Passing on Affordable Offer

Hi guys. Just want to thank all the posters here for their thouroughly informative contributions to what to my mind is probably the only non biased discussion forum that a FTB can get some decent intelligent feedback from. You have made me suitably paranoid about the property industry!!

To give you an idea of how clueless I was - Liz O Kane on the Late Late a couple of months ago actually made a lot of sense. A friend of mine snapped up an Apt based on that. Whereas her recent talk on 98fm would have been hilarious if it wasn’t so scary…advising people to change the colour of their apt doors to sell :unamused:

I would have been purchasing an ‘Affordable’ Apt priced at 240k, borrowing 225k and fixing a rate of 5.74 over 5 years. Lovely, well finished 2 bed apt but still a lot of empties and that’s only the first phase.

My worst nightmare would be to be stuck with something that nobody else wanted, living on an uncompleted site or seeing my Apt half in value

Enough of that anyway.

Just one more question for you guys. As an average earner 41k, (with bonus total 45k), savings of 20k and only really able to save 500 per month while renting do yee see it likely that I will be able to afford something that is a bettter prospect than what I’m passing on. Most I can save a year is 7k and that’s very optimistic so in two years time I have 35k max. Interest rates are higher, lending criteria tighter but prices lower.

Advice? Save like mad and keep an eye on the market?? Thanks again

Jen,

you’re doing a bit better than me in terms of savings at the moment.

What I have decided to do is a two pronged attack. My main concern is not having somewhere to live when I am no longer economically active, ie retired. It maybe that come the age of 65, the retirement age will have gone up (I’m certain it will) but in case it doesn’t, I have to take that into consideration.

The old way of doing things is gone for the moment; you can’t buy right now and expect inflation to do nice things for you. there are two reasons for this. the property market is in a mess and realistically, it’s hard to say, even now, how close to the top of the market you are buying. So I’ve made a call on cost of quality of life versus amount I want to save and how much I will put up with in the way of flatmates. As I watch rents fall, the likelihood is that the amount of disposable cash being spent on non-essentials like hobby related expenditure will fall off and go to rent on my own. Savings will go up and I’ll watch the market.

What scared me most over the last 5 years is watching friends of mine buying anying just to get somewhere of their own. I understood their dilemma, but could not buy into it myself. I had contracted for a while and during some of thsoe contracts found myself travelling 90 minutes to work on occasion. To me, ownership just wasn’t worth some of the associated costs.

I’ll put it into context: 4 years ago, the closest to Dublin I could afford to buy on my own was somewhere like Slane. If, at that point, I could have afforded to buy in Balbriggan, I would have done. Even a 2 bedroomed apartment. Now, however, 3 and 4 bedroomed houses are within my reach in Balbriggan and instead of hopping for them, I’m looking at the market and thinking "well I’d really prefer to live somewhere much closer to the city centre, but not too far from work either, so somewhere like Santry, Glasnevin or Whitehall would be ideal. Dublin 9. In fact, if I pushed west a little, much of Finglas is now within reach. They’ve fallen, I think, a little faster than other areas. I wouldn’t necessarily choose to live in Finglas. What I am seeing, however, is that places I want to live are actually not completely outlandish price wise now, the way they were 4 years ago. Places I’d actually want to live. So now, I have no longer any itnerest in buying in Balbriggan.

So if I were you, i would do the following:

  1. pick a couple of places where you’d like to live. Watch the market there for a few months and see what way the prices are going.
  2. rent in the area if at all possible. MAKE sure you have a break clause in your lease so that if you see something sooner rather than later you can get out with relatively little difficulty. A lot of people are looking for advice on how to break leases on boards.ie lately. I think this is reflective of poor forward planning
  3. keep saving
  4. keep an eye on what you want from a property. You won’t necessarily get it all, but set priorities
  5. sit back and wait until you find a balance in a property of what you want, where you want and how much you’re willing to pay for it.

That’s for the short term. If that doesn’t work out, keep saving so that come the age of 65, you can go somewhere else if necessary. My mother has a cousin who, following family difficulties, moved from the UK back to Ireland after something lik 40 years away and set up home and is amazed by just how well it worked out for her.

In the meantime, rent close to work.

PS, what freaked me out of about the various affordable schemes were the conditions attached. Ownership wasn’t worth it to me.

I’ve been browsing these forums for a while, but I’m not an expert in the field of finance or property, so take this for whatever it’s worth.

Its difficult to say without knowing more about your monthly outgoings. I’m willing to bet that a significant percentage of your income is going on monthly rent on a house or appartment. With rental prices dropping, you may have scope to reduce that significantly. See the Rental Price drops section for examples. This will obviously help you in saving up for a larger deposit.

However, what you have to remember is that even supposing lending criteria does get tougher (which it will) meaning its harder for you to afford a larger mortgage, everyone else will be in the same boat. At the moment, you can afford to sit pretty, knowing that the longer you wait the better your prospects will be because you will have a larger deposit while house prices are falling.

Thanks guys.

Calina sounds like you have really thought out your options. Having not jumped on the band wagon a couple of years ago you’ve given yourself just that - options. Circumstances may not be great at the moment but looking at the bigger picture and longer term you’ve been very wise.

The affordable restrictions were something I was willing to overlook for the supposed saving on the property - especially in a falling market - no clawback which is the major drawback but is not an issue unless profit is made which lets face it would not happen. Rent a room was an option and to rent it out - if totally necessary I’m sure they would accept on a case by case basis if declared and willing to pay the difference of rent received versus mortgage repayment. All else fails and you want out just sell the bloody thing. At the end of the day not really worth the hassle though.

Swiss - while budgeting I worked out that my current outgoings per month, including rent, food, phone, health insurance, house bills and taxi costs (I would save on these with apt closer proximity to town) are 1,080. Was saving 400 pm as well but was dipping into it unnessarily. Including the 400 savings my net salary monthly balance 1,480

Mortgage and new Apt including all bills food, insurance and essentials etc would have been 1,625. Monthly net left 1,175.

Where I am now is not ideal - sharing. At the moment to rent on my own would cost 1,000 at least (impossible to save) and anything I have seen for that would not live in… so will wait and see - hopefully this will steadily decrease

There’s pleanty to be hopeful about rent and save is a good policy, at least as long as prices are falling.

To put it in perspective. I’m renting in an area that I might like to buy in eventially, so I’m watching asking prices very closely. Some of the asking prices that I’ve been watching have droped by about 25K in the 9 months I’ve been watching and renting.

Needless to say I haven’t spend anything like 25K on rent in those 9 months. Indeed in a whole year I wouldn’t be spending anything like 25K.

So, at the same time that you’re saving a few hundred a month into a savings account, you’re really saving that PLUS any drops in prices.

With regard to fears about mortgages, I think this is being over played in an attempt to scare people back into the market, or to convince people that they are no better off when prices fall.

The bottom line is that if you have a good deposit, and little or no other debts, you will be able to get a mortgage. Banks need to lend money, it’s their bread and butter.

The reality is that the longer this impasse lasts the better it is for you. Every month that you add a little to your savings, and a little more is shaved off the price of your eventual house, the better off you are.

Head down, keep saving, avoid debts. It’ll all work out.

-Rd

^^ This man makes a lot of sense.

Up till about this year, I didn’t even think about property prices because they were so high that there was no chance I could or would take the plunge.

A few months ago, spotting the falling prices I thought to myself “aha, now this seems an opportunity for me to pick something up at a bargain price and rent out to make up the mortgage”.

But now, I think that was the wrong way to look at it. Firstly, because market conditions are such that we are still - I believe - a long way from the bottom. If you look through this board and similar threads you’ll see the reasoning behind this. And the more they fall, the more I’ll claw back on top of savings by choosing to wait.

The second reason is just because I may be able to now afford that 2 bedroom appartment closer to Bray than Dublin doesn’t mean I have to buy it for the sake of it. It’s ludicrous to suggest I should pay 10x my salary and be saddled with crippling debt for most of my adult life in order to have a roof over my head. Not when I could rent for significantly less and earn interest on savings. But yet, thats what many people did, and it only seems to be now that people are cottoning on to the fact that is far from an ideal lifestyle.

If something goes up by 400% for no good reason, a 10% price drop does not make it suddenly good value again. That’s what people need to remember.

It has only become slightly less insane.

I agree with Daltonr - we all know it’s a waiting game out there. Sometimes it’s not that easy to be that clinical about it when your quality of life is lessoned in the interim. Not all decisions are purely financial and based on sound financial principles - life would be pretty simple if so. It’s tough waiting indefinitely on something to happen that we all know will but no one can predict how long it will take, so that’s where the conflict came from. I sure hope it doesn’t drag out with 5% annual decreases over the next five years. I think things are so unclear at the moment that to not wait and see would be mad.

Would have been borrowing 5 times my salary. Location 20 mins from town, 10 mins from family home

So I think from reading posts here what we can hopefully expect eventually is to only need to borrow 3.5 times salary ie 157,000 and stumping up at least a 10% deposit

Well on a 30 year mortgage on 225000 you will only be paying 7.5k off the capital balance. So save a little harder and you can congratulate yourself that you are already paying off your mortgage without the risk of owning a house in turbulent times. Your interest payment would be 7.7k pa so see what that bears up against your rent.

This is an interesting point . here is the Amortisation on a mortgage over 30 years.

Amortisation is a steady amount designed to clear the loan after a period ( if interest rates are steady) and at first you pay feck all off the principle but that increases over time. The outcome at the end of each year is nearly the same irrespective of interest rates which may vary as we all know , excepting Country Tom who believes they will always be 'around 4% of course :slight_smile:

The calculator is here .

jeacle.ie/mortgage/ie/

Have a look at how much you owe after 10 years mortgage payments on a 30 year 250k mortgage .

Even after 10 years you only manage to pay €45k TOTAL off a €250k mortgage over 30 years …unless you overpay each month . You are already saving more than that each month !!!

Annual Table Start July 2008 @ 5.75% Mortgage Interest ( no tax relief allowed)

Year > Interest Paid > Capital Paid > Balance Remaining

2008 €7,168.63 €1,584.95 €248,415.05 2009 €14,197.54 €3,309.62 €245,105.43 2010 €14,002.14 €3,505.02 €241,600.41 2011 €13,795.20 €3,711.96 €237,888.45 2012 €13,576.05 €3,931.11 €233,957.34 2013 €13,343.96 €4,163.20 €229,794.14 2014 €13,098.19 €4,408.97 €225,385.17 2015 €12,837.86 €4,669.30 €220,715.87 2016 €12,562.19 €4,944.97 €215,770.90 2017 €12,270.25 €5,236.91 €210,533.99 2018 €11,961.05 €5,546.11 €204,987.88

You do not get the generous first time tax buyers interest relief ( for 7 years) unless you buy of course but I pointed out in another thread that an average first time buyer should buy in the spring to fully mop up their tax relief in year one .

A critical point to remember here as well is that there is a direct corrolation between the availability of credit and price. As credit becomes tighter then price takes a hit. If you have assiduously saved then you are in a better position to take advantage of this than ‘everyone else’. Some boats are more equal than others. :wink:

But what about the rising tide, floating all boats, eh… :laughing: