Question of Finance: Property
What are implications of renting out my home?
Q I bought my property as a first-time buyer 26 months ago. However, since then I have been made redundant and cannot afford my mortgage repayments.
I have moved back in with my parents and I am now renting out my property to pay for my mortgage. However, I have been told that this will have some implications on my personal financial status. Can you advise?
AYes, this move has implications. If you leave your home and rent it out, it changes your status from owner occupier to landlord. A first-time buyer must remain an owner occupier for at least two years after purchasing his/her property to avoid any stamp-duty clawback.
You fall outside of this as you were resident in your property for just over two years.
As a landlord you must now register your property with the Private Residency Tenancy Board (PRTB -- www.prtb.ie), and register each tenancy for €70. You will be obliged to register any change in tenancy, but will only pay for the first two lets in any one year. As a landlord, you will lose your mortgage interest tax relief at source.
However, the mortgage interest (75pc from May 1, 2009) would be allowable as a tax deduction against all rental income. You must be registered with PRTB to claim this, or revenue may disallow mortgage interest as a deductible expense.
Expenses incurred by a landlord for letting fees, repairs, renewals and advertising are allowable as tax deductible expenses against rental income.
By changing the property from a home to a RIP, you may be inviting the provider to increase the interest rate due to their higher risk classification for a RIP as opposed to a home loan.
Your broker or financial adviser should be able to point you in the right direction on all of the items I've mentioned above.
Brian Duffy, managing partner DFS and Co, accountants and business advisers.