p/m do people think we would be stretching ourselves too much?

Probably. It's cheaper to rent than to pay a mortgage. Why not save for a bit longer and build up a bit more of a deposit? If house prices fall, the same house will be cheaper later. If house prices rise, it will cost you more to get on the housing ladder, but you will probably have higher incomes and higher savings.

Brendan
Click to expand...

bamboozle said:
perhaps you could consider a bank that is willing to go Interest only for the 1st year to give you a chance to get on your feet.
Click to expand...
Brendan, you used to advise young people to go interest only in the early years of their mortgage and increase their payments later on when their incomes had increased. Are you rowing back from that position given that it only made sense in a rising market or just in this particular case given the nature of the OPs employment type?

Interest only in this case would be E2146 per month before Mortgage Interest Relief, below the OP's stated comfort level.

28 is young in mortgage taking terms and certainly below the average.
 
You must log in or register to reply here.
Back
Top