Sunday 21 July 2019

Your Questions: Can I get an exemption from lending rules to buy a house this year?

 

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Charlie Weston

Charlie Weston

Q: I'm going to buy a house in 2019, or at least I'm going to try. I previously owned an apartment with an ex. I have been saving hard for the last two years and have been keeping a clean sheet in terms of banking, credit history etc. But because of the high rents, the one area I'm struggling with is the deposit - I simply won't be able to make up the 20pc. I am going to fall short by about 2pc or 3pc. I can't wait another year because a friend is selling their house and they say they will sell to me, for a certain price, but it has to be done before the year is out because they will be emigrating. I know there are some ways to bypass this deposit rule. Can you give me any advice?

A: It sounds like you really have ticked all the right boxes and it is unfortunate that you have found yourself in this position, because of high rents and high property prices.

The good news is that this is the perfect time of year to try to get in under the bank's exemptions, according to Joey Sheahan, head of credit at MyMortgages.ie.

As it stands, you can only get an exemption under one of the lending rules. In your case, you will have to stay within the loan-to-income ratio of three-and-a-half times your annual gross income if you want to avail of loan of up to 90pc as a second-time buyer. Mr Sheahan's advice is to use a broker. The banks can advance 20pc of their loans in 2019 to second-time buyers as loan-to-value exceptions (ie up to 90pc loan).

However, the caveat is that the granting of these exceptions is at each bank's discretion.

This means they will require you to have a minimum level of income (for example, one bank requires minimum €40,000 income for a sole applicant and €70,000 income for a couple to be considered) as well as other criteria and each exception is considered and granted on a case-by-case basis.

Q: My mum has been in a nursing home for months and we paid privately and claimed back 40pc of the cost. She is now five years asset-free and the officials in the HSE's Fair Deal have deemed the amount to be paid each week at €191.31 (basically 80pc of her State pension of €242). Can I pay this amount and claim back 40pc? The receipts will be in my name anyway. Or must it come from her funds? She is unable to make any decisions, so I just want to be sure I am not assuming anything from a tax perspective.

A: The tax relief in respect of costs of maintaining a relative in a nursing home is available at the highest rate (40pc) for the costs made, less any amount paid by any compensation scheme.

This means that you are effectively only paying 60pc of the total cost of annual care, according to commercial director of Taxback.com Eileen Devereux. However, you need to estimate what the nursing home resident's contribution would be under Fair Deal and weigh it against the net charge to you under private care. Each person paying nursing home fees is entitled to claim tax relief on the portion paid by her or him which has not been reimbursed, directly or indirectly, by a third party.

If the taxpayer cannot identify the proportion paid by the nursing home resident, the long-standing Revenue practice is to accept that the person resident in the nursing home has contributed an amount equal to 60pc of her or his income towards her or his maintenance, Ms Devereux added.

Q:  I am confused. I took out life cover, income protection and a pension just last year, now my broker says she wants to review it. What's going on?

A: Regular reviews are part of any good financial plan and are not to be feared. The whole purpose of a review is to ensure that your financial plans suit your lifestyle and budget, according to Mike Knightson of KMfinancial.ie.

Over the course of the year, you may have received a raise, had a child, got married, inherited money or changed job for instance.

From a pension perspective, it is important that you fund at a level that is affordable and will maintain your lifestyle in retirement. Market volatility should also be considered, and a broker can review and explain this. If you have had children, you may need to review your life cover.

Of course, it is possible that nothing has changed for you, but it's important to keep on top of what you have.

For example, your health may have taken a setback and you might not think this has a financial impact, but it could.

Look at the review in the same way that you would look at a gas boiler or car service, it is important to ensure that what you have works for you when you need it.

The good news is that this is the perfect time of year to try to get in under the bank's exemptions. But you can only get an exemption under one of the lending rules.

Regular reviews of protection policies are part of any good financial plan. The purpose of a review is to ensure that your financial plans suit your lifestyle and budget.

Irish Independent

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