Wednesday 28 September 2016

Home economics: Answering your property questions

Published 12/02/2016 | 02:30

Savings for a deposit for a house
Savings for a deposit for a house

Our property expert advises on the tax implications of family members staying in your hoses for expenses and the attractiveness, or otherwise, of the Bank of Ireland cash-back loan.

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Question: We have my sister and her husband, who are saving for a house deposit, living with us since last summer; they hope to apply for a mortgage this year. They insist on paying us expenses of €400 per month and the Sky TV bill (for the sports channels) and babysit for us occasionally along with doing some of the housework etc. I think it's a fair trade, but a work colleague told me I have to declare the income to Revenue. I don't view them as a tenant and they don't have a rent book. Could it be a problem?

Sinead replies: Yes and no. When you let some or all of your home in exchange for money, you become a de facto landlord whether you like it or not. What you call "expenses", Revenue would call rent. So, yes, you should declare it.

However, there is good news because under a tax exemption called Rent-a-Room Relief, you can earn this income tax free (up to €12,000 p.a.) without providing a rent book, or registering with the Private Residential Tenancies Board.

Revenue adds: "If you claim relief you must provide details of the relevant sums on your annual tax return, notwithstanding that the profits or losses from the letting(s) are disregarded for income tax purposes."

They have more information on their website www.revenue.ie or drop into your local citizens' information office. A tax return must be filed by the end of the year of assessment.

I would also caution about house insurance. It is probably worth a call to your insurer to make sure they're aware of the arrangement; you certainly don't want them repudiating a claim for a loss (say a theft) by querying why it's not your belongings.

Question: We're saving for a house deposit between the credit union and EBS and have €24,850 already. However, we are attracted by Bank of Ireland's offer of a 10pc saving bonus. We also like that they have a 2pc cash-back deal and wonder will it still be in place when we are ready to buy (do you know?) Are they the only bank offering these and is this the best offer available?

Sinead replies: Bank of Ireland's 2pc cash-back deal is indeed attractive, and they have extended it to the end of June.

I have no information beyond that date, but do bear in mind their mortgage interest rates are at the higher end, so it's worth taking that into account before buying your loan from them - you may simply end up paying it back over the longer term.

The savings bonus is open to first-time buyers who save between €200 and €2,500 per month by opening an account before the end of the year. You get the extra 10pc only when you draw down the mortgage funds, which must be within 30 months of opening the account. Bear in mind, this "bonus" is simply extra interest and as such, is subject to DIRT tax at 41pc, however Revenue will refund this to you (up to 20pc of the purchase price) as first-time buyers.

You can also put in a lump sum within 30 days of opening the account and get a bonus on that also, although I wouldn't recommend the whole lot, as it only applies to a maximum €20,000.

What you could do is start off with that and 'strip off' a set monthly amount until the remaining €4,850 is used up.

The catch, if there is one, is that both offers cannot be used together i.e. you cannot get the savings bonus and the 2pc cash back. So you have some sums to do. Permanent TSB has also started offering a 2pc cash back deal by the way, but if you 'save' with BoI and attract the bonus, you must draw down the funds from them.

Both will seek to claw back the offer if you switch or pay off your mortgage within the first five years, or if it doesn't go ahead.

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