TRS Scenario - First time buyer in 2008 second home purchased in 2013

BooYah

Hi All,

Wondering if I could get some help as I got letters from my bank this afternoon and by the time I read them, both bank and Revenue had packed off for the weekend.

Scenario:
Both myself and the wife to be own an apartment each (both Affordable Housing Scheme and purchased in 2008 with EBS) and we've just purchased a house in April 2013, again with EBS. We both received a letter today for each of our mortgages for our apartments indicating:

• The TRS on her property was being reduced from €195 to €0
• The TRS on my property was being reduced from €258 to €0

... But we received no letter indicating that said TRS was being transferred to our new family home. While I understand that house purchases made in 2013 do not qualify for TRS, surely it cannot be true that we're now out by €450 collectively a month!

Figures for properties are:

• My apartment was purchased on the affordable housing scheme for €230k. EBS insisted on this mortgage was transferred to a RIP (Residential Investment Property / Buy To Let) when we signed the contracts for the new mortgage which resulted in a .5% increase in my mortgage rate to 4.8%
• Her apartment was purchased on the affordable housing scheme for €170k. EBS insisted on this mortgage was transferred to a RIP (Residential Investment Property / Buy To Let) when we signed the contracts which resulted in a .5% increase in my mortgage rate to 4.8%
• Our mortgage for our family home is for €166k but we've had to do extensive renovations to the value of €50k (€25k credit union loan and 25k in family loans)

... Now I know I'm very lucky to be in this position but I was never informed by EBS that our TRS would be removed nor would both our previous mortgages be transferred to RIP/Buy to Let mortgages. To be honest, there was no way we could build a life together or raise a family in our apartments as mine was a 1 bed and hers is a very small 2 bed.

I was wondering if those in the know could point me in the right direction here? Are we entitled to continue receiving TRS even if it's on our new family home. We're at the point of just waiting for the next "surprise" to hit us because these things normally come in 3's

Alan Shore

Not being smart with you but you don't seem to have done much research into this before ending up with 3 properties and loans of €500k.

TRS only applies to the house you live in, it's not up to the bank to tell you that.

Have you secured permission from the Local Authority to rent out the property. You received a discount on the purchase of the property and there is a condition that the property is not rented out. This is waived in certain circumstances but I understand that by agreement.

TRS has been discontinued from 01.01.13.

You will lose the TRS on the investments and the interest is only allowed at 75%,

Did you not consider selling one or both of the investment properties.

BooYah

Alan Shore wrote: »

Not being smart with you but you don't seem to have done much research into this before ending up with 3 properties and loans of €500k.

TRS only applies to the house you live in, it's not up to the bank to tell you that.

Have you secured permission from the Local Authority to rent out the property. You received a discount on the purchase of the property and there is a condition that the property is not rented out. This is waived in certain circumstances but I understand that by agreement.

TRS has been discontinued from 01.01.13.

You will lose the TRS on the investments and the interest is only allowed at 75%,

Did you not consider selling one or both of the investment properties.

Thanks for the reply Alan. While I understand that it may not be up to the bank to tell us about the ins and outs of TRS, we fully disclosed all information about all properties to EBS as all mortgages are with them and we also informed EBS that our new property would require upwards of 50k for renovations. It was a rather long process securing the new mortgage (as I would have assumed it would) but we were never even advised that both existing mortgages would be moved to Buy to Let Mortgages (increase of .5% per mortgage) and consequently, our TRS would be greatly reduced / removed altogether.

While I also fully appreciate that it may come across that we ma not have done as much research as is now evident, I would have assumed that in going to the bank for another mortgage, they are to advise us financially on this? As I said, we asked to be brought through the stress test and to understand the criteria ... TRS was not mentioned at all nor was it a factor according to them. A "possibility" of a reduction of disposable income of €450 should certainly be included in a stress test.

I've looked in to selling off one or both of the investment properties but hers is 80k in negative equity (Purchased for €170k but only worth €90k) and mine is about €15k in negative equity (Received a 53% discount from Dublin City Council to purchase for €230k. €215 outstanding on the mortgage and property will be lucky to sell for €200k). I'm thinking about approaching EBS to discuss selling my propert and loading the outstanding debt on the new mortgage which could at least ease the burden.

Again, I know it can be conceived as to being in a lucky position and I understand that people need to do their research. While it may come across that I didn't fully research this, I done as much as I could and my understanding of the current system ... I tend to lean on those professionals in the know when I'm out of my depth and I would have assumed the bank would have at least informed me as a common courtesy instead of trying to sell me protection policies to the value of €300 per month.

Alan Shore

BooYah wrote: »

but we were never even advised that both existing mortgages would be moved to Buy to Let Mortgages (increase of .5% per mortgage) and consequently, our TRS would be greatly reduced / removed altogether.

The nature of the mortgage is irrelevant here. TRS is not available on rental properties. The fact that your are renting it out not the type of mortgage.

So you need to see will the rent cover the repayments, plus the other costs plus the income tax, remember it rent minus 75% of the interest (not repayments) minus allowable expenses x your / your spouses marginal rate of tax.