Financial Advice - mtg/family

[BIK30]

Age: 30
Spouse’s/Partner's age: 27

Annual gross income from employment or profession: 39K
Annual gross income spouse: 60K

Type of employment: Private Sector

Expenditure pattern: In general are you spending more than you earn or are you saving, Saving

Rough estimate of value of home: 350K
Mortgage on home: 275K
Mortgage provider: First Active
Type of mortgage: Offset variable
Interest rate: 5.4%

Other borrowings – none

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? nil

Savings and investments: 14K First Active Internet account, 5K Regular saver a/c

Do you have a pension scheme? Yes, spouse no

Do you own any investment or other property? No, but will change

Ages of children: none yet

Life insurance: mortgage protection only


What specific question do you have or what issues are of concern to you?
1. We are moving shortly from Dublin to the West of Ireland, should we rent out current property (1300pm rent, current mtg per month 1698pm incl trs) or sell?
2. New build in country will cost 350-400k fully finished, second mtg will be required if we rent out current residence, should first mtg be changed to investment?
3. Also thinking of starting family soon, what else do we need to consider financially?

 

[Mpsox]

Re: Financial Advise - mtg/family

In terms of selling v renting your family home, key thing to watch out for is capital gains tax. If you sell your family home, you have no liability. If you sell a rented property in the years to come, you more then likely will have a CGT liability.

Secondly, if you are in the west and the property is in Dublin, who will manage it for you, will you use a letting agent given the fact that the hassle of trying to do this could be an issue given your distance

As for kids, best of luck with that. You will get the childrens allowance and the €1000 from the govt. This comes in total to just under €3k pa for the first. I'd be concerned however taking on a large mortgage at this stage, given that one of you will not be working for some months(will you get full maternity pay from your employer?) and in effect, you are leaving youself with no option but to return to work after the smallie arrives, as you'll struggle to pay a mortgage this size on your spouses salary alone, even if he were to take you TFA

 

[BIK30]

Re: Financial Advise - mtg/family

What rate would the CGT be? We are seriously considering renting the property out via a letting agency.

Re the maternity aspect, maternity pay will be full pay for 16weeks then govt maternity benefit for reminder of time of 280pw.

 

[Jimbojones]

Just two quick point,
1) Your loan to value ratio is below 80% I would look at a cheaper mortgage see best financial buys.
2) Mpsox is spot on re CGT liability. CGT will be chargeable at 20% of any gain you make on the sale of the Investment property. Therefore selling the house now would exempt you from any tax liability.

 

[Satanta]

2) Mpsox is spot on re CGT liability. CGT will be chargeable at 20% of any gain you make on the sale of the Investment property. Therefore selling the house now would exempt you from any tax liability.

Just to clarify....

The CGT due will be a fraction of the total gain, as the house has been your PPR for a period.

The fraction of the gain liable for tax will be the...
"term of ownership where it's not your PPR" - "final 12 months of ownership [if not PPR during the final 12 months]" / "total period of ownership".


So if you've owned the house as your PPR for 5 years, then rent it for 5 years and then sell 4/10 (5 years as non PPR - 12 month exemption / 10 years ownership) of the capital gains will be due at 20%.

Covered in more detail throughout previous threads.