Young couple , debt free, baby on way, want to buy house - financial health check

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wexfordbob

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Age: 31
Spouse’s/Partner's age: 28

Annual gross income from employment or profession: 105k plus bonus (20%)
Annual gross income of spouse: 70k

Monthly take-home pay : Approx 8.5k

Type of employment: PAYE Employed , Private Sector

In general are you:
(a) spending more than you earn, or
(b) saving? Saving 3000 per month

Rough estimate of value of home: Renting 1800 pm (2 bed apartment in Ballsbridge – paying below market rent)
Amount outstanding on your mortgage: n/a
What interest rate are you paying? n/a

Other borrowings – No borrowings

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: Approx 60k cash, 20k equities.

Do you have a pension scheme? Yes I am contributing 10% and employer 6%. My wife is contributing 10% and employer 5%. Heavy Equity exposure.

Do you own any investment or other property? No

Ages of children: 1 on the way – April 2020

Life insurance: Yes, I have a work insurance not sure of the details will check them out.


What specific question do you have or what issues are of concern to you?
Ok have been following this website for over 10 years and credit it with a very prudent approach to financial planning. We are the fortunate position of having no debt and for the last few years we have had good incomes and lived very comfortably (big holidays, regular meals out, shopping etc) and we have saved relatively well.

However we are now eager get on the property ladder as we have paid a LOT in rent over the past 5 years. We have begun viewing houses with a 650k budget. I am very conscious of not over extending ourselves particularly in light of our pending arrival. The banks have been very receptive to lending and even encouraging borrowing more than the 3.5 x……….. (thankfully I’ve been reading this forum for a while so I remember a lot of the stuff from the previous “good times”. )
A 650k purchase would use up most of our savings. However the mortgage wouldn’t be hugely more than what we currently pay in rent. Are we potentially borrowing too much as first timers??

Basically just here looking for some opinions / advice on our current situation and what we could improve upon. I have invested a bit in equities over the past few years but have moved the majority to cash in the last six months as we started looking to buy a house. As I said earlier we have lived very comfortably for the last few years with a lot of discretionary spending so I don't want grief on not having saved more on our salaries :) – I am aware that our situation is going to change dramatically come the little ones arrival so I suppose main questions are:
Are we saving enough relative to our incomes?
How much do I need to budget for babys arrival? Haven't bought any of the big ticket items yet....!
How much extra per month will baby cost?

We both have scope to increase our salaries however baby might slow down my wifes career in the short term, she will be taking maternity leave for 6 months at least and I would like to budget for another 6 months off if she wanted it.

Appreciate all advice.
 
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at €650k you’ll barely have the 10% plus costs plus means to furnish/decorate? Or intend saving more before you buy? Personally it’s a good plan to buy esp with family growing. Whether you buy at €650k or not is your decision. Certainly your joint income would suggest you *could*.
You’re both relatively young so a 30/35 year mortgage and pay off extra each month - then you’ve got flexibility should one lose a job temporarily or reduced income. Only downside is a lot of the decent interest rates are fixed. Anyway, you’re being prudent yes but no point in buying somewhere and having to move again in 5 years if you can afford a property now you’d be happy with in the longer term.
kids are expensive. You’re probably looking at 1200 per month in childcare. Plus everything else on top. But your lifestyle will adjust anyway so savings will be had there. Also try use parental leave. Worth it esp of you can take a day or 2 a week. So beneficial to you and baby to spend as much time together as possible (both you and your partner!)
 
Congrats for having such a good salary at your age. I would be careful..650k is high on such a salary is still risky. Have you thought of living in the burbs? Houses are bigger and cheaper. There is life outside ballsbridge
 
Just jumping in the Childcare\budgeting. We pay 1400 a month for two from 9-3 each day and we paid 1200 for one from 8:30-4 (The main difference is the first kid is now is pre school from 9:30 to 12:30 each day). Initally, you do make a lot of purchases for a buggie, cot and car seats etc. which can be expensive but on the plus side they do last for a long time (4 + years and going). You will find that your Shopping also increases as nappies, formula etc. are pricey too but again as Luckystar said, your lifestyle adjusts too it.

FInally, I would add that if your partner is going to take 6 months unpaid then you need to have a conversation about that and budget for it. As all of the bills, rent, shopping etc. will be coming out of your wage, you should also consider how much you will give your partner as her "spending" money each month so that she has the freedom to live. I hope this doesnt sound sexist but she will need \ want to to be able to attend classes, buy for the baby, get her hair done etc (in the same way a man would) and she will be use to having a steady income every month. We hadn't anticapiated how much that would cost and could have budgeted better for it.

Congrats on the new arrival :)
 
I assume 650k for a house that is move-in ready is nonstarter in Ballsbridge area (I have looked myself). Buying at 650k is fine, you have just enough to cover the deposit, stamp duty and lawyer fees. You are saving 3k per month, that will give you another 18k by June plus you have ~12k in a bonus coming in. So you can use that to fund the furnishing, minor works.

I would look at houses that need minimal work, as even cosmetic work can such as floors, painting can be expensive.
 
Thanks for replies.

Definitely not looking in Ballsbridge as we want bang for buck (ideally looking to buy a 4 bed house with garden) that we could see ourselves in for 10 years plus or longer if necessary. We are not focusing on the south side - been mainly looking around Drumcondra / Raheny….a short commute into city centre is our only location criteria. 650k is our absolute max , would be hoping to get something for 600 or less.
 
wexfordbob said:
Thanks for replies.

Definitely not looking in Ballsbridge as we want bang for buck (ideally looking to buy a 4 bed house with garden) that we could see ourselves in for 10 years plus or longer if necessary. We are not focusing on the south side - been mainly looking around Drumcondra / Raheny….a short commute into city centre is our only location criteria. 650k is our absolute max , would be hoping to get something for 600 or less.
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Just be aware that from my experience in Dublin, the listed price is generally the minimum that they want, and quite often can go in excess. This means that if you see a property at 650k, it may go above. This was my experience whilst bidding and purchasing on a property in Dublin in 2018. The properties that have a sticky price or go for less tend to be those requiring work which is expensive.

I think the 600-650k could be a crowded market, so make sure you have your mortgage approval and ready to go. Prepare to be disappointed and be prepared to move fast. However, do as much research on properties that sold in the area / same street. By googling you can access the sold properties on myhome and using property price register you can see how much they sold for to assess value.

Novel example from my experience, there was a property on the market at 500k, and at this point, I was getting desperate. So I asked the agent what it would take to take it off the market, and the response was the 540k because the house up the road sold for that 6 months ago. I researched and that house was bigger, extra bathroom, a similar condition, and on an sqm valuation basis this house was worth 495k. The agent presented with that information said oh well, that is what they want. I think it sold for 530k in the end.
 
Agree with above. If your absolute max is E650k then you'll almost surely buy a house for that amount, that's how property works in Ireland :-D this is exactly what happens with our house. If there was even 1 euro more bid from other party then we'd have walked.
 
Live Well said:
...You should also consider how much you will give your partner as her "spending" money each month so that she has the freedom to live. I hope this doesnt sound sexist but she will need \ want to to be able to attend classes, buy for the baby, get her hair done etc...
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One way to avoid that scenario is to have a joint account, where both salaries are paid into, and all bills come out of. By pooling your income, it completely changes the narrative about either partner needing to give the other money. If your income pool is reduced, such as during unpaid maternity, then you may need to adjust your budget but otherwise everything else remains the same. Some couples get a set of Revolut cards and each add the same amount for private/discretionary spend on a weekly/monthly basis.
 
yep once you are married and you have kids the easiest way to manage is to pool income, you arent an island any more and its the fairest way of working things out.
 
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