Home economics: Sinead Ryan answers your property questions
We've just bought a house which we're moving into in a few weeks. We have a query regarding the Local Property Tax (LPT). Do we have to pay the rate based on the price we paid for the house, or the price the previous owner paid? Obviously there's a big difference and this would put us out of kilter with our neighbours who have been paying at the rate established on 2013 prices.
A. Happily, you only have to pay LPT at the level struck in 2013, which holds until October 31, 2019, unless you have reason to believe the property was significantly under-valued at that time by the previous owner, tipping it into the wrong band, in which case you have a duty to inform Revenue.
This is hard to know, obviously, since prices have changed so much but let's assume the owner was upfront in their calculations.
The tax is paid by the person who owned the house on November 1 in the preceding year (2017), so I'm assuming that's you, but if not, than the previous owner is liable for 2018.
It must be paid, so it may already have been done; it's worth checking with your solicitor to see if this was the case, and if so, you're off the hook until November this year, when the same amount will apply.
The rate that is paid is normally 0.18pc of the value for properties under €1m and 0.25pc for those over, but local authorities have had the leeway to reduce or increase these by 15pc either way, so you can check with your own local authority what band the property falls into or use Revenue's online calculator in the LPT tab (revenue.ie).
LPT was due to be paid on January 10, 2018, but since you were in transit, give Revenue a call and sort it out now, if you discover you were liable to pay it after all.
If paying by single-debit instruction, the amount will be deducted on March 21, 2018, so this might be the simplest option for you now.
Q. My home loan is a tracker - priced at 0.53pc above ECB - and originally taken out with Danske Bank. I have €129,000 left and 17 years remaining in the term. Should I overpay it? I could afford to pay €1,000 extra a month, or would it be better to wait until rates begin creeping back up before I pay extra?
A. First of all, and I'm sure you know this, you are extremely lucky to be on a tracker at barely half a per cent above base rates. Hang on to it at all costs!
In extremely low interest-rate environments, such as those that pertain currently, over-paying a mortgage doesn't usually confer any particular benefit except to the term reduction. There have been rumblings from the ECB that rates are soon to rise, but I believe it will be a slow inflation-settling move, rather than any shock hike.
In your case, you would be far better off, in the first instance, reducing other debts you may have, which undoubtedly carry higher interest rates. So, put the money to use by paying down credit cards, personal loans and overdrafts first.
Also, make sure you start a 'rainy day' fund - around six months' salary which you could draw on if your financial circumstances change in the future.
You won't get much interest on it, although KBC is offering 2.25pc pa on its Instant Access account up to €1,000 pm.
You might also consider putting it into your pension, which is by far the most tax efficient way of spending the cash. If you have a work-related scheme, talk to your pension trustee, or adviser. If you are self-employed, a good, independent broker will advise.
If you still want to use it toward your mortgage, than Frank Conway of MoneyWhizz says you'd save just €3,625 in interest over the term, but would shave a total of 10 years and four months off the term, which would make a difference in freeing up extra money sooner and leave the property debt-free in a decade.
The Ryan Review
Property tax hasn't been doing what it says on the tin.
It has been a sledge-hammer which seriously discriminates against those who live in cities, particularly Dublin, who can pay as much tax on a "shoebox" one-bed flat as a rural household would on a five-bed McMansion. It's not fair. Ho hum… since when was tax ever fair?
"But up above in Dublin you have trams and buses and shops," say the country cousins. Fair enough. If only the tax was actually going to support transport and retail outlets. It isn't. A third of all property tax was collected in Dublin with a significant portion divvied out to poorer local authorities around the country (which is fine, to a point), but given it has been frozen since 2013 it doesn't even reflect the asset valuations it purports to tax.
Politicians are in a bind. They know that by lifting the freeze, taxes would double in some places, in and outside the M50, so they've been fudging it. Eoghan Murphy is looking for a different valuation solution - whether this is a site tax or income based will depend on how the raised flags fly.
Shane Ross has cited asset-rich, income-poor pensioners suffering unfairly.
Well, one of the purposes of any property tax is to 'encourage' those with big houses and low incomes to move along, freeing up family homes. As I said, it's sledge-hammer style, but hey.