My Home Ireland

Posted by myhome on October 4th, 2007 in Buying

There is no  simple formula that will answer for everyone when you  should buy a house. You have to consider  variables, such as your income and expenses, the mortgage you can get, your attitude to risk and your ability to handle stress.

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1. Can you afford it?
It’s a simple question, but one which is sometimes overlooked by many firsttime buyers. Just because a house  is a good investment, it doesn’t mean you should buy now and at all costs. Assess your income and expenses to see what monthly mortgage payments you could afford without too much stress.
Many brokers and mortgage lenders  now talk about using your ‘future expected earnings’ as a measure, as they believe that a relatively short period of tight finances is manageable for most people.
 You have to ask yourself how certain you are of increased earnings, how soon the increase will happen and if you can handle it were things to go wrong. Most importantly, make sure your budget is not too tight in the short-term.

2. Do you have a deposit?

You can get better mortgage deals if you have a sizeable deposit, but you can still get 100% mortgages . A buyer with an average-sized mortgage and a 5% deposit might pay roughly €2,500 less over three years than a buyer  with no deposit. However, if you spend 3 years saving a deposit you may find that the property has gone up so much in value that you pay even more anyway.The answer for many people is to not try to predict the market. Keep an eye on your finances and house prices, and buy when you can, deposit or no.

3. Can you handle an increase in interest rates?

You need to be able to handle interest rate increases. Even if you’re after a fixed-rate mortgage, if it’s just fixed for a couple of years you may then find that interest rates have risen by, say, 1%. Could you handle an extra €100 or €200 per month?

The main thing to remember is that a house is firstly a home to live in - not just an investment . Past data shows that property is a good long-term investment and buying when you are younger will probably save you more money in the long run. However, you have a life to lead in the meantime, which should be as stress-free as possible. It’s all about balance. If you can’t afford the money or stress, then don’t buy, but keep saving and keep looking for bargain properties.