Your property questions answered
Should I rent out a second room?
Q I have rented a room in my house for the past 18 months under the rent-a- room scheme which brings in €5,400 per annum. I declared the income for 2009 in my Form 12 tax return but as it was below €10,000 I didn’t have to pay tax. If I become unemployed (which might happen in the New Year) how is that rental viewed by Social Welfare? Do I have to declare it given that it is below the €10,000 threshold? Also, that threshold has been increased in previous budgets. Is it likely to be increased again? If not, renting a second room won’t make sense for me.
AIt depends on what type of assistance you might be applying to the Department of Social Protection for. Some are means tested and some are not. In some instances, you are allowed a certain amount of money before your entitlement to a payment is affected. It is difficult to say without knowing your particular circumstances. If you do become unemployed, your local social welfare office will advise you on your entitlements but in the meantime you could contact your locals Citizen's Information Centre (citizensinformation.ie); the experts there will be able to give you free advice. As you know, if you rent a second room at the same level as your current rental income then you will be above the €10,000 threshold and therefore all income (and not just the portion above €10,000) will be liable, with some allowable deductions, for tax. At the moment we don't know what's going to happen to that threshold in next month's Budget but as it is a property-related relief it's hard to see it rising.
Will I have to give up tracker mortgage?
Q Like many others, I may be forced to leave Ireland to find work. I currently have a tracker mortgage for my principal private residence (PPR). Can or will my lender force me to change to a variable mortgage if I rent the house out for the years that I am abroad?
AYou did tell us your lender but we went to the Irish Banking Federation (IBF) for the general position. It replied that "it depends on the terms that the borrower and lender have agreed to in the loan facility. The risks for the lender and borrower change when the status of the property changes from home to investment property, and these risks may be reflected in different product pricing". In other words, talk to your lender about your specific situation and check the terms of the loan agreement. A recent article in the personal finance section of this newspaper quoted Bank of Ireland as saying that in circumstances whereby a borrower rents out their PPR, the mortgage customer can still remain on their tracker rate unless they choose to move to a different product. However there is plenty of anecdotal evidence to suggest that other lenders are moving people off trackers at the first opportunity and changing the status from PPR to rental could be just the chance they're waiting for.
Your questions
Send your queries to Property questions, The Irish Times, The Irish Times Building, 24-28 Tara Street, Dublin 2 or e-mail propertyquestions@irishtimes.com. This column is a readers’ service and is not intended to replace professional advice.
