Monday 20 November 2017

Home Economics: answering your property questions

Old couple can't get a mortgage
Old couple can't get a mortgage
Sinead Ryan

Sinead Ryan

Personal Finance expert Sinead Ryan answers your property questions.

Q. I received a generic email in my ROS (revenue online service) account regarding off-shore assets and I understand there is a new requirement to declare same. My siblings and I were left an apartment in France by an aunt who died almost a decade ago. We only use it ourselves (there are four families) and there is no rental income. We pay property taxes in France, but my brother thinks we need to declare this and I disagree. My understanding is the double taxation agreement between our two countries means no tax is payable here. I don't want to ignore the notice, however.

A. Firstly, just to confirm that the notice you received is indeed a generic mass mail designed to raise awareness among the public of the change in legislation. Therefore if it doesn't apply to you, it can be safely ignored.

Secondly, it should be recognised that there is nothing inherently unlawful in holding or investing in offshore or foreign assets and funds. However, if they generate income, and assuming you are an Irish resident and domiciled, this income must be reported on a tax return.

Barry Flanagan of Taxback.com says: "As the asset in France is for personal use and currently does not generate any revenue, there is no ongoing reporting requirement. However, should you rent it in future, any profit must be reported and may be taxable in Ireland, regardless of the French position.

"Double taxation agreements are widely misunderstood to mean that the same income cannot be taxable in two countries at once. This is incorrect. All it means is that if income is taxable in two countries at once, relief may be available. This could be in the form of an exemption or, alternatively, a Foreign Tax Credit, but additional tax may be due here if the Irish tax rate is higher (which it often is)."

However, Mr Flanagan stresses that you may have been required to report the initial inheritance, depending on the value of the asset and your residency status at the time. Even if no inheritance (Capital Acquisitions) tax was due, if the inheritance used up more than 80pc of the relevant group threshold, then there is a requirement to report this. For an aunt to a nephew, this is currently €32,500 but has been increased in recent years.

Q. I have met a lovely widow and we have decided to buy a house and spend the rest of our lives together. I am divorced and we are both in our late 50s, but as she has been renting and my flat is quite small, this will necessitate a mortgage. I am self-employed, she works in an office and we have more than enough income to make repayments. However, we are finding great difficulty in convincing a bank to give us a mortgage, even though I have no wish to ever stop working, but, in any event, have made financial provision for retirement. Would getting married help?

A. Although I don't doubt your intention to continue working (many self-employed people consider the idea of retirement to be abhorrent), banks simply don't like the idea of over 65s making repayments out of what is often a lower or fixed income, so it is not that they don't want to lend to you, the issue is the term of the loan. That you are self-employed may not help matters.

Out of necessity, 'mortgages' are typically decades long, so this would naturally worry a bank if you are in your late 50s. They may, however, consider a shorter term loan, say 10 years, although this would obviously result in higher repayments. Other outlets, such as a personal loan with a bank or credit union, would carry higher interest rates, but is a possibility.

My advice would be to employ a mortgage broker who would tap lenders you may not have considered or at least give you options. It would cost around €500, but do shop around. As to getting married, it might give some relief to a lender in terms of asset ownership, but if it were me, I'd only be doing it for romantic reasons!

The Ryan Review

When is a bubble not a bubble? When the Financial Regulator tells you so. Like the one who told us just before the crash that the economic fundamentals were sound and the banks were well capitalised.

Philip Lane is a different kettle of fish from Patrick Neary and for that we must be grateful.

But his comments at the launch of the Central Bank's annual report that there are enough 'self correcting brakes' in the system to avoid another bubble must be viewed in light of spiralling house prices, out of control rents, a lack of building supply and property inflation running at 11pc, not to mention the Bank's own deposit rules to first-time buyers scrapped.

He seems to be relying on the 3.5-times income limit as the corrector to all ills. I'm sure he must know something (probably lots) that we don't.

But it is unsettling, rather than reassuring, to hear such a calm response to what most of us see as a chaotic environment.

The value of mortgage approvals to first-time buyers is up an eye-watering 93pc year on year. That's a direct result of market meddling. Mortgage approvals are up 62pc in the same period, but actual fund drawdowns are just 27pc as demand cannot be met.

Lane has a superb record and so far the CBI has finely diced its way through the political morass, but it'll take more than reassuring pressers to convince some that the boom and bust isn't cyclical.

Indo Property

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