Building second house beside current house

Mogli

Registered User
Messages
33
Him: 51, HSE staff, 20 years service, Death in service benefit
Her: 41, HSE staff, 22 years service, Death in service benefit

Children: 2, ages 12 & 18

Annual Gross Income Him: €70,000
Annual Gross Income Her: €45,000

Joint monthly take home pay: €4,800

Other Income: €650 pcm Rent a Room Scheme.

Child Benefit: €140 per month

Investment: €22k in Bitcoin
Investment: €25k in pension AVC contributing €500 per month, to buy HSE notional service on retirement.

Savings: Credit Union €1200

Value of Home with site FFP: €750,000
Amount Outstanding on Mortgage: €169,000 @ 2.75 AIB, €1,190 per month, 14 years remaining

Other Borrowings: €11k on credit card 0% interest for next 14 months. Current repayment €120 per month.

My first question is, we have recently married, are we better off being income tax assessed jointly?

Also, we are planning to build a house on our site next door in Dublin 9.

What is the best strategy here, a top up loan from bank or a separate self build loan?

Once the house is built should we sell our existing house and pay off the build and remaining loans or rent out old house and live in new house, current rental market rate of €3200 pcm.

We are just a little lost on best strategy around this. Any advice and observations most welcome.

Many Thanks in advance.
 

Brendan Burgess

Founder
Messages
44,172
What is the best strategy here, a top up loan from bank or a separate self build loan?

I don't the answer to this. I would guess that it's simpler and cheaper to give you a top-up loan. The best thing to do is to ask AIB.

If you end up renting out your home, the interest you pay on your existing mortgage can be set off against the rental income for tax purposes. So make sure that if you are paying down a loan, pay down the top-up for your home first.

Once the house is built should we sell our existing house and pay off the build and remaining loans or rent out old house and live in new house, current rental market rate of €3200 pcm.

I don't see any advantage to you in making that decision now.

It's very likely that you would be better off selling the house and becoming debt-free. But see what the market is like when the house is built. When you have all the information, then you can make that decision.

Brendan
 

Brendan Burgess

Founder
Messages
44,172
It's essential to sell your Bitcoin immediately.

1) It's the right thing to do anyway as it's worth nothing and will fall to zero in time.
2) AIB might well look askance at your gambling habits.
3) The existence of other borrowings may limit what you can borrow.
4) It's better to have plenty of cash available to meet the initial costs such as planning , architects, etc.

So sell the Bitcoin. Don't pay off your credit card as the interest rate is 0%. You don't want to pay it off and then find you need to borrow to get the building underway.

Brendan
 

Mogli

Registered User
Messages
33
It's essential to sell your Bitcoin immediately.

1) It's the right thing to do anyway as it's worth nothing and will fall to zero in time.
2) AIB might well look askance at your gambling habits.
3) The existence of other borrowings may limit what you can borrow.
4) It's better to have plenty of cash available to meet the initial costs such as planning , architects, etc.

So sell the Bitcoin. Don't pay off your credit card as the interest rate is 0%. You don't want to pay it off and then find you need to borrow to get the building underway.

Brendan
Thanks Brendan.
 

cloughy

Registered User
Messages
210
If you rent your existing house you will pay a lot of tax as you can only use the existing interest as a deduction,

Whats the cost of building new house, this interest will not be allowed as a deduction if you move into it. The best from a cashflow might be rent new house and use interest on the cost of its build against rental. You will pay similar amount of total interest but less tax.

Rending out existing house also leaves you open to tax on any gain in its value if you sell after 12mts of moving out.

If you want to be a landlord, then best solution is to build, sell existing house and get mortgage buy new rental and pay off the costs of the build. That way you get full relief on sale of old PPR, the tax writeoff of mortgage on the new purchase, but a lot of paperwork and need to ensure bank backs this.

There would be buying and selling costs so maybe not an option and best is to rent out new house use interest on its build against rental income then assess whether its worth it or just sell one and probably be mortgage free.

As an aside would you wamt your tenants next door and would they want their LL over the fence.
 

cloughy

Registered User
Messages
210
Just a question what would you clear if you built and sold either house v's the hassle and you only have a small mortgage, for being left with smaller site, maybe you would get more by selling the site and no build hassle.
 

KOW

Registered User
Messages
411
Him: 51, HSE staff, 20 years service, Death in service benefit
Her: 41, HSE staff, 22 years service, Death in service benefit

Children: 2, ages 12 & 18

Annual Gross Income Him: €70,000
Annual Gross Income Her: €45,000

Joint monthly take home pay: €4,800

Other Income: €650 pcm Rent a Room Scheme.

Child Benefit: €140 per month

Investment: €22k in Bitcoin
Investment: €25k in pension AVC contributing €500 per month, to buy HSE notional service on retirement.

Savings: Credit Union €1200

Value of Home with site FFP: €750,000
Amount Outstanding on Mortgage: €169,000 @ 2.75 AIB, €1,190 per month, 14 years remaining

Other Borrowings: €11k on credit card 0% interest for next 14 months. Current repayment €120 per month.

My first question is, we have recently married, are we better off being income tax assessed jointly?

Also, we are planning to build a house on our site next door in Dublin 9.

What is the best strategy here, a top up loan from bank or a separate self build loan?

Once the house is built should we sell our existing house and pay off the build and remaining loans or rent out old house and live in new house, current rental market rate of €3200 pcm.

We are just a little lost on best strategy around this. Any advice and observations most welcome.

Many Thanks in advance.
Again could you please explain take home pay of only 4800 Euro?
Him: 51, HSE staff, 20 years service, Death in service benefit
Her: 41, HSE staff, 22 years service, Death in service benefit

Children: 2, ages 12 & 18

Annual Gross Income Him: €70,000
Annual Gross Income Her: €45,000

Joint monthly take home pay: €4,800

Other Income: €650 pcm Rent a Room Scheme.

Child Benefit: €140 per month

Investment: €22k in Bitcoin
Investment: €25k in pension AVC contributing €500 per month, to buy HSE notional service on retirement.

Savings: Credit Union €1200

Value of Home with site FFP: €750,000
Amount Outstanding on Mortgage: €169,000 @ 2.75 AIB, €1,190 per month, 14 years remaining

Other Borrowings: €11k on credit card 0% interest for next 14 months. Current repayment €120 per month.

My first question is, we have recently married, are we better off being income tax assessed jointly?

Also, we are planning to build a house on our site next door in Dublin 9.

What is the best strategy here, a top up loan from bank or a separate self build loan?

Once the house is built should we sell our existing house and pay off the build and remaining loans or rent out old house and live in new house, current rental market rate of €3200 pcm.

We are just a little lost on best strategy around this. Any advice and observations most welcome.

Many Thanks in advance.
Again could you explain why take home pay is only 4800pm.?
What is your current house worth on its own not including the site.?
Have you full planning permission for a new build? If so what size and what will its estimatated value be when completed?
Will the new house reduce the current value of your current abode?

You both have decent jobs and have been in them a long time why have you no savings?
While you may have done well with Bitcoin in the past I do not really understand holding Bitcoin and having 11k on a credit card.

The figures you have supplied and the jobs you have held for a considerable amount of time might suggest that you would struggle to finance building a new house. Dublin 9 say 1400sq ft house would cost well north of 400k to build. How will you fund this?
You currently have a small mortgage but are unable to save or chose not to pay off your credit card.
Should you manage to secure funding for the build and rent out your house for 3200pm you will pay 1600pm tax on the rent.
Twice in my lifetime I have built a new house in similar situation to yourselves. Sold the house I was living in and moved to the new house.
Fortunately I was in a position to finance all myself.
Good luck with all but thread carefully.
By the way my wife is a civil servant and has been buying service as we lived in Canada for a few years. Retires November age 60 best thing we ever did.
 

Brendan Burgess

Founder
Messages
44,172
then best solution is to build, sell existing house and get mortgage buy new rental and pay off the costs of the build.

I have often wondered about this, but I would want to see the numbers to justify it.

1) They are paying 2.75% rate at the moment. I had a look at AIB's Buy to Let rate and the cheapest is 4.85%. So while you might get tax relief on it, a reduction of 50% brings the rate down to 2.45% . Not enough of a difference to justify the costs of selling and buying. €170k@0.3% is about €500 a year.

2) Given that it was their PPR for a number of years, the effective rate of CGT will be lower in most circumstances.

3) It's risky buying a house to let. You don't know if there are any hidden defects and how much it will cost to fix them. As this was their home, they have probably kept it in good condition and know if there is anything wrong with it.

Brendan
 
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