renting out a mortgaged property

ratface

Hi,

I bought an apartment with a friend of mine 50/50, they moved out about a year ago. Mortgage is in total approx €910 p/m inc interest relief, I want to rent out the property for €1,000(someone is interested) and move into my fiance's brothers house for a year to help him renovate it. Rent at new place will be €600 p/m should I inform the bank that I'm no longer living in the mortgaged property? and more importantly how will this affect me financially, Interest relief, tax etc. Not trying to dodge any tax but also don't want to get screwed moneywise any more than I am already. I have someone interested in renting the apartment for €1000. thanks for any replies in advance.

Uriel.

Are you on a tracker mortgage?
Take a look at your mortgage contract.
Personally, I wouldn't tell the bank. Liklihood is that you will be moved to (higher) buy-to-let interest rate.

You will need to inform Revenue and your interest relief will be discontinued.
You will need to register the tenancy with the PRTB and get a BER cert.
You will need landlord specific insurance
You will need to file a tax return - costs such insurance, capital costs of certain items in the house, advertising for the tenancy, repairs etc... and 75% of the mortgage interest can be written off.
You will pay tax then on the rental income in accordance with your own tax situation.
Next year you will also have to register for the NPPR and pay the annual €200 tax

Presumably all of the costs and subsequently the income will be split 50% with your friend

ratface

variable mortgage, thanks for the reply. looks like alot of things to consider, is it really an option to infor the revenue but not the bank? Interest deducted at source. am I likely to be worse off?

Uriel.

re the bank, I'd advise you to look at your mortgage contract terms and conditions before making a decision regarding the bank.

I am not sure what you mean by the interest at source thing? I'll help further if I can when you elaborate.

Revenue definitely need to be informed though. I can't stress that enough... It's not a chance I would take.

ratface

Uriel,

Thanks again for the reply. If I inform revenue(which I will), will it not be obvious to the bank that my circumstances have changed as the mortgage interest has stopped? my other option, well I think its an option is this - the apartment is 2 bedroom, the person renting the apartment is renting it alone, if I keep registered at this address can I just claim this is still my principle residence and I'm just renting the other room to the new person?

mrs vimes

ratface wrote: »

Uriel,

Thanks again for the reply. If I inform revenue(which I will), will it not be obvious to the bank that my circumstances have changed as the mortgage interest has stopped? my other option, well I think its an option is this - the apartment is 2 bedroom, the person renting the apartment is renting it alone, if I keep registered at this address can I just claim this is still my principle residence and I'm just renting the other room to the new person?

That sounds like fraud.

Shane732

ratface wrote: »

Uriel,

Thanks again for the reply. If I inform revenue(which I will), will it not be obvious to the bank that my circumstances have changed as the mortgage interest has stopped? my other option, well I think its an option is this - the apartment is 2 bedroom, the person renting the apartment is renting it alone, if I keep registered at this address can I just claim this is still my principle residence and I'm just renting the other room to the new person?

Eh.... You're on a tax forum here.

I'd advice you to de-register for mortgage interest relief. Do you really think the bank are going through accounts checking accounts for mortgage interest relief and tying them back into loan agreements. The bank won't bat an eyelid at the fact that you're no longer getting mortgage interest relief.

You'll be entitled to 75% mortgage interest relief against the rental income you receive.

Uriel.

ratface wrote: »

Uriel,

Thanks again for the reply. If I inform revenue(which I will), will it not be obvious to the bank that my circumstances have changed as the mortgage interest has stopped? my other option, well I think its an option is this - the apartment is 2 bedroom, the person renting the apartment is renting it alone, if I keep registered at this address can I just claim this is still my principle residence and I'm just renting the other room to the new person?

Nah they are different accounts - current account versus mortgage account. the bank would need to monitoring your transactions specifically on a regular basis so I wouldn't worry about it.

In relation to your second question - all I can say is that you can do what you propose, but it is tax fraud and is illegal. Obviously, I can't advise you to go down that road.

If you were legitimately renting out a room to a third party rather than the entire apartment and you remained living in it aswell, you would not need to register for the NPPR, or get the BER cert or register with the PRTB. In addition you can continue to claim the Interest Relief. the other major stipulation is that the maximum annual rent can only be €10,000 - see here for further details

As I said you could lie and do things illegitimately but as it is illegal and if you get caught you can expect serious implications.

Is there anyway you can stay living in the apartment and have a rent a room agreement with the prospective tenant? You could stay with your brother at weekends and help him renovate or something?

LiamACA

Yeah but if you have claimed first time buyers relief you will be hit by Revenue for the relief you got if you move out and rent the house. You should be careful about this

Uriel.

LiamACA wrote: »

Yeah but if you have claimed first time buyers relief you will be hit by Revenue for the relief you got if you move out and rent the house. You should be careful about this

Possibly true. You should have provided more information though.

OP, if you received relief from stamp duty as a first time buyer, you must not benefit from rent (with the exception of the rent a room scheme) for the first two years after the purchase of the property. If you are within the first two years and you start renting out the place Revenue will enforce a claw back of the stamp duty relief received - more details here

murphaph

ratface wrote: »

Uriel,

Thanks again for the reply. If I inform revenue(which I will), will it not be obvious to the bank that my circumstances have changed as the mortgage interest has stopped? my other option, well I think its an option is this - the apartment is 2 bedroom, the person renting the apartment is renting it alone, if I keep registered at this address can I just claim this is still my principle residence and I'm just renting the other room to the new person?

I never informed my bank but certainly did inform Revenue. Revenue then instruct the bank to cease TRS. I guess in theory some banks might watch for these things but in all honesty I'd say most banks are just happy that the mortgage is being paid.

As for the bit in bold: forget it. Whatever about playing your bank, NEVER try to play Revenue. In any case, the Rent a Room relief only goes up to like 7k a year and you'd be taking 12k gross. It's tax evasion and you could end up in prison for it.

Renting out a property is certainly not something to be taken lightly. Even when it all goes to plan, there are headaches. When your tenant turns nasty and stops paying rent for the craic, then you're in a world of hurt. Think it over carefully and do your homework before proceeding

jalaura

Can anyone advise me please. Have a mortgage of €900 on a property(from remorgaging the house a number of times over the years) which I can't really afford anymore as I've retired. I'm in the house about 35 years so am not receiving any real tax allowances. I was looking to rent it out for about €1100 and move back home down the country and rent out down there. If I pay a mortgage of €900 a month and make €1100 on the house leaving me with €200 but have to pay €600 rent myself do I pay much tax? I have tried selling the house to no avail. I am struggling to pay the mortgage but not sure if doing it this way will make me any better of. Will I only get taxed on the €200 profit of rent I made? Will the tax office take into account the rent I have to pay?

murphaph

jalaura wrote: »

Will I only get taxed on the €200 profit of rent I made?

No.

You will be allowed to deduct 75% of the mortgage INTEREST component. If you look at a recent mortgage statement you'll see how little (I presume) of your €900 repayment it is these days (perhaps 3 or 4 k)

You can deduct some other expenses when calculating taxable profit, like wear and tear, insurance, PRTB fees and maintenance but not much else and not the NPPR or Household Charge.

jalaura wrote: »

Will the tax office take into account the rent I have to pay?

No. It will be treated independently by Revenue.

And as Rent Relief is gone (AFAIK) you won't get any relief for it whatsoever.

jalaura

Thanks for your response appreciate it. Tax is all very confusing. A friend of mine rents an apartment out for €850 a month but pays €600 a month mortgage on the apartment. The tax office sent out a form asking basically was any profit being made on the apartment. My friend said no because of the mortgage plus the management fees etc(this is true) and all seems ok with that so I was wondering would I be at a loss if I rented out with tax.

relax carry on

jalaura wrote: »

Thanks for your response appreciate it. Tax is all very confusing. A friend of mine rents an apartment out for €850 a month but pays €600 a month mortgage on the apartment. The tax office sent out a form asking basically was any profit being made on the apartment. My friend said no because of the mortgage plus the management fees etc(this is true) and all seems ok with that so I was wondering would I be at a loss if I rented out with tax.

Try revenues guide to rental income for a start.

http://www.revenue.ie/en/tax/it/leaflets/it70.html

You declare your rental income on a tax return each year. It's combined with all other soures of income to determine what if any tax is due.

You might want to chat to an accountant about it to save yourself hassle if you can't get your head around it. Remember everyones tax affairs are unique to them, so what's true for your friend may not be true for you.