The ultimate home buying guide

In Ireland’s current housing crisis I consider myself very lucky to have been in a position to buy my home. There are plenty of posts in the financial independence community about whether renting is better than buying or vice versa and there are a lot of criteria that go into deciding which is right for you however I’d like to share my experience and how we managed to reduce our living expenses by buying instead of renting in the hopes that it may help others in their search.

Know your criteria

When we were looking for a house I started by compiling a checklist of all the things I wanted. My list may look different to yours but for interest sake here was mine, maybe my list will have some things you had not considered.

The main criteria was that we wanted the overall cost of owning to be less than our current rent which was low at the time at 950€/month for a 2 bedroom apartment. Even with the rental increase caps being brought in, our rent was continually going up. It started at 890€/month, then to 950€ then by the time we left it was 1,052€ and now the very same apartment is renting for 1,400€/month – That’s a 63% increase in housing costs in just 5 years! Needless to say we wanted a bit more control over our expenses as well as a little bit more freedom to have pets and make things the way we wanted them. We also wanted more stability. We have had two sets of close friends as well as plenty others on local forums, who were kicked out of their homes, as landlords were selling or refurbishing and with the market as it is now, they needed to either pay much higher rents to stay in the area they were in or move out of town. Even our friends that moved out of town were being kicked out of the home they moved to as their new landlord had also decided to sell now that markets were more favourable. Being at the mercy of a landlord was a bit scary especially since we were trying to start a family at the time. So regardless of all the other rent vs buy debates, these were the main reasons which swayed our decision to buy.

And now for the remaining criteria:

Non-negotiable:

• lower cost than paying rent
  • as mentioned above, by the time we moved we were paying 1,052€/month for rent and when we bought the costs of owning were coming in at 914€/month including mortgage (after 20% downpayment), life insurance, home insurance, refuse, property tax and increased car insurance due to area. Now when you include the added maintenance and upgrades we’ve done owning has been more expensive but most of those are optional, non-recurring and hopefully adding to our resale value
• house position lets in sunlight
  • the main living area and balcony in our apartment was north facing and it was always dark even on a sunny day, this was a strange one for me as I’d never experienced how the lack of sunlight can impact your mood. My first winter in Ireland was very tough, I would come home from work and cry even though nothing was wrong except for my lack of vitamin D! Any time I would find a house I liked I would check its position on google maps. Our home now gets lots of light in the sitting room and master bedroom in the morning and sun all afternoon in the kitchen, back garden and other bedrooms which is so so nice to come home to after work on a sunny day.
• close enough to one of our works and/or city not to need 2 cars OR the house price would be lower to cover the cost difference
  • we calculated that a 2nd car would cost us 200€ more per month plus another 150€/month for tolls for 2 cars if we lived beyond the toll booths and that’s without a car payment so if we found a house further away the mortgage would need to be 350€ less per month to justify owning a 2nd car. In our case that meant 175,000€ with a 20% downpayment would be the max to buy outside of town
• commute less than 30 minutes for both of us
  • for us, in addition to lowering costs we didn’t want to add more time to our days, after all time is the most important resource, we were renting in the city and so our commutes were small, we didn’t want to buy a house with a lower cost only to add time (and cost as mentioned above) to our commutes so distance from both of our work places was also a big factor. If I found a house I really liked I would google map the commute for both of us (including updating the setting to prime time traffic and public transport to help assess if it was feasible). In Cork for example, even though there are centrally located homes in well serviced suburbs, I know that traffic in those areas can get really congested and so using the google map feature that allows you to select journey time helped to highlight areas that get pretty congested. This helped rule out a lot of homes. I’m lucky enough to have flexible work hours so can go in earlier or later to avoid traffic times but now that we have a kid and will be facing drop off and pick ups we may not have that luxury as much anymore. That said, my husband will be within walking distance of both home and the creche so between the two of us we should be able to work something out with the one car.
• high speed internet available
  • we are a gaming family and a large part of how we keep entertainment costs down is having access to high speed internet to download games and game updates so living out in the country without internet, even if cheaper was not worth it for us
• parking
  • I didn’t want to have to struggle to find a parking spot on the street every day so availability of parking was high enough on the list
• 2 bedroom min but not too big
  • the more square footage the higher the maintenance cost both in money (to heat and service) and time (to clean). We used to live in a 1,700 sq ft home in Canada and it took nearly one full day each weekend to clean and maintain it, we then moved to a 625 sq ft apartment which only took us 2 hours to clean. A study in 2012 showed that while house sizes in the US have nearly tripled from 1950 to 2010, the usage of those homes when tracked using heat mapping was only 40% of the square footage. I try very hard to be minimalist and not buy stuff for the sake of filling rooms which allows us to live in a smaller space
• space for washer and dryer
  • we North Americans love our tumble dryers. Though I line dry as much as possible I still like the option to throw things in the dryer if I need it quickly and to have soft fluffy towels, sheets socks and jeans. We ended up putting in a gas dryer so it was a little more energy efficient than electric.
• energy efficient or able to upgrade cheaply enough to bring up efficiency
  • we managed to find a house with a BER3 rating with gas heating, we have since upgraded our boiler which should bring it to BER2 rating
  • for the non-Irish readers a BER rating is an energy efficiency rating all homes must list with their sale to give buyers an indication of heating costs, it ranges from A1 (<25 kwh/sq. m/year) to G (>450 kwh/sq. m/year)
  • our 2 bedroom apartment was E2 rated and cost us 1,371€ in electricity for the year (electric heating), our 3 bedroom house with much larger square footage cost us 50€ more for the same time frame – I’m a cold creature and keep the house at 20 degrees in the winter so my costs will likely be higher than others

Negotiable:

• south facing private back garden
  • we did find a house with a private garden but it is west facing instead of south, still though it gets a lot of sunlight from early afternoon to sundown which is right when we get home from work so was a happy compromise
• space for bins outside
  • I didn’t want to have to drag refuse bins through the house
• nice area
  • this is one we compromised on, in order to meet all the other criteria, especially the cost one, we ended up buying in a less desirable area
• scope to modernise and increase value
  • I studied interior design in college and so I like to put my stamp on whatever house I’m living in even if it’s just cosmetic. The house we ended up with was in great condition and would have been fine with a lick of paint but we updated a few things to be more our taste. This is somewhat linked to the nice area criteria as even if we pumped loads of money into modernising the house, the area would determine a cap on how much we would get back for those updates once we sell. We knew that once we spent beyond a certain value that those updates were purely for our enjoyment and not adding further value to the sale price so we kept this in mind when choosing finishes in our upgrades ie: laminate counters instead of granite or engineered hardwood instead of solid hardwood etc
• view
  • this was another one we compromised on, we bought in an estate but at least has a large green area in the centre and we are at the top of a hill so as soon as you drive onto the road you get sweeping views of the cork countryside
• not cookie cutter
  • again another one we compromised on, we wanted something that was a bit different (don’t we all) but ended up finding a house that met most of the other criteria so we said that even though the house was almost the same layout as most other new houses we would put our own stamp on it through other means

Keeping these criteria firmly in mind and not letting emotion rule our home search ultimately helped us make our final decision which I am really pleased with.

Think outside the housing box

For us, as the overriding factor was to lower housing costs, given the current housing prices, I considered many housing options which were outside your traditional home. I looked at and crunched numbers on all kinds of options, including:

• Traditional homes in the city
• Traditional homes outside the city
• House boats
• Tiny homes
• Buying a site and building a traditional home
• Buying a site and building a pre-fab home
• Buying a fixer upper and renovating
• Mobile homes

There may have been more but ultimately even after being open to all those options, we still managed to find a traditional home that ticked most of our boxes.

Weighing the costs

If cost is one of your driving factors the you need to look at the big picture not just the mortgage cost. Below is a list of things to consider in terms of the overall cost compared to your current living costs:

• mortgage
• life/mortgage protection insurance
• additional costs for car insurance depending on area (our car insurance went up 120€/year due to the area we moved to)
• home insurance
• property tax
• additional transport costs depending on distance from work/local amenities including:
  • petrol/diesel
  • public transport
  • taxi fares
  • parking
  • tolls
  • cost of a second car if needed including:
    • petrol/diesel
    • motor tax
    • NCT
    • car repairs/servicing/maintenance
    • car payment if not owned outright
• energy costs (as mentioned above – what is the BER rating/cost to heat the square footage you are buying)
• refuse (usually included in rent if you are comparing renting vs buying)
• TV license (I know a lot of people don’t pay this while renting and may be an added cost once you own)
• what furniture do you need to buy (most rentals in Ireland come furnished so unlike Canada where you slowly build up your furniture while renting, people in Ireland typically need to fully furnish a home when they buy with the exception of appliances if not a new build)
• home upgrades (do you want to change floors, paint walls, upgrade appliances etc)
• regular house maintenance including things:
  • chimney sweep
  • boiler service
  • clearing gutters
  • cleaning windows
  • grounds maintenance (grass/tree/hedge cutting)
  • general house cleaning (I know lots of people with kids have opted for paying for house keeping in exchange for more time with their family on the weekends)
• bigger house maintenance:
  • when is the boiler due for replacement
  • when is the roof due to be updated
  • do the windows need updating
  • when do appliances need replacing/repairs
  • any other repairs

Some of the above are optional and can wait until you have more money (upgrades/updates) and some you can do yourself (grass cutting, house keeping etc), but keeping them in mind even if you have to do them yourself might sway your decision on a bigger lawn/bigger house etc.

Rent vs Buy Costs

So how do these stack up against average rental and house prices in Ireland at the moment? Looking at the latest daft rental and housing reports for 2019 the average national monthly rent is 1,391€ and the average national house price is 257,114€. Below is a breakdown of estimated home ownership costs assuming 10% downpayment, no additional costs for energy, transport or major updates and using the standard 1% rule for maintenance costs (1% of the value of the home).

item	monthly	annual
mortgage	900	10,800
life insurance	16	192
home insurance	30	360
property tax	41	492
refuse	25	300
maintenance (1%)	214	2,571
total	1,226	14,715

As you can see the total cost of owning a house worth 257,114€ with a 10% downpayment is 165€/month cheaper than renting (or 1,980€/year). You can do a similar exercise when comparing your own costs keeping in mind that any unplanned maintenance or once off upgrades will totally cancel out those savings. And trust me, once you own a house it’s really hard to stop updating it, something you wouldn’t do if you were renting.

Keeping within your limits

While we were building up a deposit for our home I had a spreadsheet that calculated how much we could save every month and what that meant in terms what price of house we could afford including purchase costs. I did my best to only look at houses we could afford at that point in time. Here is a chart as a guide to show you how much savings you need to buy a house at different price points.

At a high level based on the assumptions in the table below:

• for every 2,500€ you save you can afford 20,850€ more in house price
• for every 5,000€ you save you can afford 41,700€ more in house price
• for every 10,000€ saved you can afford 83,400€ more in house price

Table columns explained:

Savings is based on:

• 10% a downpayment (available to first time buyers) and
• purchase costs of 1% stamp duty, 1% legal fees, 150€ valuation and 450€ engineer report

House value is the amount your savings can purchase including purchase costs and 10% downpayment

Mortgage amount is based on 10% downpayment and a 30 year mortgage (if you will be in a position to invest alongside your mortgage payments then as you may have seen in this post, it can make sense to keep your mortgage payments as low as possible, worth noting is that some banks will only lend you up to the age of 65 so if either you or your buying partner are 36 or over you may only be able to get a 29 year mortgage or less which will increase your monthly payments.

Property tax is based on the 2014 base rate per house price.

Maintenance is based on 1% of the house price divided by 12 which is a general guide on how much money is needed to maintain a house at that worth

The new monthly cost includes the mortgage amount, property tax, maintenance (as listed) as well as life and home insurance and refuse estimated at 16€/30€/25€/month respectively keeping in mind this can obviously differ based on your own criteria.

savings	house value	mortgage amount	property tax	maintenance	total new monthly cost
€10,800	€85,000	€ 295	€ 8	€ 71	€ 444
€15,000	€120,000	€ 415	€ 19	€ 100	€ 605
€20,040	€162,000	€ 561	€ 26	€ 135	€ 793
€30,600	€250,000	€ 865	€ 41	€ 208	€ 1,186
€40,800	€335,000	€ 1,160	€ 49	€ 279	€ 1,559
€50,400	€415,000	€ 1,437	€ 64	€ 346	€ 1,918
€60,600	€500,000	€ 1,732	€ 79	€ 417	€ 2,298
€70,080	€579,000	€ 2,005	€ 86	€ 483	€ 2,645

Obviously if you need any immediate renovations, updates, upgrades, repairs or furniture then you will need to add that to your savings.

Something else I added to my own table was a column beside house price and reduced the house price by 15% to know what list price I should be searching for online based on the fact that at the time houses were typically going for 15% above list/asking price. For example: I didn’t want to search for houses listed at 250,000€ if houses listed at that typically were going for 287,500€, in that case I would only search for houses listed at 212,500€ so that I wasn’t tempted to go over what I currently had saved.

Negotiations

It can be hard not getting into a bidding war when you’ve been searching for a home for a long time but if keeping costs down is your main concern then this part is the most important to take a hard line on. In our case we were up against other bidders, one was a cash buyer, which had us losing hope but that buyer’s cash was coming from another country and could have been tied up and delayed. We went in with a strong enough offer along with our mortgage approval letter from the bank as proof of funds, this ultimately swayed the sellers to go with us as they were hoping or a quick sale. There were also other offers on the table, pushing our price up but we asked if they had provided proof of funding, and a lot of the time they hadn’t – which was basically inflating our price even though they possibly hadn’t even gotten mortgage approval yet. By asking for this proof and providing our own I think we may have managed to keep the cost below what it would have gone to otherwise. Also keep an eye on the property price register to get a feel for what homes are going for in that particular area. This is what worked for us but there may be other tactics that work better so don’t take my account as gospel. Providing the proof of funding from the bank also shows the maximum you are approved for so if you are bidding much below that the auctioneer may take that to the seller and they could try to get more from you due to that so that tactic may only work well if you are bidding close to the maximum you are approved for (which would indicate to them that they will lose you as a buyer if they try to raise the price more).

Be prepared for delays

I can’t even remember what all of our delays were but for multiple reasons we went sale agreed in July and only got the keys after much pushing just before Christmas. Many other of my friends have experienced the same. This was a shock to my system as in Canada it only took a matter of weeks! In our case I think the main delay was that there was a chain of purchases taking place ie: we were buying a house from someone who was buying a house from someone who was buying a house etc and each seller needed their funds from their house sale to purchase their new house and any delays anywhere along that chain pushed our sale back. Things that can help are to get a good mortgage broker and a good solicitor who will help to push things through as quickly as possible on your side. Shoot me a message if you’d like to know who I used. I’d gladly recommend them.

Searching for a mortgage

I use this website for comparing mortgage rates, it sorts the results in order of cheapest monthly cost to most expensive however do keep note of the APRC rate as often the bolded rate is an introductory rate for the first 2 years and then the remaining 28 are charged at a higher rate, or there are hidden admin fees which drive that actual rate higher. For example: there is a rate of 2.3% listed with KBC but when you click on see details it shows 2.3% for 2 years and 3.3% for 28 years as well as the lending criteria that you need to have a current account with KBC.

There is nothing stopping you from taking the introductory rate if you think you will be in a position to switch in 2 years time but while this can be done it requires you to basically apply for a mortgage all over again along with solicitor costs etc so if there is anything in your circumstances that changes and you are no longer in a position to qualify for a mortgage you could be stuck paying the higher rate. For example: This has happened to me in both my Irish and Canadian mortgages. In the Canadian mortgage we have looked at switching but since we’ve been in Ireland we’d need to fly to Canada to sign documentation in person order to get the better broker rates so when you add in the cost of flights home for both of us it outweighed the savings we would be making. In Ireland, I went on extended mat leave and so we are down to one income and no longer in a position to apply for another mortgage even though we had more than a years worth of living expenses in cash our broker advised we would be better holding off until I was back to work. Not being able to switch has probably cost us about 1,000€/year on both properties even after legal and discharge fees (some of which would be covered by the bank you move to). Anyway all that to say, you may have all the intentions in the world to switch after the 2 years but life happens and you may not be in a position to so take the APRC into account!

And that’s a wrap on all the nuggets I can think of from our home buying experience here in Ireland. I hope that was useful and as always please let me know if I’ve missed anything in the comments below.