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Can I afford to buy? |
What is the Affordability Index? |
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The Affordability Index, which is published quarterly, tracks levels of affordability for first time buyers and allows buyers and lenders to monitor the level of debt that first time home buyers across the country are taking on.
Housing affordability is a measure of the proportion of net income required to meet net mortgage repayments for first-time buyers on average earnings. The EBS/DKM Affordability Index takes into account changes in mortgage rates, changes in the level of mortgage interest relief, and is based on average earnings and average new house prices for Dublin and nationwide.
The latest EBS/DKM Affordability Index shows that the current first time buyer working couple is spending 22.6% of their net income on mortgage repayments. |
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| Case Study - Married Couple |
Below is a sample of a married couple's mortgage costs, mortgage interest relief and monthly mortgage repayments.
Married Couple –
Dual Income |
Ronan and Ciara
Married Couple in 2008 |
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| Job and Salary |
Ronan works as a Higher Executive Officer in the Civil Service and is on point 1 of the salary scale earning: €46,646 per annum
Ciara is a teacher and is on point 5 of the basic salary scale, earning: €36,040 per annum
Combined Gross Income: €82,686
Combined Disposable Income: €66,540 |
| House Prices |
Average House Price €249,359 |
Mortgage Costs
92% loan to value over 30 years at comparable Standard Variable Rate from High Street Lender
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€229,410 @ 5.35%
Cost per month €1,280.11
Interest per annum €12,617 |
| Mortgage Interest Relief |
MIR up to €20,000 for married couple in 2008
€12,617 interest per annum
= maximum MIR of €2,521 per annum |
| Net Monthly Repayments |
€1,070.02 per month |
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| Case Study - Single Person |
Below is a sample of a single person's mortgage costs and mortgage interest relief and monthly mortgage repayments.
Single Person –
Single Income |
Gemma
Single Person in 2008 |
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| Job and Salary |
Gemma works as a Senior Radiographer in a hospital. She is on point 1 of the salary scale earning €44,574 per annum
Gross Income: €44,574
Net Disposable Income after tax: €34,983 |
| House Prices |
Average House Price
€249,359 |
Mortgage Costs
92% loan to value over 35 years at comparable Standard Variable Rate from High Street Lender
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€229,410 @ 5.35%
Cost per month €1,208.99
Interest per annum €12,617 |
| Mortgage Interest Relief |
MIR up to €10,000 for a single person in 2008
€12,617 interest per annum
= maximum MIR of €2,000 per annum |
| Net Monthly Repayments |
€1,042.32 per month |
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| Is it cheaper to rent or buy? |
The following are recent examples analysed in the national media towards the end of 2007.
Daft.ie, the property website, noted at the end of 2007 that “While loan repayments remain higher than rents, on average, the gap has become quite narrow. Indeed, in some areas like west Dublin, where yields are highest and growing most strongly, this gap has been eliminated”.
More at www.daft.ie
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| Rent v Buy Case Study 1 |
| Property |
Two-bedroom apartment with around 74sq m (800sq ft) of living space in West Dublin, Co Dublin. |
| Price |
from €320,000 |
| Rent |
West Dublin has seen strong rents in the last year and with the improving transport links have pushed them up even higher. Expect a monthly rent of €1,250-€1,350. |
Mortgage repayments |
Buying the apartment as a first-time buyer and borrowing 92 per cent would mean a mortgage of €294,400. On a rate of 4.99 per cent over 35 years this would equate to a monthly mortgage repayment of €1,483.76 |
| Interest relief |
Can be up to €266 per month for a married couple or €133 as a single person, could bring this figure down to €1,217 |
| Conclusion |
This property is potentially cheaper to buy rather than rent |
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| Rent v Buy Case Study 2 |
| Property |
Two-bedroom duplex in new scheme Midleton, Co Cork. |
| Price |
from €295,000 |
| Rent |
High rents are being achieved at this attractive waterside scheme. Rents are around €1,050 |
Mortgage repayments |
Buying the duplex as a first-time buyer and borrowing 92 per cent would mean a mortgage of €271,400. Borrowing on a rate of 4.99 per cent over 35 years would equate to a monthly mortgage of €1,367.85. |
| Interest relief |
Up to €266 per month for a married couple or €133 for a single person, could take the cost down to as little as €1,101.85 per month |
| Conclusion |
Only €52 more than the rent |
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| Rent v Buy Case Study 3 |
| Property |
Two-bedroom apartments in newly-constructed scheme in Finglas, Dublin 11 |
| Price |
from €330,000 |
| Rent |
Although new owners are just about to move in, investors who have purchased at the scheme are expecting a monthly rent of around €1,300 |
Mortgage repayments |
A first-time buyer borrowing 92 per cent would get a mortgage of €303,600. Borrowing on a rate of 4.99 per cent over 35 years would result in monthly repayments of €1,530.14. |
| Interest relief |
Up to €266 a month for a married couple or €133 for a single person would take the cost down to as little as €1,264.14 per month |
| Conclusion |
This property is potentially cheaper to buy rather than rent |
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| Rent v Buy Case Study 4 |
| Property |
Two-bedroom apartments measuring 70-79sq m (750-850sq ft) in Dublin 1. |
| Price |
from €450,000 |
| Rent |
Rents in the fast-developing docklands area are extremely strong. Expected rental income in the region of €1,800-€2,000 in this new scheme |
Mortgage repayments |
Buying the apartment as a first-time buyer and borrowing 92 per cent would mean a mortgage of €414,000. On a rate of 4.99 per cent over 35 years this would equate to a monthly mortgage repayment of €2,086.56 |
| Interest relief |
Up to €333 a month for a married couple or €166 for a single person would take the cost down to approximately €1,800 per month |
| Conclusion |
This property is potentially cheaper to buy rather than rent |
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| Rent v Buy Case Study 5 |
| Property |
Two-bedroom apartments in phase two of a new mixed-use scheme currently under construction in Ashbourne, Co Meath |
| Price |
from €295,000 |
| Rent |
Rents are strong in Ashbourne thanks to its relative proximity to the capital and the major expansion of retail business in the area. Expect rents in the region of €1,050-€1,150. |
Mortgage repayments |
Buying this apartment as a first-time buyer and borrowing 92 per cent would mean a mortgage of €271,400. Borrowing on a rate of 4.99 per cent over 35 years this would equate to a monthly mortgage of €1,367.85. |
| Interest relief |
Can be up to €266 per month for a married couple or €133 as a single person. |
| Conclusion |
This property is potentially cheaper to buy rather than rent |
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| Rent v Buy Case Study 6 |
| Property |
Two-bedroom house in Finglas, Dublin 11 |
| Price |
from €285,000 |
| Rent |
Rents in Dublin 11 are strong. According to the Daft Rental Report you can expect a monthly rent of approximately €1,250 |
Mortgage repayments |
Buying the house as a first-time buyer and borrowing 92 per cent would mean a mortgage of €262,200. On a rate of 5.35 per cent over 30 years this would equate to a monthly mortgage repayment of €1,219.00 per month |
| Interest relief |
Mortgage Interest Relief of €166 as a single person would apply here, bringing this figure down to €1,053 |
| Conclusion |
This property is potentially cheaper to buy rather than rent |
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