When Aoife and Lorcan bought their home, they stretched to the top of their budget. A three-bed semi nearby was €120,000 cheaper, but the allure of a detached home with a spare bedroom and a bonus playroom was strong. Ten years later, they love the house, but this bigger home has meant a smaller life.
“We love this house, but we have less in our pocket every month,” says Aoife. The higher mortgage has locked them into their careers too.
Committing to the bigger repayments, and the higher running costs of a larger house, means the family is down about €600 a month in after-tax income compared with what they might have had in the smaller, three-bed property. Discretionary purchases are more debated and holidays are fewer. The spare bedroom is rarely used.
A decision about whether one of them can ever take parental leave always comes back to the mortgage. They will both be over 65 by the time it’s paid off. Would opting for the smaller home have meant a bigger life?
All homes are expensive these days, most people count themselves lucky to buy one and will work hard and make sacrifices to pay off the debt. But others will have more latitude about how big to borrow.
A “property-ladder” culture tells us to want bigger, more space and constant upgrades.
Talk of buying a “first home”, a “starter home”, “trading up” and borrowing to make your home bigger make the home you have seem like it’s never enough.
When the expected trajectory is always up, buying, and staying, in a home smaller than you can afford seems a radical act. But this is where small can give you more: lower fixed costs, more disposable income and more room to build wealth – without feeling stretched.
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Alongside an entire canon that makes houses with dedicated boot rooms, pantries, appliance larders, playrooms, guest rooms and bathrooms with double sinks appear normal, there is a growing movement of content creators normalising “normal” homes.
“I’ve created my account about small-home living to cut through the relentless noise in society and social media that tells us bigger is better,” says the 31-year-old PhD graduate and charity researcher behind the Ordinaryenough_ Instagram account.
She and her husband, parents to one child, live in a small two-bed house in Yorkshire and extol the financial power of a smaller home. They could afford a bigger house, she says, but chose not to. She wants to normalise the “forever starter home”.
The real flex isn’t a big Pinterest-style house or fancy things, she says, but low bills, money left at the end of the month, a home that doesn’t stress you out.
“It’s being able to invest, book a trip, say ‘yes’ to experiences. It’s building financial freedom over time, creating options for your future and buying back your time one day. And it’s not about feeling the need to impress anyone, or chase external validation, at the expense of your financial security. Because the goal was never just a bigger house, it was a bigger life. It’s living comfortably within your means and building a life you actually enjoy. That’s the real flex.”
More means less
“I would caution anyone, you shouldn’t be a slave to a mortgage, you’ve got to live your life,” says mortgage broker Michael Dowling of Irish Mortgage Brokers.
“It isn’t all about working just to pay off your home. You need to live, and you will have other expenses,” says Dowling.
Take the new homes recently launched in one new housing development in Co Wicklow – the mix of houses mirrors the options facing buyers across the commuter belt.
There’s a three-bed, three-bath 116sq m semi for sale at €550,000, while a 168sq m four-bed, three-bath semi is €665,000. The bigger house means an extra bedroom, but what would this extra €115,000 mean for your wallet?
Borrow 90 per cent of the purchase price of either of these properties and the difference in monthly repayments is significant. Over a 35-year term on a low green rate of 3.1 per cent, a buyer will pay €1,933 a month for the three-bed home and €2,337 for the four-bed, says Dowling.
“That’s a difference of €404 every month,” says Dowling.
Your bills come from after taxed income, so you’d need to earn about €800 extra a month to pay for the four-bed property, he says.
A buyer would need significant income to borrow 90 per cent of the purchase price for either of these homes – a couple would need a combined income of €125,000 for the three-bed and €150,000 for the four-bed.
The difference in the interest repayment – that’s how much your bank will pocket from your choice – is significant.
Even assuming the rate stayed at 3.1 per cent, a historic low, for 35 years, the bank will get €66,000 more of your money if you chose the four-bed home.
Even on the significant incomes needed to borrow for either of these homes, €2,300 a month for the larger house is a significant mortgage repayment over a 35-year term, says Dowling.
When borrowing, buyers need to think beyond their repayment capacity today. The affordability of your mortgage can increase, and decrease as life changes.
“If rates go up, if you have children, the mortgage means the two of you will be working for a significant period, so all of those factors have to be taken into consideration,” says Dowling.
“If you lose one of those incomes, or one of you was to work three days a week, that would have an impact on your budget. But I have clients who will just go for it, they just want that particular house.”
Running costs
The heating, lighting, maintenance, repairs, painting, furnishing and cleaning of a bigger home will also cost more.
You’ll pay more property tax on a home of a higher value too, though this isn’t directly related to size.
For example, the owners of a four-bed home valued at €840,000 will pay €808 in property tax a year. A three-bed in the same estate valued at €525,000 will pay nearly €300 less a year.
A bigger mortgage means a more expensive mortgage protection policy too. On the €100,000 more expensive house in our Wicklow example, the owners will pay €15 to €20 more a month for their policy, says Michael Dowling
This won’t be a reason not to buy the bigger house, but it’s another way in which a more expensive home is eating your money – it amounts to €8,400 more over the lifetime of your mortgage.
A bigger house isn’t always more expensive to insure than a smaller one – the rebuild cost, which is driven by several factors, is a bigger indicator, says James Dorrian of Compareinsurance.ie.
Dorrian refers to the Society of Chartered Surveyors Ireland calculator which puts the average cost of rebuilding a detached, four-bed home in a housing estate in Dublin at €300 more per square meter than a four-bed semidetached home, and €370 more expensive than a three-bed terraced town house.
In a recent poll conducted by Dublin-based quantity surveyor Shay Lally on his Houses to Restore Instagram account, 60 per cent of respondents among his 70,000 followers said a smaller house was better, with 85 per cent saying the higher running costs of a bigger house were a factor.
Yet, a dysfunctional property market means some first-time buyers are paying for bigger homes than they need right now, says Lally.
“It’s so stressful to find and buy somewhere, they don’t want to have to go through that process again, so they are buying bigger houses with spare bedrooms they don’t need initially, but with the future in mind,” says Lally.
This dysfunction also carries to the other end of the market, where empty nesters with room to spare find it difficult to downsize, says Lally.
Imagination
For those thinking of buying bigger, or borrowing more to extend, advice on rejigging the existing layout can spare them incurring more house debt than necessary, says Lally.
“I think there can be a lack of imagination,” he says.
“You can use rooms for multiple purposes where everything has a place within the same room, rather than having a separate room for each of these functions.”
A play room could have a Murphy bed for guests, or a home-office station used while children are at school.
A big extension can be “overkill”, he says, and he encourages homeowners to be more creative.
“The easiest thing for anyone is to extend the house – it’s much more of a challenge to remodel what you already have. I think a lot of people go for the easy option – but the easy option costs a bomb.”
One argument put forward for buying bigger, or borrowing to extend, is that of appreciation – you’ll make your money back, right? But the repayments can constrain your quality of life in the now, or limit other assets such as your pension.
Ending up in a bigger, more valuable home that you’ve sacrificed over a lifetime to pay down can be a pyrrhic win.
“There are plenty of asset-rich and cash-poor people who live in substantial properties, who in extreme circumstances are solely reliant on the State pension while living in a home valued at one million euro,” says Dowling.
“It’s very difficult to convert that asset into greater income unless your family is going to help you or you take out an equity release product to improve your quality of life.”
Balance
First-time buyers are are more cognisant of the “big house, small life” trade-offs – perhaps more so than their predecessors, says Dowling
“I think they value quality of life – that ‘slave to the mortgage’ piece means they can’t go on the two holidays a year, they can’t go on the weekend breaks, they have no buffer if rates go up or if they have children – I think first-time buyers are more conscious of the impact of their mortgage and are going for the three-bed, not the four-bed,” he says.
At a median age of 35, first-time buyers are older now, they have experienced life and they don’t want to give that up for a certain house, he says.
Some first-time buyers availing of the Government Help to Buy scheme, only available for houses valued at €500,000 or less, can end up with decent financial headroom.
“I find that first-time buyers are conscious of that – they say, I’ll buy a house at €500,000 rather than paying €520,000 or €525,000, because I’m losing out on that €30,000,” says Dowling.
“If their incomes are at the lower end and they are relying on the First Home Scheme to give them a significant lift again, they will look at buying a property that means they qualify for one or both of the government initiatives,” he says.
“That’s where you will get someone saying: I’m not going to buy that detached three-bed, I’ll be happy in the semidetached or terraced three-bed because I can get the Help to Buy grant – and I think they are right,” says Dowling.
“What’s the difference if I’m living in a semi versus a detached – is it really that significant in a development of 100 or 200 houses? I’ve seen clients not going for the higher-value house.”
A smaller or less expensive house can mean less space inside your home, but enjoying a bigger life outside of it.