Q&A: I am selling my house at the moment. It's nearly sale agreed. I have no property for myself yet as nothing is up at the moment that suits me.
Would it be wise for me to sell and put my money in the bank or should I forget selling until I find some where myself? I’m afraid if I sell now, put my money in the bank and rent, the property price will start rising.
I am looking for an apartment in Clontarf and the house I am selling is not too far away from that area.
Ms SH, Dublin
It’s not unusual as a property sale moves towards a close that people suddenly question whether they’re doing the right thing – especially, as you note in your own case, when they don’t have somewhere specific lined up to go.
I suggest you take some time to recall why you decided to sell in the first place. It’s been a very challenging time to sell property and you clearly were quite determined to do so at the outset.
At the same time, I’d counsel caution – “nearly sale agreed” can very quickly be followed by “fell through”. You may have found someone who wants to buy your home; whether they can find a lender in the current environment willing to finance the deal is an entirely different matter – a number of the banks are simply not lending and others have raised the criteria dramatically.
Should the sale go through, you have a new set of issues. You mention that you have seen nothing yet that suits you. If that’s the case, don’t buy.
The last thing you want, having sold your home, is to be saddled with a mortgage on another property you really do not want.
Bank the money? Why not? Will property prices rise? Eventually, but all the signs in the market and the economy just now is that they probably have a little bit further to slip yet (at least in most areas) and that when they do bottom out, any subsequent rise will be hesitant, at least at the outset. Of course, if we could see such things with clarity, we’d all be better off.
In the interim, it’s worth noting that at this time of year, the rental market is at its busiest with colleges soon to reopen. Even if you are targeting a different segment of the market, as you are, you can find rents slightly inflated and acceptable service more difficult to find. Be clear in what you are looking for and don’t be afraid to challenge rent levels if they appear to have risen notably in the past few months. General supply levels suggest there should be no dramatic increase in rent levels in the next couple of years.
How will joint mortgage affect future purchase?
I have a dilemma. My sister and I are paying a mortgage for our family home where our father currently resides. Mortgage commenced in 2006 and payments are up to date. The mortgage is in the name of my father, my sister and I, while the property is registered in the sole name of my father in the Land Registry. We are currently receiving mortgage interest relief on these repayments from the Revenue.
If I purchase a house in my own name in the coming years, I presume I cannot claim additional mortgage interest relief?
Also, if my father dies and I inherit the house while there remains an outstanding mortgage on the property in all three names or if the loan is repaid, I presume I can claim inheritance tax within the permitted threshold of €250k (father to son) and as such not be liable to CGT?
If my father dies first, I inherit the house (within the Revenue-approved inheritance tax threshold – the family home is currently valued at €150k) and then decide to purchase an additional house in my own name, will I be liable for stamp duty as a non-first time buyer?
Mr KO’N, email
Taking your queries in order, mortgage interest relief is claimed only on your principal private residence. As of now, that is the family home; if that changed (by you purchasing a new home), then you would move mortgage relief to that property – although you would not qualify for enhanced mortgage relief as a first-time buyer.
Bear in mind that any mortgage taken out from the start of next year will not qualify for mortgage interest relief, which is being phased out.
If your father dies, the mortgage will be paid off only if the associated life insurance policy pays out on “first death”. If the property passes to you (in whole or in part) by way of inheritance, it will be assessed under capital acquisitions tax (CAT or inheritance tax) rather than capital gains tax (CGT). As you say, the relevant Revenue threshold for inheritance from parent to child is now €250,000, having been reduced in recent years. Remember that this is cumulative – ie if you previously received an inheritance from your mother, for instance, it must be taken into account.
Given your €150,000 valuation for the property, you will probably be okay, especially if your sister is sharing in the inheritance.
CGT applies only if you have another property (ie this is an investment property) and it passes to you other than by inheritance or CAT gift.
Finally, on stamp duty, there is no longer any difference between first-time buyers and those moving up the housing chain. First-time buyer exemptions under stamp duty rules were ended in December 2010.
As such, you will be liable to stamp duty on any residential property you purchase at the rate of 1 per cent up to a property value of €1 million and 2 per cent on the balance above this.
This column is a reader service and is not intended to replace professional advice. Please send your questions to QA, c/o Dominic Coyle, The Irish Times, 24-28 Tara Street, Dublin 2, or to dcoyle@irishtimes.com. No personal correspondence will be entered into.
