Home economics: answering your property questions
Our property expert on the consequences of being a 'lead' tenant in a rental property and on whether it is a good idea to pay off more of your mortgage while interest rates are low.
Question: I am about to rent a four-bed house with three other tenants. I am the one who originally found the house and negotiated the rent and the other tenants are two work colleagues of mine and a college friend. We're very happy with the house, but the landlord is insisting I am the 'lead' tenant, i.e. he wants one of us who he can collect rent off and deal with exclusively. I'm concerned if one of the others doesn't pay on time or damages something, or breaks the lease I'll be liable. How can I protect myself?
Answer: Leases can be messy business, so I asked the advice of John Leahy, founder of www.irishlandlord.com and author of Renting In Ireland, who said you need to be clear on what conditions are in your lease.
"Your landlord's request is quite common and you need to agree some house rules with your house-mates in relation to managing the payment of rent, including who will have overall responsibility for managing rent payments and dealing with the landlord.
"Will there be a lease agreement in place and are all of the occupiers listed on the lease as tenants or are you the only person named on the lease? Most leases will include a 'joint and several liability clause'. This means each person who signs the lease can be held liable for the total rent and not just their portion of it.
"Landlords will always insist on the rent being paid in full even if someone has moved out. It is also common for landlords to insist on the payment of the rent in one full payment amount and not split payments from individual tenants. It's a good idea for house rules to deal with a situation where one person moves out and the others remain in the property. Agreeing these things now can help avoid misunderstandings and problems at a later stage."
Question: I received a letter from my bank informing me the interest rate on my tracker mortgage is less than 1pc now due to the ongoing rate cuts. Would it make sense to pay more than is being charged and try and use this time to pay off more of the mortgage? How would I go about it and could I reverse it if rates go up? I am currently paying €909 per month with around €180,000 and 18 years left, but I could afford to increase that by €150 per month.
Ongoing cuts at the European Central Bank have meant that lucky tracker owners here have seen their interest drop to as low as 0.5pc, which is historically low. This of course frees up disposable income so many mortgage holders have spare cash to spend, or save. It's a great idea to pay down mortgage debt, as it reduces both interest and the length of the term. However, you are currently borrowing what is effectively 'free' money, so you will only be paying down the capital. Adding €150 per month to the existing repayment would reduce the term by two years, 10 months and cut €2,612 off your lifetime interest. Were you on a standard variable rate of say, 4.5pc, the effect would be much greater at a €14,350 interest saving.
My suggestion would be first to use the extra money to pay down any other loans you have; invariably they will be at a higher interest rate and this would be immediately beneficial, whether it's a personal loan, credit card or overdraft credit.
If you still wish to use it towards the mortgage, write to the bank, stating clearly that you wish the €150 to be a temporary monthly overpayment off the capital, until further notice. That gives you a back-out clause when rates rise again, as they will, and it will be reflected separately on your mortgage statement.
The Ryan review
The latest Davy analysis of the Property Price Register shows that Dublin and surrounding commuter belt areas accounted for 75pc of all property transactions over €220,000 (the first-time buyer threshold for a 10pc deposit). So far, so unsurprising.
What is interesting is that of the total 48,374 transactions in 2015, just 35pc exceeded €220,000, meaning that outside the commuter belt, only 17pc, or just over 4,200 property sales were over that. Or were they?
While it might give grist to the Central Bank's mill, the indicators are not necessarily that this magic figure, which causes so much grief for borrowers, is 'about right'.
The reason it cannot be relied upon is that the Property Price Register only records mortgaged properties.
Since we already know that up to 50pc of all sales are still in cash, how can it possibly tell us anything, other than what we still don't know?
What we do know for certain is that notwithstanding the small increase in transactions, activity is still at stagnant levels.
Those homes quietly passing hands for ready money aren't recorded, while many poor old mortgagees still can't afford the 20pc deposit to trade up.
Getting a properly comprehensive recording system in place would go a long way toward analysing what is, albeit, a dysfunctional market - but at least we'd know where and how.