Saturday 24 February 2018

Bank has pulled interest-only deal on my buy-to-lets

I have a couple of buy-to-lets rented out and while I have a reasonable income from them the bank has pulled the interest-only arrangement and I cannot now afford my own domestic mortgage on top of the increased payments to cover capital repayments. What options do I have?

It would be nice to think that banks think in 'big pictures', but they're running scared and tend to become "mé féiners" when they're looking for money.

You don't say whether the investment properties are with the same lender as your domestic mortgage. If they are, I would strongly urge you to fight the demand, especially as you're currently covering all three loans -- something many others are not. This should gain you some kudos from the bank.

Trevor Grant of Mortgage Negotiators (www.mortgagenegotiators.ie) says, "Our experience is that most lenders take the view that if net rent covers the interest-only repayments then this constitutes a long term investment for both parties and is adequate. However, there are some lenders with their own agenda who will demand the sale of the property".

He adds, "Where an individual has more than one mortgage they may be tempted to capitulate to the lender that shouts loudest, but this is a joint problem and should be addressed as such. Where interest-only payments can be met on an investment mortgage we advocate a wait and see policy.

Don't be bullied by the bank. Remind them that:

•The buy-to-lets were long-term investments when taken out so what has changed?

•Rents have stabilised and in certain areas are increasing.

•A negative equity sale will create a shortfall which you cannot meet, resulting in a lose/lose scenario.

Bring an appropriate third party adviser and make your case with documentation and solutions. Part capital repayments could also be considered as part of your proposal.

Can you settle an argument? I have an apartment which is let out and a friend tells me I need to pay the Universal Social Charge (USC) on the rental income. I bought it as a S. 23 property and don't think I owe anything.

I think you probably do. Preliminary taxes were due on October 31. This year payment of the USC is required for the first time on rental income.

The USC ranges from 2-7pc but if you are self-employed and earning over €100,000 there is an additional 3pc surcharge of the amount over €100,000.

Many S.23 incentives have expired but even if yours still applies it cannot be used to offset liability for the USC.

Unfortunately this is not a good time for Celtic Tiger landlord and it looks as if the Budget may well add to their difficulties. At least there will be a household charge to add to previous increases in tenancy registration fees, increased maintenance charges and negative equity concerns, Many are propping up mortgage payments out of personal income as they ride the storm.

The only chink of light is the fact that tax, including USC, is paid on the rental income "after deductions for normal business expenses".

See www.revenue.ie. siryan@independent.ie

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