Wednesday 26 September 2018

Home Economics: Our property finance expert answers your questions

Sinead Ryan
Sinead Ryan
Sinead Ryan

Sinead Ryan

Q: Dad is in a nursing home in Galway. His house is in Dublin. None of us live there now and we plan to rent it out. It’s near UCD but we don’t want students living in it and don’t have time to get tenants and manage it. While shabby, it’s structurally sound. Are there companies who do all this and is it expensive? How would the rent factor into Fair Deal?

A: A number of estate agents offer ‘full service’ lettings which range from cleaning and refurbishing to vetting and managing tenants. Terrie Dunne is one, based in Greystones (terriedunne.com).

She told me, “We do everything from furniture removal, painting, flooring, updating kitchen/bathrooms, even down to fitting new light-bulbs. We handle the RTB registration and advise on legalities etc. You could expect to pay around 8pc of the rental income for a full ongoing property management service. Handling the letting would be an additional 5pc”.

In relation to your second question, there are two implications: letting your father’s property will mean that the rent forms part of his overall income, in addition to whatever pension etc, he has. Under Fair Deal, 80pc of this is taken as a contribution toward his care (although the amount will never exceed the actual cost of care).

The second issue is that 7.5pc pa, for a maximum of three years (i.e. 22.5pc) will be billed on the asset (the house), and you can choose to pay, or defer it on a loan arrangement until after he passes.

If he is currently on Fair Deal, you will already know this.

It would be worth talking to an accountant in order to assess whether he would, in fact, be better off coming out of Fair Deal and paying for the nursing home privately.

Q: My husband and I moved here from Canada after our marriage two years ago. We have decided to stay and buy a house and both of us have good jobs.  We have CAN$48,000 which is in Royal Bank of Canada (RBC) through savings, an inheritance from an aunt and wedding gifts to use as a deposit. What is the best way of transferring it here and will an Irish bank accept it as a deposit?

A: I can’t see any Irish bank turning it down, as long as you meet normal anti money laundering procedures and checks. Get together those bank statements to show the different deposits.

The other issue is the actual transfer. A money transfer organisation like TransferWise may be one of the best options — a quick check tells me (at time of writing) that CAN$48,000 will convert to €31,388.97, using a rate of 0.65797 (this is very good as the actual inter-bank rate is 0.66), costing you a fee of $294.23 (€193.55).

Currency Fair is another you could try, but just be sure that RBC will facilitate such a transfer remotely (some banks insist you present yourself for an amount of this size).

Once you have it lodged in a bank here, you can go mortgage shopping. My advice is always to engage a broker for this to do the heavy lifting on paperwork. It will cost you around €500 (some are free if the loan is large enough) and is money well spent. Best of luck with the move, and welcome!

The Ryan Review

The Central Bank issued an excellent report on the state of Long Term Mortgage Arrears (LTMA), examining the 29,000 cases which stubbornly remain in arrears over two years.

The findings show that the average loan is €206,000, at 90pc loan-to-value with €66,000 owing in outstanding arrears.

The 2+year category is the largest component of the remaining LTMAs, so why on earth are they all simply not scooped up and flogged off (to Vultures or otherwise)? They are terminal basket cases, completely incapable of being serviced by their owners, after all.

The answer, as with so many things, can be found by following the money. The report looked at the ‘Cure’ and ‘Exit’ approaches taken on these loans. Cures happen when borrowers engage with lenders (the completion of a Standard Financial Statement, which is mandatory since 2013 is twice as likely to see success in reducing arrears, than a case without one).

Exits tend to be when they don’t, resulting in the voluntary or forced sale of property.

The reasons banks don’t go full tilt at them is because they’re engaged a game of ‘who blinks first’. Repos are very expensive — more so in Ireland than anywhere else. It puts banks off, especially if the property’s in negative equity. But a large number engage in what the report calls a ‘wait and see’ approach, as house prices rise, the books look better anyway.

There’s method in their madness, in other words.

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