Ask Sinéad: 'My brother willed the old family home to four of us... Is there a way to keep it as a holiday home and for everyone to have a share?'
Our property finance expert answers your questions
Question: My brother died last year and as he had remained unmarried, left everything in his will to his remaining brothers and sisters in equal measure. Part of his estate includes the old family home where we all grew up and in which he lived until his death.
There are four of us left and although we are scattered in various parts of the country and overseas we have always maintained contact with our roots. We are now faced with the prospect of having to sell the house although we would much prefer to keep it as a holiday home so that our connection can continue. Is there any way this can be achieved legally so that each of us has a share?
A There's absolutely nothing stopping you keeping the house between the four of you. However, there are some things to consider.
The first is whether you are liable for Inheritance tax as a result of the bequest. As siblings, you are each only entitled to receive €32,500 from the estate tax free. Any amount over this is taxed at 33pc, due within six months of the date of your brother's death. This tax applies whether or not you retain the property. So, if you can raise the tax bill yourselves without having to sell, then that's fine. If not, you might consider mortgaging it, which will allow you to retain ownership, but obviously, you'd then have the debt.
Another issue arises if you plan to let the house out. You say you want to keep it as a holiday home, but I'm not certain if this means just for family use or paying tenants. If it's the former, there's no issue as money won't be changing hands, presumably.
If you plan to commercially let it (e.g. on AirBnb) then Solicitor Susan Cosgrove of Cosgrove Gaynard advises: "As the property would be transferred to each of you to hold in equal shares, it means you are equally liable for all debts, taxes etc, and likewise to the income". She adds it might be an idea to formalise the situation by signing up to a Co-Ownership Arrangement which agrees the logistics around letting: who will run it, pay for the costs, and what would happen if one of you wanted to sell their share or died? Do they give first refusal to another sibling, or would the remaining three pay a portion?
Although your intentions now are clear, I'm sure you're aware that families can fall out over the slightest of issues at times, so writing everything down at the start is probably a good idea.
Q I have a mortgage with approximately 20 years left. I want to get an extension on our house that will probably cost €80,000. We have some savings of around €30,000. Are we better to put the €30,000 off our mortgage to lower the term and principal and then borrow €80,000 or simply try borrow €50,000 and use our savings?
A I'm not a fan of holding debt where you have an option to pay it down.
That said, interest rates are so low now as to almost constitute free money, so borrowing is certainly not the worst thing you could do.
It doesn't really make sense to pay off €30,000 from your mortgage only to reborrow €80,000.
If you don't need the savings for anything else (e.g. a higher interest-bearing debt like a credit card, or future education fees etc), then by all means put it toward the extension.
Borrowing €50,000 would add around €280 a month on to your repayments, at a 3pc interest rate. The full €80,000 on the other hand would cost €443, which is a lot of disposable income to lose while your savings are earning precisely zero at the same time.
Finally, if you're effecting the top-up with your current lender, and if you happen to have a tracker, just ensure that you get to keep it.
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The Ryan Report
There was a question answered here recently about the Rebuilding Ireland Home Loan. This is the Government (aka taxpayer)-sponsored scheme to offer rock-bottom rate, 30-year mortgages to sub-prime borrowers. To qualify, they must have been rejected from three mainstream banks and not earn over €50,000.
The scheme is now in abeyance given its success (the money was hoovered up very quickly, with half of it going to one-off rural houses instead of hard-pressed urban buyers, but that was virtually inevitable from the start).
The catch is in the add-on. Borrowers were forced to take out insurance using the Local Authorities' own insurer rather than shop around in the market like everyone else. Worse still, they had to take it out at inflated premiums with additional disability cover, which isn't required by ordinary banks. This made it not just unaffordable for many, but as I later heard from readers, it prohibited them from drawing down the funds altogether. One lady, who was refused the disability insurance but qualified for the life cover, couldn't go ahead despite fully meeting the criteria that would have satisfied a bank. The council insisted the exact same terms apply, but there isn't actually an insurer in Ireland who sells such policies. She was directed to a UK firm.
The added insurance is to protect the Council, not the borrower. But it's another example of a lack of joined-up thinking. A creative and popular scheme let down by over-zealous bean counters on a cover-your-backside mission.