Thursday 17 October 2019

Home economics: Our property finance expert answers your questions

 

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Sinead Ryan

Sinead Ryan

Q I'm taking early retirement in October as my company is offering a package that makes it worth my while. After a break I intend to continue working for a few more years at least as I am only 62. Part of the pension includes a lump sum of €48,000. I have a mortgage left of just over €50,000. Should I pay it off in full now, or am I better off holding on to it with low interest rates or could I even put it toward another pension for tax relief?

A Brendan Costello of Galway-based Talk Financial says paying down debt makes sense as it's difficult for an investment to consistently out-perform the cost of loan servicing. However, he suggests you explore this in the context of your personal circumstances.

"If you have a tracker mortgage, retaining it makes sense. ECB rates may even go negative at some point. If it's a fixed rate, you save nothing by early redemption unless the bank agrees, as they can charge a penalty. A variable rate loan charging 3-4pc p.a. could make paying it off attractive.

"However, you should also consider your savings. Accessible cash is always advisable; do you have expensive credit card or credit union loans? If so, pay those off first as they are higher interest bearing. Are you expecting future cash demands such as education, changing the car, a family wedding, etc? If so, have you funded for the event? And finally, are there any health issues whereby the cash could be useful?"

There is no point in redirecting the tax-free lump sum back into a pension, he advises, because upon future exit, only a portion of the money will end up being tax-free whereas now, it is all tax-free. But redirecting a freed-up monthly mortgage repayment into a new pension makes perfect sense. In your 60s, you can put up to 40pc of taxable pay into a pension and enjoy full tax relief at your marginal tax rate and a further tax-free payment when you cease the new employment. Talk to a financial broker.

 

Q I have new neighbours who have moved into a property which has been vacant for over a year and the garden is completely overgrown. To my relief they said they were getting in someone to cut back the growth and chop the trees, as much of it overhangs into my garden. I agreed (they offered to pay in full), but when I returned from work saw that one of the branches had crashed through my greenhouse. I'm furious but they're claiming they're not to blame as the branch was on my side of the garden! What can I do? I don't want to claim off my own house insurance.

 

A Cara Walsh, partner with MWM Legal agrees this is not your fault and you shouldn't be responsible.

"The tree belongs to your neighbours and it is their responsibility to prevent it from overhanging into your garden and to cut it back when necessary. In carrying out this work, they or their agents owe you a duty of care to do so in a manner that will not cause any damage to you or to your property. It seems entirely foreseeable that a branch from a tree will damage a greenhouse if it falls on it.

"You are right to be reluctant to claim from your own house insurance. Consider first writing a polite letter to your neighbours to say that you have been advised that this is their responsibility and that you would appreciate them paying for the repairs. Make sure to say that you are happy to have the house occupied again and would like your time as neighbours to get off to the right start. A hand-delivered written letter is more appropriate than an email - with an estimate for damages."

You may have to consider legal options if they don't see the light.

The Small Claims procedure in the District Court is an ideal process, costing just €25 - you don't need a solicitor - for claims up to €2,000. See courts.ie for the appropriate forms.

"Bear in mind however that if your neighbours dispute your claim, there will be a court hearing," says Cara. "No outcome is ever guaranteed and regardless of who wins, a dispute such as this can affect your relationship with your neighbours for years to come."

 

The Ryan Review

For some 44,000 mortgage holders in arrears of three months plus, their woes may be about to get even worse.

Banks have been given tacit go-ahead to charge customers legal fees associated with the repossession or sale of their house. It's been a bit of a grey area but the Central Bank's DG for Financial Conduct, Derville Rowland said banks had a right to recover fees paid to solicitors and courts which for many just means the debt piles higher. If you can't afford the interest and capital repayments, it's unlikely you can punt out for expensive lawyering.

While some will brazen it out, or simply put their fingers in their ears, perhaps others will see it as the catalyst to engage with the insolvency service, which is enjoying a brief moment in the sun after the number of spectacular 'celebrity' debt write-downs in the press of late.

Sinead Ryan presents The Home Show on Newstalk FM at 9am on Saturdays

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