Thoughts on Max Spend

Okay thoughts on how much of a max/best level to spend based on the following;

€40k saved, so say €35k deposit.

Approx €83k joint income - split 60/40 (works out roughly €5k net per month). Both incomes are secure as can be at this stage. Mine could increase by up to €10k in next few years but i doubt much more.

No kids at present but hoping for 2 over next couple of years. She is 100% set in staying in her job - she loves it. Both families are close and we’d probably get a minder for a day or two a week (she only works 3 long days anyway).

I’d prefer to spend about €240k on a house (3 bed semi on outskirts of dublin) - about 3 times joint income and repayments work out at about 25% of monthly income (based on 25 years) at present. I’m aware this could rise to 30% (or even 35%) in few years. Worth getting a 30 year mortgage for more flexibility?

She thinks we should reach to €300k (lovely 4 bed we’ve spotted we estimate we might just get for this). Her arguments are it would more likely be our only ever house - more space, bigger garden, extra room if we have a 3 kids, slightly better part of the town.

Obviously this would work out at 3.6 times joint income. Repayments over 25 years would be 28% of income, 26.3% over 30yrs and 24% over 35yrs. Both approx 30 so for me 30 yrs is the max term i’d like.

Am i being too prudent here? Her argument is that we are paying rent of €1.1k pm and saving €1k or more per month also. We’ve no kids yet though either.

We’d both be happy in the 3 bed, no issues we aren’t fancy about things. The issue would be a small box room though and not a massive garden - though there is a green out front. The other house would be more a dream house. But my thoughts are it might get tight money wise (interest rate rises). also we’d likely be paying it off longer - i’d guess we’d be more likely to go 30 years than 25 for that house. We’re both professionals and even if we lost our current jobs should get others but you just never know. 40-45% of one income going on a mortgage would be a killer. It’s a tough decision.

Appreciate any thoughts? how prudent to be? Or listen to the wife?

The wife will no doubt win this argument anyway best to give in now :smiley:

Personally i’d only want a max of a 25 year mortgage, part from that can’t offer too much advice.

A most wise statement.

Pay the extra money. But let it be her decision.

Am I the only one here who believes that the longest mortgage term which a bank could offer you is the best option?

The beauty is that you can pay it off whenever it suits you plus I am a believer that a euro today will be worthier than a euro in 30 years,

I agree, if you have the discipline to pay it off early - many don’t. Although i’ve heard of issues with the bank when you try revert to the normal repayment.

My point was if i was 30 i’d want to be aiming to be mortgage clear at 55 or earlier. The op seems to be suggesting they’d take 30 years to give more cashflow for other stuff not to overpay.

If you are making about 5k a month, you want to hold onto only 1 months salary equivalent? I’m also a professional at a similar salary range to you but got let go through no fault of my own. Yes there are jobs in my field which I’m very thankful for, but it still will take me the guts of 3 months to come to a place where I will secure a job I am semi happy with.

I’d feel more comfortable taking a longer mortgage and keeping back some of my savings just for piece of mind. If you have a certain percentage of your mortgage as variable, you can always pay back that % with your savings at a later date if rates rise and your savings increase.

I take your point but that’s our joint income and even on only one of our incomes we’d get by. It would get tight though.

Is it that straightforward for current variable rate mortgages with no penalties if you clear it early?

So does the bank just calculate the interest on the outstanding loan value on a monthly basis with the minimum payment being that required to meet the mortgage end date based on the current interest rate?

Personally, I would go for the bigger house, with a 30 year term. Overpay now while you can afford it and drop your payments back if cash becomes tight/interest rates go up.

From the sound of your plans, you’ll outgrow the first house fairly quickly and want to move again in a couple of years.

Thanks i think that comes to the hub of the issue - we are both pretty set on 2 kids but she might want a third (i doubt i will tbh). She says having extra space just in case (accidents happen/ twins etc) is vital. I’d be fine in a 3 bed though. Attic can always be converted too - tho often those rooms are messy and can be cold. My only issue would be the small box room as a third bedroom. Ideally we want to buy one house and one house only regardless.

I’d go with the more expensive house. More space and a better area are things you won’t regret later, especially if children are on the horizon. It might mean some diligent budgeting for the next few years but eventually that will ease. I would have no concerns about a 30 year mortgage versus 25 years. You always have the option to overpay and shorten the term if you have the cash available at some time in the future.

The problem I see is with the savings. I’d be scared to leave myself with just one month’s salary in cash, especially as you will have a boatload of expenses to deal with around moving time. I would save like a maniac to build that up a bit and like the other poster said aim for a minimum 3-6 months living expenses cash cushion after the purchase. Best of luck.

Off topic slightly, but I just wanted to commend you on your rate of saving.

Me arse. Sure Landlord’s Polish cleaner saved 70 grand in a couple of years

Thanks your right on not regretting it i guess.

On the savings bit, I guess you are also right we don’t have loads of furniture but also we arent the types to fit it our for €20k on the credit card. We’ll do what the parents did and buy as we go along - once we’ve a tv, sofa and a bed we’ll be fine.

We’ve realistically another 6 months before we buy anyway.

Thanks. It still could be better though - i’d like to get it up to 1.5k per month. We’d have more saved but for getting married and holidays.

I’d ideally like a €40k deposit and €10k cash left over.

You know that you will buy the more expensive house and then have the three kids.

That’s how they operate :nin

Don’t remind me. Slightly more difficult for us mere mortals.

Back on topic. I’d probably end up going with the more expensive larger house too if you’re only going to end up having to move again in a couple of years due to space constraints. Why pay the stamp duty twice. Not to mention fees and charges.

I’d go for as short a term as possible as we might not be as disciplined as some when it comes to overpaying (That’s our case) . But you both seem to be quite prudent so, getting a 30 year mortgage, I don’t see why you can’t reduce the term significantly through overpayments.

Does anyone think that 26.5% of income for the 30 years is too much? I’m just conscious of it being 45% or so if one of us were to lose our jobs.

Even if we kept both jobs - if rates rose it could be 30%+? at the 33% level i’d worry.

But one of you will not be working for a period of time (maternity leave) in the near future. So your income will be tested sooner rather than later.

Have you taken property tax and water charges into account? Have you stressed the mortgage by at least 2%?

If I were you I would sit down and be realistic. If you take out a mortgage of X at Y % for 5 years, then I think it is safe to assume that you will be paying higher interest then.

If you and your wife want two children then I think it’s safe to assume that for two years your income will suffer.
Add to that the cost of kids.

I would look 5 years ahead, not 30 because we don’t do 30 year mortgages.