Feb 272012
 

Husband and I recently went house hunting, after 2 months of search we found the perfect house and are now in the stage between sale is agreed and the house is ours. The post will talk about how to buy as a first-time-buyer, if you are looking for an investment property you might it less helpful. For husband and me is to find something that will be our home for the next 20 years.

Before you start looking for a place make sure that you know what you want, what your budget is and what you don’t want. Jim and I were looking initially at an area we both didn’t know. Later it turned out it was one of the more dodgy areas where we wouldn’t want to live at all. However, it helped us to get started and do all the necessary steps such as mortgage pre-approval, finding a solicitor etc.

Also, as we were looking for our future home, we weren’t willing to take any compromise. If the house it is too small, it’s too small, it won’t grow over time. If the backyard is overseen, it won’t change. If there is a busy road, it won’t go away. If you don’t like it don’t go for the house. If you step into a house and you instantly like it, consider it to be the one. But be careful, nice decoration and a freshly upgraded house might blind you regarding what you want and need. All houses we liked we saw 3 or 4 times at different times during the day.

There were a couple of useful web pages that I used for hunting:

  • myhome.ie is the property website with the most for sale properties. Pretty good search and subscription facilities.
  • daft.ie is the most famous site for rentals, but also good for sales searches. It’s a pity that the API is not available for private users otherwise searching and filtering would have been much easier to me.
  • adverts.ie I subscribed the RSS feeds. Search options aren’t as good, agents usually don’t answer.
  • property.ie Seems to be a clone of daft.ie, I have never seen any house that was only advertised there. 
  • Also, it makes sense to work directly with property agents. Just check any of the house search engines for agents that come up frequently in the search results and contact them directly. Not all houses are put into the portals.

To verify location and maybe gather initial information about the house I had a look at

  • irishpropertywatch.ie gives a good indication how long the house is on the market and what history it had. If you see a house that is available for half a year already and went through 3 price drops you will be in a different position when negotiating than you were if the house is fresh on the market.
  • As I didn’t grow up in Dublin, I didn’t know all the stereotypes for Dublin areas, what good and what bad areas are. I find it very helpful to just walk around during the day, evening and weekend through the desired area. If you like what you see, go for it. If you doubt the social status of the people around, or if you get another bad impression, don’t go for it. If you do your hunt like me – most of the time remotely, then go for thepropertyin.ie, there you’ll find comments on most of the houses and areas. Of course – at the end it doesn’t matter as much, each area has good and bad spots, good and bad people, and the most important people – the direct neighbors – are never reviewed. So be careful not to be too shallow. Husband and I usually had a mutual understand of like/don’t like as soon as we were in a particular area.

Budget for house purchase

  • Know your limits. Don’t go over them. Never. We happened to be in 2 bidding wars where we dropped out once we reached our budget, it wasn’t easy but sensible to do. At the end we got one of the houses anyway because the other bidder pulled back. 
  • If you consider a mortgage, go to your bank and ask what the maximum amount is that you would get. Smile gently, then divide this number by 2 and take this as absolute maximum. Our bank would give us based on our current salaries maximum term mortgage maxing out our incomes as payback. That doesn’t make sense, it’s not realistic. Go for half of it, at most. You don’t want to pay off your mortgage only – all your life.
  • Be aware that the house price isn’t all you are going to pay, you will pay stamp duty (2%), solicitor fees (ca. 0.6%), valuation and survey (ca 500 Euro), modernization cost, maybe extensions and furniture/interior. If you are not sure what to expect, consult an architect/builder/forum/furniture shops/friend who recently upgraded his house. This will give you a feeling for the numbers to think of.
  • We set our total budget based on max house price + max upgrade price. That means at the end we bid on 3 houses in different states, one that had no modernization required, our bid was higher than for the other ones that required lots of work. Furniture is a separate budget.
  • Don’t believe any property agent. Their task is to sell. Don’t let them push you to commitments you are not willing to take. Be honest and accept when your and the owner’s expectations are different. If the agent lied, he’ll be back.

Budget for monthly expenses.

  • List 1: Current expenses: How much can you afford to spend in addition (mortgage payback) and to save?
  • List 2: Overlapping expenses: Our house will require 2-4 months of upgrade work, during that time we will pay rent, mortgage and need to save up for builders. Be aware that your mortgage comes with additional requirements such as
    home insurance and life insurance to cover your mortgage. Plan this into
    your budgets too.
  • List 3: Once our rent contract stopped we won’t have double expenses anymore, also builders won’t be required to be paid off. However, we need to save some money for house maintenance, some for postponed upgrades and some to do lump sum payments against the mortgage.

Costs of a mortgage:

  • Use a mortgage calculator to compare options. I found a helpful one on Google spreadsheet templates. I find it’s better to play with than digging through 15 print outs of the bank that are solely designed for the purpose to confuse you.
  • We decided finally what kind of interest rate we wanted to go for, how much of the mortgage we wanted to finance and what term we’d use. We decided to go for maximum term to give us flexibility and reduce the amount of monthly payment. This will in the first place cause a higher interest; however, we plan on paying in lump sums to reduce the mortgage and the paid interest significantly within the first 5 years. And if anything bad happens… we will still be able to pay off the rates.
  • If you need to do modernization/upgrade work on your house: Compare. Ask multiple architects, builders, solicitors, surveyors etc for fees. Go for the good ones, but check their rates.

Insurances

  • I am very pragmatic when it comes to insurances. I don’t like them, I think insurance sales persons are send from hell to threaten and scare people with risks that are rather unlikely. I got ask to get an insurance for payment protection and income protection to ensure that even if we are sick or without income that we can afford the mortgage. That sounds great in the first place, however, it will add up to additional 100 Euro or more per month that are paid for – at the end – most likely nothing.
  • I think careful budgeting and a reasonable monthly rate is far more recommendable than going for additional insurances. Setting a low mortgage rate to pay back over a long term is more sensible. To reduce it, pay lump sums whenever you can afford it.
  • Don’t compare price only. If you get a home insurance make sure it
    covers the entire property back to front, and not only the house itself.
    You don’t want to find yourself in the situation that your shed and
    garage got broken in and your insurance doesn’t cover for them.
  • Invest separately into other necessary precaution for yourself. Think about pension and how future you would like to spend the rest of your life.

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