I have recently returned from living in the UK, where I was self-employed and have now taken up a PAYE full-time role in the Republic. I purchased a property in London a couple of years ago as a first-time buyer which I have retained and rented out.
However, I am looking at options to invest circa €100,000 in savings, and would like to buy a property in Ireland for me to live in permanently.
I wanted to see if there is any relief available to me as a buyer in the Republic for a home that will be my permanent residence, (as opposed to a buy-to-let or investment property per se), and if there is any way around having to have a 30 per cent-plus deposit?
My thoughts would be to buy a house and then avail of the Rent-a-Room scheme, while living in it myself, with the hope that the capital value of the property increases over the medium term.
Are there any assistance tips you could advise to assist?
Mr R.E., email
What limited incentives are available to homebuyers in Ireland these days are pretty much aimed at first-time buyers. These include lower deposits and the Help to Buy programme that allows people to claim back tax paid in recent years to help fund home purchase.
But, having previously bought a property, albeit abroad, you won’t qualify as a first-time buyer here.
We did have a series of property incentives for owner-occupiers in the past but these have all closed to new applicants since 2008 to the best of my knowledge.
The Government is bringing in a new affordable home scheme where the State will essentially be a co-owner holding up to 30 per cent of the equity in the property, as my colleague Fiona Reddan is writing about this week. However, this too is primarily aimed at first-time buyers.
There will be some access by other home purchasers but I cannot see it accommodating people who also hold investment property, as you do back in the UK.
So where does that leave you?
Well, in the same boat as most other people, I guess. You will be bound by the same Central Bank rules on mortgage lending that apply to all homeowners outside of first-time buyers.
That means you will be required to find a 20 per cent deposit – not 30 per cent, so that is some good news – and will qualify for a loan that is no more than 3.5 times the your gross earnings, or the combined gross earnings of the aspiring homeowners.
Long-term tenants
The 30 per cent figure you were looking at applies for buy-to-lets but this is not relevant to you as an owner-occupier – and the fact that you intend to avail of the Rent-a-Room scheme does not change that.
That scheme will allow you earn €14,000 a year from long-term tenants without having to pay income tax, PRSI (social insurance) or the universal social charge. The key thing is not to exceed the exemption limit: if you do, the whole amount becomes subject to tax.
The one relief you might be able to secure is some leeway against those Central Bank rules. There is wriggle room for lenders to lower deposits required for up to a fifth of secondhand owner-occupier buyers and to ease loan to income levels for 10 per cent of such buyers.
These exemptions are as a proportion of the value of all home loans issued in a year and they tend to be easier to access earlier in the year. As someone with an existing property, you might be in a strong position to persuade a lender to grant some leeway here as long as the UK rent covers the UK property mortgage.
However, if your employer is availing of a Covid-19 wage subsidy, beware that you might find banks reluctant to lend at all until things revert to normal – even if they agree to your initial mortgage application.
