Home economics... answering your property questions
Our property expert advises on the Home Renovation Initiative and changing your house when in negative equity.
Question: We're getting some work done on our house and hope to have it finished by the end of the year to get the VAT back under the Home Renovation Initiative. The work includes insulating the attic and we applied for and got a grant from the SEAI. Will it affect the tax break offered if we avail of this too?
Sinead replies: It's a yes and no answer really. Your application for the HRI can go ahead and there is no problem here. However, Revenue makes a deduction for grant aided projects at a rate of three times the grant received.
This amount must be taken off the overall spend before the VAT back element is calculated. This is because grants are generally calculated at a third of the spend, and Revenue doesn't want you benefiting on the double. Here's a generalised worked example:
Overall spend on works: €10,000
SEAI grant received: €500
Deduction off spend: €1,500 (3 x €500)
Eligible spend for HRI purposes: €8,500
Don't forget you need to have your contractor on board and ensure they are covered under the scheme. The SEAI will have a list of appointed contractors for your area and it's vital you use one of these, rather than your own.
Generally speaking, it's important that people recognise that the energy efficiency grants are not means tested - they are available to anybody once they meet certain basic criteria with regard to the type of insulation work being carried out and contractor issues. See seai.ie for more information.
Question: We have a house in negative equity but not by much, but it is far too small and we need to move. We both have good jobs and can afford a bigger mortgage. Is there any bank who will take us on? We owe around €250,000 currently on a house on the outskirts of Dublin worth probably €225,000. It is a two-up-two-down and we'd love a three bed with a garden for our family. The other issue is that we have a tracker mortgage - would we lose it?
Sinead replies: There are banks offering loans to those in negative equity, but to be honest, they are very selective and they will want to be sure they're not going to lose out on the deal.
You don't say who you're currently borrowing with, but it's unlikely a new bank will take you on, so I would definitely start with your existing one and see will they do a deal for you. If you do end up switching bank you will definitely lose your tracker mortgage, as these are no longer being sold. That will make a big difference to repayments. Currently, for say a €250,000 loan you're paying in the vicinity of €841pm. Even a decent variable or fixed rate of 3.8pc would see this rise to €1,165pm, so you can immediately see the impact.
However, for those banks offering 'portable' trackers, like Ulster Bank which is the latest to make this facility for customers, they have arrangements whereby you can move your tracker with you (albeit not at the same rate you're currently paying, but with a 2 - 2.5pc margin), and effect any extra loan requirements via a regular variable rate mortgage. This seems like the best type of option for you, so do ask your own lender if they will do such a deal - please work out the numbers well in advance or ask a mortgage broker to do it for you.
The process will involve the same round of paperwork and surveys etc, so it's important to get the financials bedded down before you start house hunting.
The Ryan review
We're told that bank lending has risen significantly and indeed, there's been a 30pc increase in mortgage drawdowns, notably for first-time buyers, which can only be a good thing.
The impact of the Central Bank deposit requirements for trader-uppers is still filtering through and the next quarter or so will be interesting in terms of who is borrowing what. Is it simply meeting pent-up demand, or is this sustainable growth in lending returning?
However, according to research from Savills, half of all transactions continue to be cash deals. This means the investors are still seeing value for money in the Irish market. All the same, the figure is surprisingly high, given that the tax reasons to invest in buy-to-lets disappeared with the Capital Gains Tax incentives abolished since the end of 2014.
BTLs are attractive still due to the buoyant rental market. However, the figures help skew the market, and indeed property prices, and may indicate some (in the capital especially) are remaining artificially high as many vendors would favour a cash buyer over a mortgaged one.
It's all still a bit of a mishmash of a market though - and much like a dysfunctional family finally crawling its way out of the mire post-divorce with lots of counselling, the market has finally lost its stagnancy but is a far way off being considered 'normal'.
Let's hope Michael Noonan resists the urge to meddle come Budget day or things could get scrappy again.