Are we overstretching ourselves? advice please

Hi Pins
As a young married couple in our early thirties, we are looking at puchasing a site/old house in the countryside to move to when we can afford to leave our urban house that we bought in the peak of boom 2006. We gave 265k for a detached house in a cavan housing estate, currently worth circa 180k . 200k owed. We have no other borrowings, but have an eye on a piece of land with old house which will probably cost 150k. Our intentin is to prchase the land and sit on it until we can sell our town house, or rent it.

We have a 1.1+ecb rate tracker on the house, and earn about 75k per year between both salaries. we have some agricultural land debt free worth circa 200k (inheritence) in a different part of the country, (dont want to sell).

my question is twofold. does anyone think we are mad taking on more debt, (albeit to secure a good deal for the future,), or does anyone have advice as to the best way to finance such a purchase? we have small amount of savings, oh and no kids.

Its not worth €180k,if you can get €120k for it take the hand off the buyer.Property has fallen at least 50% outside the pale,your boom to bust valuation is way off the mark.

Start from this point and re do your calculations.

The first rule of thumb is earning multiples. 350 (200+150) / 75 = 4.7 which isn’t too high but not ideal.

On the repayments side bbc.co.uk/homes/property/mor … ator.shtml
350k, at 30 years, for say an average rate of 4% would give repayments of 1700 a month. How comfortable would you be with that? How stable are your jobs? Do out an excel spreadsheet. And add in extras like stealth taxes and see how much you can take and be comfortable with. Remember you would have two property taxes, that could likely go up to 3k between them, per annum. Maybe more.

And you will have very little scope to reduce your loans though sales, unless your assets command something many other properties don’t.

I don’t like the sound of it, purely because you will be paying circa 500 quid/month interest alone for a property you might or might not use. Seems like a lot to me. Then add in build costs down the line. How much do you save?

Thank you very much for your comments macannrb. And in particular pointing out the interest we would be paying for essentially the property rights of something we may not use. Food for thought!

Its not worth €180k,if you can get €120k for it take the hand off the buyer.Property has fallen at least 50% outside the pale,your boom to bust valuation is way off the mark.

Start from this point and re do your calculations.

Hi knuttell, I am all for realistic valuations being discussed on the forum, but akin to the fanning of the flames during the boom, you may be guilty of over estimating the drop in a single house by applying a generalisation. Fact is the best indicator of a valuation is the price actually acheived of a neighbouring property, and one in the estate across from me has just sold for 170k. As there are many additional features in my property I would feel I am being fair.
More importantly I won’t be “taking the hand” of anyone because I’m not selling. My point is let’s not fall into the inverse of the crazy boom talk we were all subject to. The property I am looking at also has not dropped by 50% from market height.

It strikes me that your comment is posted more in support of your own ideals than to actually address the question I was putting to the forum which was one of handling overall debt.
But thank you for your comment all the same

I don’t understand. You own a house, with a mortgage, and some land through inheritance.
You now want to buy more land, on another mortgage, but do not intend on doing anything with it.

This sound crazy, and i’d imagine a bank might tell you the same.

Does the existing land provide any income? i.e. could it cover the cost of the mortgage?

Ditto

If you go to bank of Ireland or AIB the amount they give is not multiples of income but a multiple of available income i.e your net income less costs of living

Has any bank said they will lend you any more money? I’m pretty sure this conversation is moot.

I was merely pointing out that your figures are incorrect.Property whether you believe it or not has dropped by 50% nationally and 60% in Dublin.

Regardless of anecdotal evidence to the contrary,I cannot see how a property in an estate in Cavan is bucking this trend with just a 30% drop but there are exceptions to every rule however a Valuer/Bank will be looking at your figures in much the same way as I just have when they start to process your application.

Best of luck with it in any event.