Business Personal Finance

Saturday 20 July 2019

Can bank end tracker deal after move?

Your questions answered

Businessman signs contract behind home architectural model
Businessman signs contract behind home architectural model

Patrick McGettigan Principal McGettigan Financial Planning (mcgettiganfp.ie)

Query: Following a change in family circumstances, we moved out of the family principal primary residence in 2015. We've rented elsewhere since but are now looking to buy another house. We had a tracker mortgage on the property which we moved out of in 2015 - which we continued and still continue to repay. (We still own that property). We are now planning to sell that property and get a mortgage to buy another property. Our bank has a tracker retention product which allows people to retain their existing tracker mortgage rate on a new mortgage loan. However, our bank has informed us that we will not be entitled to the tracker retention product it offers as we no longer reside in the residence for which the mortgage applied. Is this permissible? We would not have moved had we known it would result in the loss of the tracker mortgage. Andrea, Co Meath

Answer: In response to the problem of negative equity which many homeowners had (and still have), around 2014, some of the main lenders in the Irish market launched a facility which permitted borrowers to keep their tracker mortgage if they moved property.

The tracker would apply to the amount that was transferable - any lending above this amount was at the prevailing variable or fixed rate.

The bank usually added around 1pc to the tracker rate on the loan that was being moved.

A further distinguishing feature applicable to the move was that some lenders granted the facility for the whole term of the mortgage - while others granted it for shorter periods, typically up to five years.

Specific literature in relation to tracker retention products provided by some lenders states that: "If your original mortgage was for your home, but you have since let it, you will still qualify [for the tracker retention product]. While investment properties do not qualify for the product, if the mortgage was taken out for your home and you subsequently let it, then you will qualify."

Ultimately though before moving on, you must read through the terms and conditions of your original loan.

If the loan was granted on the basis that the property was your principal private residence, the tracker rate would be only applicable while you were living there.

If this is the case, the mortgage terms and conditions in all likelihood would have requested that the lender be informed of any changes - such as the one which you and your family made in 2015.

In this instance, the lender would be correct not to facilitate the product for you.

Alternatively, if there was no condition on the loan to live in the property, you should be entitled to the product.

It is a matter of forensically examining the original terms and conditions to determine your next step here.

 

Jointly-held inheritance

Query: My wife and her four siblings inherited the family home and it is now used as a holiday home. Two of her siblings signed their share to her. Another sibling - who has since passed away - left her share to my wife in her will. My wife now owns four-fifths of the house, and one sibling owns one-fifth. A friend told me that if my wife dies, the sibling who owns one-fifth of the house will inherit the whole house. Is this true? Can my wife make provisions in her will for the four-fifths share of that house? We would have spent an important sum of money upgrading it and now we are worried that our children would not be able to benefit from it should something happen to my wife. John, Co Cork

Answer: When a person dies, legal ownership of all assets they owned in their name transfers to their legal personal representatives - commonly referred to as their estate.

The legal personal representatives will collect up all the deceased's funds and assets, pay off any debts and funeral expenses, and allocate the balance of the estate to beneficiaries according to the deceased's will (where he or she left a valid will - which is referred to as dying testate) or The Succession Act (where he or she died without leaving a valid will, referred to as dying intestate).

Overall, there are two different legal ways in which assets can be jointly owned - joint tenancy or tenancy in common.

Joint tenancy describes a situation where an asset is jointly owned by spouses or civil partners. With joint tenancy, the asset is legally presumed to be held by them as joint tenants, so that on the death of the first person, the other spouse automatically becomes entitled to the full legal and beneficial ownership of the asset.

Tenancy in common describes a situation where each owner's share of the asset is separate and distinct from the other owner's share.

With tenancy in common, an owner's asset forms part of their estate on death and does not pass automatically to the other joint owner on death.

On the death of one owner, ownership of their share passes to their estate. The survivor continues to own the other share.

Tenancy in common applies to a property where the parties involved are not married or civil partners to each other and where each has contributed separately to the capital invested in, or the cost of obtaining, the asset.

You state that a friend of yours has advised you that if your wife dies, the sibling who owns one-fifth of the house will inherit the whole house.

In this case, it seems that your friend is confusing ownership as being joint tenancy rather than tenancy in common.

It seems, however, from the history of the ownership structure of the property, that tenancy in common is applicable here.

Your wife's sibling willed a share onto your wife on death and the other siblings gifted their shares to her. Your wife would therefore be able to make provision in her will to pass her four-fifths share in the property on as she wishes.

This asset would not go to the other sibling unless it was willed by your wife to that sibling.

Any passing of an asset should take account of the valuation and the different Capital Acquisitions Tax (also known as inheritance or gift tax) thresholds which apply.

Furthermore, it is vital that your wife has a will in place to dispose of the property according to her wishes.

For joint ownership of any asset, it is always advisable to have a written agreement around the ownership structure - especially if one of the parties wishes to sell earlier than another.

You mention that you spent an important sum of money upgrading the property. Presumably this has enhanced the value of the property and therefore each shareholding.

Ideally, a written agreement should be drawn up to reflect this.

It would be worthwhile for your wife and her sibling to hire a solicitor to put an agreement in place to ensure the property ownership is disposed of according to their wishes.

  • Patrick McGettigan is principal at McGettigan Financial Planning (mcgettiganfp.ie)
  • Email your questions to lmcbride@independent.ie or write to ‘Your Questions, Sunday Independent Business, 27-32 Talbot Street, Dublin 1’.
  • While we will endeavour to place your questions with the most appropriate expert for your query, this column is not intended to replace professional advice.

Sunday Indo Business

Also in Business