Eldest is starting college in Galway next month, we have been looking unsuccessfully for a place for him for the last couple of months and time is ticking. Landlords looking for crazy money (even compared to last year, I am told) and all want 12 month leases. We have some savings and also are both over 50 with approx 800k in pension funds. Should we be looking to buy at this stage or is the market too inflated? We have 2 other children in secondary school who may or may not want to attend college in Galway in the years to come.
Son starting college, should we rent or buy?
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Would you borrow against the pension fund? I am assuming you can’t draw down the money? So could you get interest only until you are 65? And they pay off balance with lump sum. If you think your other kids will go to uni in Galway it makes sense, you would have use of it for them during their college years. I know in times past I saw it work really well, and if they was only one child in college in a particular year the rooms were rented out to friends.
I don’t know can you afford it if you had to do capital and interest repayments, because you won’t get a 30 yr mortgage, probably only 15. You would need to supply some figures on affordability to know if it is a good idea. But the value of the house is what is the value to you now. Will it be good value for you to use for x years while the kids go to uni.
I don’t know can you afford it if you had to do capital and interest repayments, because you won’t get a 30 yr mortgage, probably only 15. You would need to supply some figures on affordability to know if it is a good idea. But the value of the house is what is the value to you now. Will it be good value for you to use for x years while the kids go to uni.
My pension is defined contribution and I am no expert but as I understand it after the age of 50 I can take up to 20% cash tax-free (up to a max of €200,000) . I don't know how good an idea this is as I do intend working for at least another 6-7 years and maybe I should wait to get my pension to as close to a €1M before taking a lump sum? It is currently at approx €550000.
As for a mortgage we have enough for a deposit (just about) and would probably be able for the payments on a 15 year mortgage of €300k.
As for a mortgage we have enough for a deposit (just about) and would probably be able for the payments on a 15 year mortgage of €300k.
NoRegretsCoyote
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It depends on your income level but in your circumstances bit could make sense.
What price property are you looking at and what would you pay on rent for same property?
Are your mortgage calculations based on BTL rates of >4%?
What price property are you looking at and what would you pay on rent for same property?
Are your mortgage calculations based on BTL rates of >4%?
My initial thought is buying a place seems like a rather large hammer to crack a nut if the only intention is to cover your son's accommodation for college.
Firstly it is unlikely to solve the accommodation issue in the short term. The length of time it will take to find a place, get the legal and financial affairs in place and move in will likely take months rather than weeks. So for the semester coming renting is likely to be necessary.
What are your plans for the property after graduation? Sell, rent or have you or your family an interest in living in Galway? In the greater scheme of things college while hopefully a great time in your son's life is only going to to last 3-5 years. Property as a short-to-medium term investment is generally more risky. Forgetting about your son for a second had you an interest in being a landlord?
Taking the worst case scenario he could turn around at Christmas and tell you he's not happy in Galway and wants to come home or do something else.
How do the transactions cost (buying & selling) combined with mortgage interest compare to rent levels? For example, stamp duty will be 1% on purchase. Selling you'll likely face estate agents fees of 1.5%. there will be solicitors fees associated with both transactions also. It's not your primary residence so you will face higher BTL mortgage rates. Spread over the duration of a college course does it make financial sense?
More broadly any decisions on purchasing should probably involve an overall assessment of your financial position. For example have you an existing mortgage and how sustainable are your finances if you have to service the BTL mortgage yourself
Firstly it is unlikely to solve the accommodation issue in the short term. The length of time it will take to find a place, get the legal and financial affairs in place and move in will likely take months rather than weeks. So for the semester coming renting is likely to be necessary.
What are your plans for the property after graduation? Sell, rent or have you or your family an interest in living in Galway? In the greater scheme of things college while hopefully a great time in your son's life is only going to to last 3-5 years. Property as a short-to-medium term investment is generally more risky. Forgetting about your son for a second had you an interest in being a landlord?
Taking the worst case scenario he could turn around at Christmas and tell you he's not happy in Galway and wants to come home or do something else.
How do the transactions cost (buying & selling) combined with mortgage interest compare to rent levels? For example, stamp duty will be 1% on purchase. Selling you'll likely face estate agents fees of 1.5%. there will be solicitors fees associated with both transactions also. It's not your primary residence so you will face higher BTL mortgage rates. Spread over the duration of a college course does it make financial sense?
More broadly any decisions on purchasing should probably involve an overall assessment of your financial position. For example have you an existing mortgage and how sustainable are your finances if you have to service the BTL mortgage yourself
Thanks for the replies. Lots of food for thought.
Joint income of approx €160000, existing mortgage has about 4 years remaining. Saving around 2k per month at the moment but that may not be sustainable once son starts college.
I would be looking to hold on to the property for only as long as son or subsequent siblings need it. I have no interest in being a landlord and would sell asap.
Joint income of approx €160000, existing mortgage has about 4 years remaining. Saving around 2k per month at the moment but that may not be sustainable once son starts college.
I would be looking to hold on to the property for only as long as son or subsequent siblings need it. I have no interest in being a landlord and would sell asap.
Brendan Burgess
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1) Forget your pension fund. You can't buy it through the pension fund and let it to a relative. Likewise, you should not make a decision on exiting your pension fund to finance a short term property investment.
2) If you own your own home and have €800k in a pension fund presumably invested in equities, maybe buying an investment property is ok. It's a bit concentrated in property, but given that you have a use for the property, that would probably be ok.
3) Now, you need to crunch the numbers.
A: What rent will you be paying for your son?
B: How much will a similar property cost?
C: How much of a deposit do you have?
D: What will the interest rate be?
E: If you are buying a two bed apartment, will you be able to let one of the rooms to another tenant and how much rent will you get?
E: What will the transaction costs be?
4) What are the risks involved in buying?
We don't allow speculation about property prices on Askaboutmoney, but it's important to point out that there is a risk that property prices may fall. This is probably balanced out by the fact that prices may rise.
In any event, given your level of wealth, you can handle a fall in prices.
5) What are the non-financial benefits?
For your son, "owning his own place" would be a huge advantage. Not dealing with landlords. Not looking for a 9 month tenancy every year. Getting to live on his own or getting to pick whom he shares with.
6) Encourage your other two children to study in Galway
If you live in the general area, it would make it very attractive for them to study in Galway. For most undergraduate degrees such as Commerce or the Arts or Science , Galway is as good as any other university.
Conclusion - depending on the numbers
If you can afford it, it's worth doing.
2) If you own your own home and have €800k in a pension fund presumably invested in equities, maybe buying an investment property is ok. It's a bit concentrated in property, but given that you have a use for the property, that would probably be ok.
3) Now, you need to crunch the numbers.
A: What rent will you be paying for your son?
B: How much will a similar property cost?
C: How much of a deposit do you have?
D: What will the interest rate be?
E: If you are buying a two bed apartment, will you be able to let one of the rooms to another tenant and how much rent will you get?
E: What will the transaction costs be?
4) What are the risks involved in buying?
We don't allow speculation about property prices on Askaboutmoney, but it's important to point out that there is a risk that property prices may fall. This is probably balanced out by the fact that prices may rise.
In any event, given your level of wealth, you can handle a fall in prices.
5) What are the non-financial benefits?
For your son, "owning his own place" would be a huge advantage. Not dealing with landlords. Not looking for a 9 month tenancy every year. Getting to live on his own or getting to pick whom he shares with.
6) Encourage your other two children to study in Galway
If you live in the general area, it would make it very attractive for them to study in Galway. For most undergraduate degrees such as Commerce or the Arts or Science , Galway is as good as any other university.
Conclusion - depending on the numbers
If you can afford it, it's worth doing.
Brendan Burgess
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Getting a mortgage.
You will require a 30% deposit. Do you have that?
ICS does interest-only mortgages and interest-only reverting to capital and interest.
www.icsmortgages.ie
Capital and interest from the start will cost you 3.95%
Interest only will be 5.25%
Or an initial interest only period: 4.85%
(Rates will be a bit lower if you have a deposit of 40% or more)
Brendan
You will require a 30% deposit. Do you have that?
ICS does interest-only mortgages and interest-only reverting to capital and interest.
Rates | ICS Mortgages | Residential Mortgages
The ICS Brand was established in 1864 and has remained a leading and trusted brand in the mortgage market throughout its 150-year history.
www.icsmortgages.ie
Capital and interest from the start will cost you 3.95%
Interest only will be 5.25%
Or an initial interest only period: 4.85%
(Rates will be a bit lower if you have a deposit of 40% or more)
Brendan
Brendan Burgess
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When banking functioned properly in Ireland, you could remortgage your home to buy an investment property.
I wonder could you extend the term and borrow more money?
Or switch to another lender.
Let's say that they give you €100k.
You would pay about 2.5% on this €100k instead of 3.95%.
And you would have a lower Loan to Value on the BTL mortgage, so you would save a further 0.2% on €200k.
Have a chat with your current mortgage lender in the first place.
Then talk to a mortgage broker.
Brendan
You could look at Daft.ie for accomodation. He could go into digs for the first year. It would be probably cheaper than renting a whole house for 12 months. And it would give you time to find a suitable house should you still want to but one. I'm not sure how many people are letting rooms these days but might be worth a look
I don't know if this is any good to you. There used you be a lot of places in Renmore and they'd be handy for GMIT. Rahoon and Newcastle would be handy for NUIG. Easy walking distance. I think there should be buses from Knocknacarra.
www.nuigstudentpad.ie
www.daft.ie
www.daft.ie
I don't know if any of that is any help.
University of Galway - Studentpad
Welcome to the University of Galway student accommodation search engine. Here you can search for your accommodation in areas close to the University.
Property to Share in Rahoon, Galway (+1) | Daft.ie
Find Property to Share in Rahoon, Galway (+1). Search 24 properties and find new housemates and flatmates in Rahoon, Galway (+1) on Daft.ie now.
Property to Share in Renmore, Galway | Daft.ie
Find Property to Share in Renmore, Galway. Search 6 properties and find new housemates and flatmates in Renmore, Galway on Daft.ie now.
I don't know if any of that is any help.
Steven Barrett
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Taking on long term debt for a short term need is a bad idea.
For this reason alone it would be a terrible idea. What would your plan be when your younger kids choose to go to Cork/Dublin/Limerick?? You won't have the ability to buy an apartment for each of them.
You are unlikely to buy anything for this academic year so really you are talking about buying a house with a 70% BTL mortgage for a 3 year period with all the associated costs of buying/selling, interest, insurance, furnishing, maintenance... personally I can't see that working out any cheaper than renting a room and you are totally open to property prices rising/falling if you are really against being a landlord
At the very least, you should be comfortable knowing that if property prices have dropped in 3/4 years that you will need to be a landlord for the foreseeable future until you can choose when to sell. Even a modest drop of €20-30k in property value would make this scenario an incredibly expensive solution to student accommodation
Brendan Burgess
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But he is not taking on long term debt. He is renting money instead of property for the years that his child or children are in college. That seems reasonable to me.
Adding €30k to a 20 year mortgage to buy a new car is not a good idea.
But adding €30k to a 20 year mortgage to buy a car is a good idea, if you pay it off over 5 years.
Brendan
Steven Barrett
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He doesn't want to be a landlord Brendan and intends in selling the property when his son finishes in Galway. Where have we seen people buying property in short term intentions before? Incidentally, I have had a fair few people ask me to review properties that they still have from the Celtic Tiger. They are a disaster. They are out of negative equity because they are paying down the debt, not because the property has come back in value. All were still at a loss on the original purchase price. It is a risk to take for such a short term need.
Steven
www.bluewaterfp.ie
Again thanks for all the replies.
I suppose this line of thinking has been brought about by the lack of availability of suitable rental accommodation in Galway city. A few people mentioned that even if I was to purchase it wouldn't be done in time for this semester which is true and would weigh against buying.
With regard to affording, we probably would scrape together the 30% (for a €300k mortgage) but that would leave us with little or no savings and with 2 others following we could be left in a precarious situation if they decided to go anywhere else other than Galway. We do live in Clare as my username probably gives away but are closer to Limerick and UL would also be an attractive option.
In general, what I'm hearing is that while an investment property mightn't be a bad idea with the proper due diligence but rushing into buying a property to solve this short term dilemma might not be the best way to go?
I suppose this line of thinking has been brought about by the lack of availability of suitable rental accommodation in Galway city. A few people mentioned that even if I was to purchase it wouldn't be done in time for this semester which is true and would weigh against buying.
With regard to affording, we probably would scrape together the 30% (for a €300k mortgage) but that would leave us with little or no savings and with 2 others following we could be left in a precarious situation if they decided to go anywhere else other than Galway. We do live in Clare as my username probably gives away but are closer to Limerick and UL would also be an attractive option.
In general, what I'm hearing is that while an investment property mightn't be a bad idea with the proper due diligence but rushing into buying a property to solve this short term dilemma might not be the best way to go?
NoRegretsCoyote
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Why €300k?
€200k would buy a property suitable for a student in Galway, with room for a flatmate too.
Laughahalla
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What if your son decides he doesn't like Galway/College after a few months.
Managing property from an other county is a pain.
There is a few apartments for sale in Galway for less than 150k.
You don't have to buy for 300k
Managing property from an other county is a pain.
There is a few apartments for sale in Galway for less than 150k.
You don't have to buy for 300k
My parents had this dilemma in the 1990s, several offspring approaching college and they didn't live in a town with a university. they decided not to buy as they didn't want us all to be "forced" to go to a particular college and, importantly, realised that late-teenagers really aren't likely to be capable of living together without parent/referees. I love my brothers (now) but the idea of living with them without someone in charge
That said, they would have made money, but not necessarily had the family they have now.
That said, they would have made money, but not necessarily had the family they have now.
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