Need to move out of home soon!

L

lotus

Registered User
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Hi

Am a 25yr old earning 35k per yr. Earn about 3k on the side per year also. Am on line for promotion and touch wood will have salary of 50k in a year. Job is permanent. Am living at home and want to buy my own place. Have rented in the past and moved back to save.

Have saved 10k
Have equity SSIA hopefully worth 20 k in a bit over a year - paid max frm start
have car loan to tune of 15k

Purchased house for investment over 2 yrs ago. 25 yr mortgage and rent more than pays for repayments - its in strong rental area. Has also appreciated by about 50k. Dont want to sell it as I think its a good long term investment and I have a good tenant (from the start who hopefully will be long term). I also dont want to sell as I would probably loose most of the capital gain on taxes and charges. I will never live in house as its too far from work and not in an area I would live in.

Would like to buy 4 bed semi and they cost about 320k in area I want.
How much of a mortgage would I get? I am willing to let a room or 2 to help with repayments but this obviously would not be something I would rely on for the long term. Would I be able to use some of the equity built up in my rental property? Parents are willing to gift me money towards deposit but would prefer to go it alone if at all possible. Would I be better to buy now or would I be better to try save for another year and also my salary will have increased significantly by then also?

I do not want to be living at home for much longer......all advice and info appreciated.
 
Hi Lotus

lenders will normally take the stance that the rent received will cover the mortgage outstanding for the investment property, so that leaves your salary to cover your car loan and new mortgage, income right now is taken into consideration, not income in a years time

can you advise what the monthly instalment is for the car and your approx age (to determine mortgage term ie 25/30/35 years)

regards
Deirdre
leonard@rea.ie
 
Bear in mind that it may make sense to have an interest only rather than an annuity mortgage on an investment property - Brendan had a good post on the pros and cons and there are other threads in the Property Investment forum on this topic. I assume that investor stamp duty was paid on the initial property since it is rented out and not your PPR and this liability is not outstanding since this would presumably hit your means and/or borrowing capacity? Not also that the initial investment property purchase means that you don't qualify for first time buyer "perks" (e.g. lower rates of stamp duty on certain purchases and higher rates of owner occupier mortgage interest relief).
 
Thanks for replies

Deirdre: I am 25. My car repayments are 300 per month. Income now is €35,000 + €3000 earned on the side(not sure how I could accont for this). Would I be better to try to clear most of car loan with savings? How much extra of a mortgage would I be eligble for if my salary was 50k?

Clubman: I will look into why it would be better to have interest only mortgage (I did not realise this). Have a variable mortgage at the mo. Did not pay investor SD- auctioneeer and solicitor advised i didnt as I was FTB...Will I now have to pay a penalty on this? Am I better to buy a new house now as there are lower SD rates for these (I think). How does the interest relief work? Since I didnt pay SD on house am I receiving owner occupier mortgage interest relief and does this differ to investment interest relief?

Thanks for replies
 
lotus said:
Clubman: I will look into why it would be better to have interest only mortgage (I did not realise this).
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It may be - this is the thread that I was thinking of. There may be a few more relevant threads among .

Did not pay investor SD- auctioneeer and solicitor advised i didnt as I was FTB...
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But if you never lived there as your PPR then you were not an owner occupier FTB and were thus liable for investor SD (same liability - just a different reason). Even if you did live there as your PPR for a time but rented it out within five years of purchase then you are at least subject to a clawback of this SD. Whatever about your solicitor you should not rely on an auctioneer with a vested interest in the sale for independent, professional advice on tax and other matters.

Will I now have to pay a penalty on this?
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You are still liable for the SD - either on the original purchase or via the clawback. Interest and penalties may be charged. I'm not sure.

Am I better to buy a new house now as there are lower SD rates for these (I think).
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New houses under 125sqm are exempt from SD for owner occupiers (FTB or not). However there are obviously issues other than just SD to consider when choosing a home.

How does the interest relief work? Since I didnt pay SD on house am I receiving owner occupier mortgage interest relief and does this differ to investment interest relief?
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You should not have been claiming owner occupier mortgage interest relief if you were not an owner occupier and the property was actually rented out. You need to attend to this issue as a matter of urgency in my opinion since this is effectively tax evasion. On the other hand you are entitled to write off 100% of mortgage interest (and other allowable costs) against rental income when filing your rental income returns. Please say that you have at least been doing this?
 
Thanks Clubman

You have me worried now.

I have filed my rental income returns. I did it myself and got help from my local tax office in doing so. Surely they would have noticed and been able to point out that I had not paid SD and should have - I mean its obvious I was an investor when i was filing my returns?

Surely the revenue would also have been able to point out to me if I was obtaining owner occupier mortgage interest relief - I mean i went in and got advice on how to complete my returns and then did them out and paid my dues? Also am I not entitled to get any mortage interest relief as an investor or are there different rates?

Thanks for your help.....I obviously need to get this sorted and quick..do I just go to revenue office and explain the muddle I am in or what?

Thanks again
Lotus
 
Seems strange that they did not spot this but nonetheless, based on what you've posted to date, the SD liability remains. It may be that stamp duty and income tax are separate divisions and don't, as a matter of course, trawl through individuals' files looking for discrepancies. In any case the onus is always on the individual to make sure that their tax affairs are kept up to date and that they remain tax compliant. Ignorance of the rules and the lack of promoting from Revenue will not be accepted as a reasonable defence against non payment of tax liabilities I'm afraid.
Surely the revenue would also have been able to point out to me if I was obtaining owner occupier mortgage interest relief - I mean i went in and got advice on how to complete my returns and then did them out and paid my dues?
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Strictly Revenue do no dispense advice, merely information. As I said above regardless of what Revenue do or say (and they do make mistakes!) the onus is ultimately on the indvidual to take care of their own tax affairs. This is why it makes sense to engage an accountant or tax advisor when dealing with stuff like investment property.

Also am I not entitled to get any mortage interest relief as an investor or are there different rates?
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Only owner occupiers are entitled to mortgage mortgage interest relief. Investors can write all mortgage interest off as an allowable cost against rental income.

Thanks for your help.....I obviously need to get this sorted and quick..do I just go to revenue office and explain the muddle I am in or what?
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I would be inclined to get an accountant/tax advisor on the case first to assess the damage and advise on how to approach Revenue.
 
OK this is worrying me more by the minute.....

So what u are saying clubman is that I should never have recieved any of the mortgage interest relief I have been recieving each month since the purchase?.....This will obviously all have to be repaid and also the SD......Can anyone advise where I can get advice on this issue? Am I going to be charged a load by the revenue in penalties? I honestly did not realise this and to top it off my solicitor told me I was not liable for SD.......HELP! I though I was doing everything honestly by goin to the revenue and paying the tax due on the rent......obviously there is much more involved here
 

Did you also deduct the mortgage interest from the rent when paying your tax? If you haven't claimed twice you may actually be owed a refund on the income tax as the PPR mortgage interest relied is capped whereas the mortgage interest on a rental property would normally be fully deductible.

It does look like you have a stamp duty problem though.

As other posters have said I think you really need to talk to a professional tax adviser about this.
 
I deducted the mortgage interest I paid against the rental income aswell as a few other small allowable deuctions (followed handbook on calculation of rental income published by revenue and checked with revenue to make sure i had calculated it correctly)..................so I guess it looks like I need to pay back the mortgage interst relief

As for getting legal advice Im not sure after my the solicitor who originally did the conveyancy for me told me I was not liable for SD. Which now appears to be completely incorrect advice

I wonder am I better just to approach the revenue directly and explain the entire situation.....cant see how a legal advisor or tax advisor could help......situation appears to be quite black and white.

Thanks for information and advice thus far.....appreciated
 
Looks like this might be the case alright.

As for getting legal advice Im not sure after my the solicitor who originally did the conveyancy for me told me I was not liable for SD. Which now appears to be completely incorrect advice
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Did you ever tell your solicitor that you were buying the property as an investor and not as an owner occupier? I guess s/he should have asked but I'm not sure what the protocol is in this respect.

I wonder am I better just to approach the revenue directly and explain the entire situation.....cant see how a legal advisor or tax advisor could help......situation appears to be quite black and white.
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A good accountant/tax advisor may be able to ensure that you (legitimately) minimise your liabilities and help prepare a case for presentation to Revenue that may help mitigate any liabilities, interest and penalties.

Thanks for information and advice thus far.....appreciated
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Sorry to have been the bearer of bad news!
 
Thanks Clubman.

I guess its better for this to be sorted now than to cripple me down the line when there is some investigation......Anyway I like to have things straight.....and thats whats really annoying me......I though I had everything sorted and I could start looking for my own place......looks like i am stuck at home for another while.

Yes my solicitor did know I was buying this house for renting......Not sure what the hell he was at. Maybe he though he was saving me money?!!

I wonder has anyone here had any experience of approacing the revenue with a matter similar to this?......any ideas would be appreciated.

I am trying to think ahead here without complicating matters further....and Clubman your suggestion on changing to interest only mortgage is in my head. Maybe i could change over to this and also add a year or so onto the mortgage to provide the funds to pay the revenue.....does this sound like an appropriate route to getting out of this mess? I dont want the bank to screw me with loads of charges either though my changing my mortgage.....would it cost much to change my mortgage to interest only and add on a year or two?

Thanks again for help....it is bad news but I want to get this sorted
 
lotus said:
Yes my solicitor did know I was buying this house for renting......Not sure what the hell he was at. Maybe he though he was saving me money?!!
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A reputable solicitor would not facilitate tax evasion since they would be partially liable too as far as I know. Maybe you should ask him why he didn't inform you about the SD liability. Perhaps the initial purchase price fell under the relevant stamp duty exemption limit for an investor and you don't actually owe anything!? Only thought of that now. How much did you pay for the property and when did you buy it?
 
OK - at the moment under €127,000 is exempt from SD for investors. You'd need to check if your purchase was under the relevant investor SD exemption threshold in 2003 - I'm not sure. I suspect not but perhaps the deal was structured in such a way that it was. You should check with your solicitor for an explanation of why he determined that investor SD was not due at the time. Hopefully you were/are not liable for it after all and this was all a false alarm and then that just leaves the issues of mistakenly claiming owner occupier mortgage interest relief to be dealt with. Does that make sense to you? Let us know how you get on.
 
Was the first time buyers grant still around at that time?
Did you get that?

At least you are concerned about it, and genuinely seem to be unaware
of any wrong doing.

60% of my close friends who bought a house:
1) got first time buyers grant
2) payed no stamp duty due to new property and first time buyer owner occ.
3) claimed owner mortgage relief

then rented out their houses and pocketed the rent with out paying any
tax and are still doing so.

i also know of lots of other people who rent out houses and don't pay
tax, some with 4+ houses. At least 20 people just off the top of my
head with any deep looking.

So my mates get all the government to buy help to buy a house, then
get someone to pay their mortgage and get all that tax free
and then when they pick up a girl they bring them back to my house
So i pay my mortgage and obey the law along with providing my friends
a place to party.

Will this ever be tackled by the government??
 
quickquestio said:
Will this ever be tackled by the government??
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Why is it not reported to Revenue by people like you who are aware of the rip-off being perpetrated by these tax evaders against all compliant taxpayers and the state?
and then when they pick up a girl they bring them back to my house
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I presume you don't expect the Government to deal with this issue too?
 
very interesting quickquestio!! You are obviously a very loyal friend!

I did not get FTB grant.

I contacted my solicitor and he told me I should not have to pay SD needlessly - particularly since this is the only property I own. He told me I could say I intended to live in the property and then ened up renting it. He said this is very common. I explained how I wanted to get this sorted properly and he advised against going to the revenue directly with my hands up as they may needlessly take some of my money. Told me my best bet was to contact an accountant who I know, or an accountant in my family...........

Anyone got any further advice on how I can get myself in the clear while minimising my liabilities? Any accountants on here?!

Thanks again for replies
 
lotus said:
he advised against going to the revenue directly with my hands up as they may needlessly take some of my money. Told me my best bet was to contact an accountant who I know, or an accountant in my family...........
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probably because the revenue\others will want a word with him also.

note how he said an accountant you know or one in your family, he
obviously thinks you've done something illegal and that its not a good
idea to talk to a unknown accountant because they might want to
follow the correct procedure.
 
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