Ask Sinead: Are there tax implications when downsizing from the city to the country?
Q We owe a small mortgage on our Dublin home. We want to retire and release equity in our home and then downsize to the country. But we want to do it over a year, taking out a mortgage on our second home and then gradually move in. Are there any CGT implications if we sell our Dublin house a year later and make our country house our main residence when we retire?
A I don't know your age. It's pertinent, because you mention retirement and a mortgage and there are few banks willing to lend to people nearing or at retirement. 'Releasing Equity' is a fanciful term, used some years ago to sell what is in fact a plain vanilla mortgage, often with nasty rolled-up high interest rates. These products, thankfully, no longer exist but that said, a bank will be very reluctant to loan to someone over 65. Permanent TSB, EBS and Bank of Ireland will lend up to 70 but generally that's for longer term mortgages and self-employed applicants.
If you do get a loan on your 'country' home, it is likely to be at a higher interest rate than usual and initially you'll need a minimum of 20pc of equity from your own resources.
You are concerned about CGT and that is fair enough. While your Principal Private Residence (PPR) is normally exempt from CGT when you sell, the last 12 months are automatically considered an ownership period for PPR relief. It's to allow for the situation where you have moved into a new home but are still trying to sell your previous home. You are manipulating the theory somewhat, but I can't see an issue with it.
If you go over 12 months, move to the new house, and then sell or rent out the Dublin home it's a different story, obviously.