In preparation for a call with PJ Coogan from Cork's 96FM I started putting together some notes. As I have normally let these moments slip into the ether I will record this as a blog post for any listeners to read the notes back, and hopefully it can be a help to others.
Before I start; I work with Individuals. This will have a lot of generalisations because it's not for specific person.
We're in a weird time because with COVID, housing supply and everything else. Some people have been hit super hard, and others are thriving.
If anything here works for you, take it. If it doesn't work for you (or enrages you), it's just not for you.
1. Soft Questions - figure out your long-term needs and plans
Do you want to put down roots?
More people and their jobs are mobile and international now. This means we have to question a lot of assumptions.
There are more immigrants and people in relationships with people from other countries living here than ever. If you or your partner's family is in another country; ask yourself will you be in Ireland in 5 years? Ask yourself: "What will my life look like in 5-10 years?"
If you are in a stable job, having kids, or want to live in an area near friends/family/city/town/whatever - buying a home could be a great idea.
If you are in more of an uncertain situation, unsure where you may be working or living in the near future - maybe buying a home is a bad idea right now.
The Financial Crisis showed us house hopping doesn't often work. The “Property Ladder” is a myth for most. Buying a home puts down roots. Ask yourself if this is what you want and where do you want those roots to be.
Plan to buy a "forever home". If you can upgrade later and want to, great.
You don't want to buy a 1-bed home just before having kids and not being able to move.
Ask yourself as many questions as you can think of. What kind of property do you want? Where? Timeline? Cost ranges?
Answering the soft questions can stop people buying at the wrong time, in the wrong place, and direct you to a better long-term solution.
2. Know the Lending Rules
It is not magic. I constantly talk to people who misunderstand the rules or don't know them.
i) Deposit - 10% FTB, 20% Switcher, 30% investor.
ii) Income rules - 3.5X, 4X is the exception. Don't plan for the exception.
iii) Affordability - Monthly savings should be more than mortgage payment - this can include rent.
Do the math and know what you can afford.
3. Good Financial Health - get your money in order
i) Set up an automatic savings each month. This should be at least rent plus any difference in mortgage cost. If you’re not there now, try chart a path to this.
ii) If above is not met, try cut expenses elsewhere.
iii) Increase income/change job if timeline allows it. The jobs market is currently hot and employers are having to pay up. If you're not getting it where you're at, look at a job move. The public sector is secure here and knows when and what they will be getting, but private sector employees often need to agitate for this to shake things up.
The better your money situation, the easier and quicker you'll get a home.
iv) If you have other loans, try to pay them down faster.
v) Financial hygiene. There are a million articles covering this stuff so here are the basics. Get all pay into a bank account, no silly names on bank transfers to friends, lose the overdraft charges/keep a savings buffer, make a specific mortgage savings account and put a regular amount in, don't withdraw from it. Banks look at the last 6 months as a minimum so clean it up.
4. Get help/accountability
Sit down with a pen and paper and figure out your current situation. Do the maths, tidy up your finances. The first step to accountability is figuring out your current situation. You can do this yourself or with your significant other if in a relationship.
Talk to a family member or friend good with money. Talk to the bank or mortgage advisor.
Talk to us.
You don't know what you don't know. I had a client go from a 2-year timeline to a few months when we worked in the HTB scheme into the math. He didn't know what he didn't know.
Working with someone with expertise can ensure you don't miss out on any state supports you are able to use (eg. Local Authority Loan/Rebuilding Ireland, Help to Buy scheme).
There are also additional costs which often catch people by surprise. Add everything up. (eg. Solicitor, valuation, property inspections, stamp duty, insurances, etc)
You can use a professional, a friend who has recently gone through the process, or even just monthly reminder on your phone. Get organised and put yourself in the right position.
A quick message of hope - it may be hard, but it is doable.
There is a lot of bad news around housing, but there are many people happily moving into new homes all the time.
Get yourself organised and get ready. Good luck on your home journey!
You can listen to the call with PJ here.
Financial literacy leads to reduced stress, better decision making and the ability to plan to meet your personal goals.
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Call: 00353 (0)871225761