Wednesday 15 August 2018

Home economics: Sinead Ryan answers your property questions


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Sinead Ryan

Sinead Ryan

I am building a small workshop beside my house from which to run a business. My architect has recommended a flat roof structure for cost reasons, but a colleague told me that they couldn't get insurance for theirs, and now I wonder if I will.

Sinead replies: You have two issues here, so let me deal with the technical one first. Michael Gaynard of ArdCo Construction advises: "Flat roof designs and material have changed dramatically with standard felt being the only guaranteed choice before now. But today there is a range of colours, designs and membranes, creating a lightweight finish as low as 3mm, compared to the previous 20mm.

"Whilst the flat roof finish has become more popular in rear extensions, getting insurance in a home with more than 65pc of flat roof coverage is difficult unless the building is attached to the main property. The alternative is to create a slightly pitched roof using any of the modern membrane finishes, or raising it high enough so it could have a slate/tile finish to match the main roof finish."

I also asked Deirdre McCarthy, of for her advice. "Though some insurers will only quote for a certain percentage of a flat roof, eg 25pc of the total roof area, we have been able to secure quotes on many houses which are 100pc flat-roofed, which would not be considered standard by some. The most common material used is felt on timber, but more recently there is a new material called Trocal which comes with a guarantee of 12-20 years from the manufacturers.

"However, it is the size of the flat-roofed area rather than the material that will be of more interest to insurers. With a flat roof, an insurer would usually put an endorsement on the policy that the flat area would have to be re-roofed every 10 years, otherwise storm cover would be excluded.

"An important point to note also is that if you plan to run a business from your home then you must notify your insurer. Commercial use of a property is not always covered on an owner-occupied property policy".

Q. I am due a salary increase of €450 fom May 1 which would be surplus money for me and am wondering whether it would be best to pay it toward my mortgage. I have €260,000 with KBC with 19 years to run. Would I be better saving the money? I'm anxious to make a decision before I get used to having the extra cash.

Sinead replies: It's always tempting to pay off a mortgage when you have extra cash, but this can often be an emotionally-led decision rather than a financial one, and in an ultra-low interest rate environment, such as we have, it's not necessarily going to save you a huge amount, unless you were in a position to pay it down, say, with a large lump sum.

Eoin McGee of Prosperous Financial Planning explains the maths: "Let's assume that your €450 per month is before tax, and your tax rate including USC and PRSI is 50pc, your pay rise will give you an extra €225 per month take-home pay.

"Paying it off a mortgage is effectively "investing" it over a 19-year period (or whatever the period is remaining on the mortgage).

"This time frame opens up the possibility of investing in a well-constructed, diversified portfolio of shares and bonds instead. The returns on these things go up and down but over the period of time like you are talking (10+ years) you should be rewarded if you stick with it. A middle-of-the-road portfolio would average about 4pc per annum after charges but before tax.

"When the savings fund reaches the value of the outstanding mortgage, which I estimate to be around 16 years' time, you could make a decision then whether to clear off the mortgage or not. You will still get to clear it early. In the meantime you will always have access to your savings for whatever life throws at you.

"An even better idea though would be to invest the money in your pension and potentially use the tax-free cash on your pension to clear off the mortgage.

"Due to the tax relief, the €450 gross translates to €405 into your pension, which grows tax free. This would add around €137,972 to your pension pot at 4pc pa.

"While you won't have access to this money until retirement you won't have access to it if you invest in the mortgage either."

The Ryan Review

Evidence of an uptick in new home building is encouraging. A total of 8,400 newly-built houses were sold during 2017 (with prices rising accordingly), and this is up 47pc on the previous doldrum year, according to estate agent Sherry Fitzgerald. But the fact that the vast majority of new builds were semi-detached and detached family homes means that it is trader-uppers and those availing of the Help-to-Buy scheme who are the main market movers.

While there is a valid argument in the fact that movers up and sideways leave behind either a smaller, or a rented property, the reality is that at the lower end of the market, local authorities' push to get one and two bed apartments built is not working. People don't want them, and architects can't design them to be affordable.

But it remains the case that around half of all those seeking social or affordable housing are singletons and yet we can't seem to encourage building for them.

Until this changes, the market is moving despite, and not because of, Government supply policy.

Indo Property

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