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Your Questions: My property has risen in value, so should I switch my mortgage?


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Question: I took out a mortgage six years ago to buy a property in Co Limerick. The house cost €210,000 and I took out a €180,000 variable rate mortgage. The interest rate was 4.6pc over 35 years. I had my house valued recently and it has risen to €274,000. A friend recently switched her mortgage and has saved herself around €100 a month. Would it be worthwhile for me to do something similar?

Answer: In the six years, there have been some significant product enhancements introduced for mortgage holders, including the option to pay off lump sums while on a fixed rate without penalty with some lenders, according to the chief executive of the Association of Irish Mortgage Advisers, Trevor Grant.

When switching mortgage provider, you will need to engage a solicitor to act on your behalf. The majority of lenders offer cash incentives to effectively cover the costs of switching. Based on your current interest rate, it is very likely there are better mortgage terms available to you, either with your existing lender or an alternative one, Mr Grant said.

You may also be able to reduce your term and save significant interest payments over the remaining term of the mortgage. A mortgage intermediary will review your personal circumstances and requirements and advise you accordingly.

Question: We are thinking of taking out life insurance and wonder how much we need. I am the sole earner in my family, with five children. Aside from the mortgage, our monthly outgoings come in at around €3,500 a month, on average. Obviously during back-to-school month and Christmas our expenses soar. If I was to insure myself for, say, €200,000 how long would it last for my family? How much would that cost me?

Answer: In determining how much cover you should put in place you need to look at your monthly outgoings, as you have done. You must also decide how long this pay-out would need to last your family, according to Sara Murphy of Royal London.

Next, you need to decide what you can afford to pay in premiums. There is a calculator on the Royal London website which allows you to input some basic details and it will estimate how long the life cover could last after it is paid out.

In your case, €200,000 would last just shy of five years if your family expenses stayed the same.

As a guide, though, a relatively healthy 40-year-old non-smoker could expect to pay around €22 to €23 a month for single life cover of €200,000, lasting 20 years.

Question: After eight years of living together, I married my partner over Christmas. Will this make a difference to us tax-wise? Is there anything we need to do or is it looked after automatically?

Answer: There are three ways to arrange your tax once you marry - you can opt for single assessment, separate assessment or joint assessment, according to CEO of Taxback.com Joanna Murphy.

Joint assessment is usually the most favourable option for couples as it allows you to split your tax credits and rate band.

If only one spouse/civil partner has taxable income, all tax credits and the standard rate cut-off point will be given to the spouse/civil partner with the income. If both have taxable income, you can decide which of you is to be the assessable spouse/nominated civil partner, Ms Murphy explained.

You may also choose to have your tax credits equally split. Assessment as a single person means you will receive the same tax credits and rate band as a single person. Both partners pay their own tax and cannot claim any of the spouse or civil partner's unused credits or rate band or claim for any payments made by the other.

In the case of separate assessment, you are both taxed as single people during the year, the difference being that some tax credits are divided equally between you and your spouse, with an opportunity for an additional review after year end.

If you both elect for either joint or separate assessment, it's worth checking your eligibility for 'Year of Marriage' relief. This applies where you pay more tax in the year of your marriage as two single people than you would if you had been jointly assessed.

Refunds are normally only due where a couple are taxed at different rates and one spouse could benefit from the unused tax credits of the other.

Notify Revenue of the change in your marital status. Otherwise, Revenue will keep taxing you as a single individual.

You will need to engage a solicitor if you are switching your mortgage, but the majority of providers offer incentives that effectively cover the cost of switching.

Joint assessment is usually the most favourable option for couples as it allows you to split your income tax credit and rate band.

Irish Independent