Home economics: Our property finance expert answers your questions
Q I'm heading for the big five-oh birthday, have recently separated and will be purchasing my own home in the next few months. My dream is to live by the sea but I have children in secondary school for the next three years in the midlands. My question is, if I purchase a house in, say Dublin, and rent it out for living in at a future date, and then rent another house near my children's school, will I be penalised tax wise for not living in my home?
A Congratulations on the birthday milestone. I don't know about 'penalised', but you will be expected to pay income tax on any rent you receive from the house you let.
Many people, mainly 'accidental landlords' have found themselves involuntarily in your position; renting out their own home while finding somewhere cheaper to rent themselves. It doesn't always work out as they had hoped.
Being a landlord now is expensive, and there is no off-set tax wise between the rent you are paying and the rent you are receiving. There's nothing wrong with doing it, but just run your numbers before starting to be sure it's not going to leave you poorer for the experience.
Income tax is payable on all rent received (effectively just added to your regular income and the lot is taxed at whatever rate is applicable). You are allowed deductions for things like repairs and maintenance, furniture replacement (a write-off over eight years), insurance premiums, some professional fees and 80pc of the mortgage interest, but you must register with the Residential Tenancies Board (rtb.ie). Your tenants will acquire strong rights after six months so just be aware of what they are because you'll need to give increasing levels of notice when you decide to move in yourself.
Q We've been told that there are new grants available for a heat pump system, which sounds great. Our friends have one in their brand new house and they pay hardly any energy bills. What's involved, what would it cost and which one is best - they tell me there are different types of pump?
A There are grants available and they are great. However, without further details about your house I cannot say whether they are right for you. They are operated by the Sustainable Energy Authority of Ireland (seai.ie) and their website will give you a list of what you can get, but generally speaking grants pay around a third of the cost of whatever insulation works are included.
The heat pump is a newish addition. None of the grants are means-tested, and the only criteria is that you are a home-owner (local authority tenants cannot apply), and that your property was built before 2006 (or 2011 for a heat pump grant).
I don't have space here to go into an exhaustive list of how heat pumps operate, but there are five types and the grants offered depend on which you choose. The range is €600 (for air-to-air) to €3,500 at the top end (for air-to-water).
Bear in mind two things: heat pumps are expensive, even with the grant, so it's essential to find out what you need, and what it will cost. You can't expect to recoup the cost within four years.
Secondly, I am told by experts that retro-fitting older houses with heat pumps is a waste of money. The work involved can be onerous and far outweigh any benefits. It's important to get in a technical adviser to see if you qualify (the SEAI has a list and will pay €200 toward it, but only if you go ahead with the pump). Proceed with care, and research as much as you can before deciding.
The Ryan Review
Mortgages are booming and there's no denying first-time buyers are leading the way. First quarter figures show 8,577 of them drew down funds of €1,884bn, almost half of all monies borrowed, and approvals were up over 22pc this March over last. This latter figure is important. Up until now, there was a yawning gap between approvals and drawdown, as buyers, anxious to get a definite budget set before going house-hunting, found themselves unable to follow through due to lack of supply on the market. Most banks only grant Approval in Principle for six months, meaning if you don't find what you're looking for, you have to start the process again.
So the fact that more approvals are being granted doesn't necessarily mean a similar increase in available properties, merely an uptick in borrowers' finances.
The first quarter always contains additional 'spikes': not only do people generally prefer spring as a time to sell, but the banks, who are allowed a derogation from strict Central Bank loan-to-income rules in up to 15pc of cases, often front-load these, or in any event, favoured borrowers who hold their horses until the new year to avail of them.
There's something of an argument to be made for banks having to eke these out evenly over the year, but they don't know who's going to rock up at their door to qualify and any lender prefers a 'sure thing' over 'potential' when it comes to assessing risk, so you can't blame them hoovering up a good prospect when they see one; often their broker reps will be actively scouting for business. The half-year figures will paint a more even picture.
Sinead Ryan presents 'The Home Show' on Newstalk on Saturdays at 9pm
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