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Reluctant landlord mortgage query

  • 17-04-2015 11:47AM
    #1
    Registered Users, Registered Users 2 Posts: 142 ✭✭


    Hi,

    Apologies if this has been covered before.

    I recently moved from an apartment to a house. The apartment is now rented out. The apartment is on standard variable rate.

    Am I required to inform the bank that the property is no longer my principal private residence (PPR)? If so, does this mean that I will revert to Buy to Let mortage higher rates? The apartment was my PPR for signficant number of years however my circumstances changed which lead to a move to a house.

    Any feedback or direction to another thread would be appreciated.

    Tricky


«1

Comments

  • Registered Users, Registered Users 2 Posts: 3,528 ✭✭✭gaius c


    In theory, yes.

    In practice, keep your mouth shut. As long as you're paying in full, they won't care.


  • Registered Users, Registered Users 2 Posts: 1,945 ✭✭✭Grandpa Hassan


    Agreed. I've been in that exact situation for 8 years. Just keep paying the mortgage.....that's all the bank care about. They have more important things to worry about than whether you're on the right rate


  • Moderators, Society & Culture Moderators Posts: 32,286 Mod ✭✭✭✭The_Conductor


    If you're getting TRS on the original mortgage (which you very well may be)- you have to inform the Revenue Commissioners that you are no longer resident in the property- and the TRS no longer applies.


  • Registered Users, Registered Users 2 Posts: 7,134 ✭✭✭Lux23


    If you get audited you would be in a good bit of trouble.


  • Posts: 24,774 ✭✭✭✭ [Deleted User]


    Lux23 wrote: »
    If you get audited you would be in a good bit of trouble.

    Trouble with who? Once the TRS isn't being claimed then revenue couldn't care less about the bank being told it's being let out or it being kept from them.


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  • Registered Users, Registered Users 2 Posts: 3,492 ✭✭✭phormium


    Just make sure your insurance is the correct type for renting.

    After that it all depends on your mortgage loan offer, many don't have any stipulation about increased rates if you rent it out.

    Cancel the TRS though if you are still getting it, trouble with Revenue would be worse than the bank finding out.


  • Registered Users, Registered Users 2 Posts: 2,200 ✭✭✭Arbiter of Good Taste


    Lux23 wrote: »
    If you get audited you would be in a good bit of trouble.

    The rate of interest is of no concern to a tax auditor. As long as the OP is not claiming TRS, is declaring the rental income and only claiming 75% of the interest, then Revenue don't care


  • Closed Accounts Posts: 6,934 ✭✭✭MarkAnthony


    While there is no doubt you must cancel the TRS - does it not tip off the bank?


  • Closed Accounts Posts: 5,482 ✭✭✭Hollister11


    What is TRS ?


  • Moderators, Society & Culture Moderators Posts: 32,286 Mod ✭✭✭✭The_Conductor


    What is TRS ?

    Tax Relief at Source
    It doesn't exist anymore (its being phased out)- but it was a relief granted on mortgage interest paid to owner occupiers.


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  • Registered Users, Registered Users 2 Posts: 142 ✭✭Tricky1979


    Thanks for help all.

    In relation to one question noted above - I believe if I cancel the TRS with the Revenue they inturn notify the bank as its the bank that faciliates the payment of TRS. This may then prompt the bank into a review of the mortgage rate.

    Can anybody confirm?


  • Registered Users, Registered Users 2 Posts: 9,368 ✭✭✭The_Morrigan


    Tricky1979 wrote: »
    Thanks for help all.

    In relation to one question noted above - I believe if I cancel the TRS with the Revenue they inturn notify the bank as its the bank that faciliates the payment of TRS. This may then prompt the bank into a review of the mortgage rate.

    Can anybody confirm?

    Does it matter? Either way you have to cease claiming the TRS from the moment it stops being your PPR. It doesn't matter whether that is via the revenue or the bank.


  • Registered Users, Registered Users 2 Posts: 142 ✭✭Tricky1979


    That's true.

    I'll put it another way - Why does the bank then have the right to increase their finance charge by way of switiching me to a buy to let mortgage rate when nothing has really changed?

    My overall financial circumstances have in fact improved due the significant equity on my PPR.


  • Registered Users, Registered Users 2 Posts: 9,368 ✭✭✭The_Morrigan


    Tricky1979 wrote: »
    That's true.

    I'll put it another way - Why does the bank then have the right to increase their finance charge by way of switiching me to a buy to let mortgage rate when nothing has really changed?

    My overall financial circumstances have in fact improved due the significant equity on my PPR.

    Everything has changed!
    It's no longer a PPR, but an investment property that you rent out and pay tax on. It has been converted to a business venture and therefore may be subject to business rates.

    What you're actually asking is, how can I get away with not paying business rates even though I'm business.


  • Registered Users, Registered Users 2 Posts: 6,452 ✭✭✭alias no.9


    Tricky1979 wrote: »
    Thanks for help all.

    In relation to one question noted above - I believe if I cancel the TRS with the Revenue they inturn notify the bank as its the bank that faciliates the payment of TRS. This may then prompt the bank into a review of the mortgage rate.

    Can anybody confirm?

    With the experience of a single instance, no.


  • Registered Users, Registered Users 2 Posts: 142 ✭✭Tricky1979


    Thank you alias no.9.

    The_Morrigan everything has not changed.
    There's no issue with cancelling the TRS and paying interest on the rental income. I as an individual did not set out to become a landlord, rather I had envisaged to sell the apartment and pay CGT if applicable on the proceeds (not likely tho as it was my PPR at the point of sale!).

    I am not a business and inturn as you say should not be applicable to business rates. The only thing that has changed is the bank may (and hopefully not) see an oportunity to make a few extra quid!

    At what point does the finance cost from the bank become excessive? The bank is funding itself at next to 0.00% or even negative in some areas and yet lending out at likely 5% on a BTL basis. That's a fairly high ROCE!! At what point does over-charging come into play?


  • Closed Accounts Posts: 6,934 ✭✭✭MarkAnthony


    Tricky1979 wrote: »
    Thank you alias no.9.

    The_Morrigan everything has not changed.
    There's no issue with cancelling the TRS and paying interest on the rental income. I as an individual did not set out to become a landlord, rather I had envisaged to sell the apartment and pay CGT if applicable on the proceeds (not likely tho as it was my PPR at the point of sale!).

    I am not a business and inturn as you say should not be applicable to business rates. The only thing that has changed is the bank may (and hopefully not) see an oportunity to make a few extra quid!

    At what point does the finance cost from the bank become excessive? The bank is funding itself at next to 0.00% or even negative in some areas and yet lending out at likely 5% on a BTL basis. That's a fairly high ROCE!! At what point does over-charging come into play?

    Not to speak for The_Morrigan but I think he was playing devils advocate to a degree give the back and forths he and I have had in relation to whether accidental LL's should be considered consumers or not.

    I'd just add that you are indeed running a business. Say there were no jobs and you decided that you could pick up cans and hand them in to make a living, you're still in business. It's exactly the same with negative equity properties. Now would I like to see lower BTL rates, absolutely. Are there ways around it, at least in the short term, yes there are. But the fact remains, like it or not you're in business if your a LL.


  • Registered Users, Registered Users 2 Posts: 2,632 ✭✭✭draiochtanois


    This post has been deleted.


  • Registered Users, Registered Users 2 Posts: 6,452 ✭✭✭alias no.9


    I should add that we got the second mortgage from a different bank, but I did participate in a 'tracker mortgage' focus group for the first bank where I told them straight out that with three kids in a two bed apartment, we were looking for a house and would be using a different bank because we were not prepared to bring the rate on the existing mortgage into the discussion, it is and will continue to be paid down to schedule.

    Like you, we'd never intended being landlords and will cease to be as soon as there's no major loss involved.


  • Registered Users, Registered Users 2 Posts: 9,368 ✭✭✭The_Morrigan


    Accidental landlord or not, there has been a change of use with regards to the property and therefore the business rates may apply, if the bank sees fit to amend them. I'm sure if you bought a commercial unit and changed the planning permission to allow for residential use you'd be making sure you were not paying commercial rates imposed by local authorities on the unit.
    Whether you like it or not, you are currently carrying on a business in relation to this property and it has nothing to do with the cost of finance to the bank.


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  • Registered Users, Registered Users 2 Posts: 6,452 ✭✭✭alias no.9


    Accidental landlord or not, there has been a change of use with regards to the property and therefore the business rates may apply, if the bank sees fit to amend them. I'm sure if you bought a commercial unit and changed the planning permission to allow for residential use you'd be making sure you were not paying commercial rates imposed by local authorities on the unit.
    Whether you like it or not, you are currently carrying on a business in relation to this property and it has nothing to do with the cost of finance to the bank.

    The difficulty with money already lent against security that's insufficient to cover the debt is that making the repayment terms more onerous may turn a performing loan into a non performing loan. The planning comparison is not relevant as this is relating to a private contract, not statue.

    There may as you say be an avenue in the mortgage contract that would allow the bank alter the rates, but there's little evidence to suggest they are looking for one. They're fully aware that people who have performing negative equity mortgages on properties that they no longer live in are going through a lot of effort and expense to ensure the banks book no loss on that property.

    One final thought on the topic, if the eligibility for TRS is considered a piece of personal data, under Data Protection legislation can only be used for the purposes it was shared, the making or cessation of TRS payments. Using such data to identify loans where the property has become a rental may land them in hot water. Personally, I told representative of the bank of my intentions to move but I've had no follow up.


  • Registered Users, Registered Users 2 Posts: 14,166 ✭✭✭✭Zzippy


    From experience speaking to a very experienced mortgage broker, as soon to be reluctant landlords ourselves, his advice was to say nothing to the bank and the bank will ask no questions - they are far more interested in chasing non-performing loans than turning performing ones into liabilities for them.


  • Registered Users, Registered Users 2 Posts: 138 ✭✭pobber1


    OP, we were in the same situation 2 years ago. I checked my mortgage contract which made no reference to the rate changing to an investment rate if
    the property was rented out. This is PTSB by the way, 2006 tracker.

    I would echo what other posters have said, cancel your TRS, register with the PRTB and file tax returns.


  • Registered Users, Registered Users 2, Paid Member Posts: 29,394 ✭✭✭✭_Kaiser_


    Slightly O/T perhaps but I can't stand this "say nothing"/nod & wink culture... it's why we pay so much for EVERYTHING and why NOTHING works as it should with any degree of consistency.

    The Morrigan is right.. the usage of the property has changed and accidental or not, renting is a BUSINESS. If more people treated that way then maybe both landlords and tenants alike would get a better deal.
    Your broker may say "say nothing" but it won't be him who'll be dealing with it if your insurance is cancelled as a result of not declaring a change in the facts, or the Revenue decide to clamp down on it etc

    I know I'm probably speaking to deaf ears here as it's the "Irish Way" to try and get one over on The Man/System, but to me this is no different in principle than people who "exaggerated" their incomes to get mortgages they probably shouldn't have in the Good Times and now those of us who WERE (stupidly) honest and didn't go mad are being looked at to pay the bills for them.


  • Registered Users, Registered Users 2 Posts: 35,717 ✭✭✭✭NIMAN


    Every country in the world works exactly like this, no point saying we are a disgrace for being like this.

    Of course it would be ideal if there was no grey/black economy, cash payments for trademen, everyone paid their TV licence etc etc but its never gonna change.

    And us Irish are no worse than any other nation.


  • Registered Users, Registered Users 2, Paid Member Posts: 29,394 ✭✭✭✭_Kaiser_


    Effectively though what's being advocated is fraud though, correct? "Say nothing and your bank won't get wind and thus possibly charge you the correct rate for your new BUSINESS"
    Or is it ok because it's a "faceless corporation" rather than someone's private motor insurance policy being affected for example?

    Still, as people have said there's a good chance it'll go unnoticed. We'll ALL just pay a bit more to cover it (because you can be sure that while it may not be actioned, it's certainly noticed)


  • Registered Users, Registered Users 2 Posts: 2,632 ✭✭✭draiochtanois


    This post has been deleted.


  • Registered Users, Registered Users 2 Posts: 9,368 ✭✭✭The_Morrigan


    This post has been deleted.

    Leave the moderation to the mod team please.


  • Registered Users, Registered Users 2, Paid Member Posts: 29,394 ✭✭✭✭_Kaiser_


    This post has been deleted.

    This line again.. renting may not be an ideal option, but to suggest that everyone had to buy houses is just not true.

    There are tens of thousands of tenants out there who have to move home every year or two for a variety of reasons and who have to face long commutes because they can't afford somewhere close to work but that's life!

    This notion that Property Ownership is an essential and special or unique and thus the normal rules don't apply is exactly why we're in the mess we've been in the last 8 years.

    But this is now very O/T so carry on..


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  • Registered Users, Registered Users 2 Posts: 173 ✭✭Kop On


    _Kaiser_ wrote: »
    This notion that Property Ownership is an essential and special or unique and thus the normal rules don't apply is exactly why we're in the mess we've been in the last 8 years.

    Cancel the Banking Inquiry, the mystery is solved. It was so simple that nobody else knew it except Kaiser. :rolleyes:


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