Reluctant landlord mortgage query

Tricky1979

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

gaius c

In theory, yes.

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

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

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.

Lux23

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

Lux23

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.

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.

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

MarkAnthony

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

Hollister11

What is TRS ?

The_Conductor

Hollister11 wrote: »

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.

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?

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.

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.

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.

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.

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?

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.

draiochtanois

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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.

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.

alias no.9

The_Morrigan wrote: »

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.

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.

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.

_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.

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.

_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)

draiochtanois

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The_Morrigan

draiochtanois wrote: »

This post has been deleted.

Leave the moderation to the mod team please.

_Kaiser_

draiochtanois wrote: »

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..

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:

alias no.9

_Kaiser_ wrote: »

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.

Woah there horsey, who's advocating tax or insurance fraud? The advice on thread has been to cancel TRS, file a tax return, register with PRTB and make sure you have proper landlords insurance.

With the straw men all dealt with were back to the interest rate. There's a possibility that there may be a breach of contract. It is a huge leap to suggest that this is fraud. Contract law is civil, fraud is criminal.

Even if there is a clear breach of contract which I've yet to see any evidence of, there may not be a clear sanction prescribed in the contract, that's the only place that there can be one. Sure the bank can sue for performance of contract but what would that mean? Does the contract allow for a change to the rate? Does the mortgage holder have to move back in or is simply not having it rented out enough? It's up to the parties to a contract to assert their rights under the contract in their own best interests, nobody else.

The_Morrigan

Mod Note:

Alias there is a reason we don't allow legal advice here. If the bank decided to sue for specific performance the mortgage could be payable in full immediately as it's a typical term of every mortgage to have repayment due within the first year and the 30 year term is somewhat at the discretion of the bank.

So please don't go there again because what you say here could have detrimental effects on people who read these threads.

/Mod.

_Kaiser_

_Kaiser_ wrote: »

............ 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.

The revenue have nothing to clamp down on once the rental income is declared. Being on a lower interest rate reduces the deductable expenses so the amount of taxable income is more for them if anything


Regarding the those of us speel........... many people were honest and got mortgages and are still paying them. Those without mortgages/property are not some kind of shrewd super being that are sacrificing their incomes to pay for the rest of ours mis spent celtic tiger years.

I know I'm probably speaking to deaf ears

_Kaiser_

Augeo wrote: »

Regarding the those of us speel........... many people were honest and got mortgages and are still paying them. Those without mortgages/property are not some kind of shrewd super being that are sacrificing their incomes to pay for the rest of ours mis spent celtic tiger years.

I know I'm probably speaking to deaf ears

Not at all.. I've said before many times here that if someone can affordably and sustainably take on a mortgage then fair play to them and work away

My issue lies with those who "exaggerated" on the forms, or knowingly over-extended themselves and now cry foul when it hasn't worked out and expect "someone else" to take the blame AND (potentially) pay the bills for them!
This idea of "say nothing" that's being advocated here by some posters is more of the same mindset IMO and that's my problem - despite everything that's happened since 2007, the "cute hoor" is alive and well it seems!

Your average mortgage payer (cause I'd like to think that the above type are still a minority) should be just as annoyed at those who gamed the system as people who didn't buy at all but equally are feeling the effects of those individual's personal choices!

draiochtanois

This post has been deleted.

3qsmavrod5twfe

In the same boat as the OP. Informed the bank that we were considering renting the place out and asked what implications there would be. They couldn't have cared less - and absolutely nothing changed as regards rates etc. Got it in writing from them all the same though. This was PTSB.

Zzippy

_Kaiser_ wrote: »

Not at all.. I've said before many times here that if someone can affordably and sustainably take on a mortgage then fair play to them and work away

My issue lies with those who "exaggerated" on the forms, or knowingly over-extended themselves and now cry foul when it hasn't worked out and expect "someone else" to take the blame AND (potentially) pay the bills for them!
This idea of "say nothing" that's being advocated here by some posters is more of the same mindset IMO and that's my problem - despite everything that's happened since 2007, the "cute hoor" is alive and well it seems!

Your average mortgage payer (cause I'd like to think that the above type are still a minority) should be just as annoyed at those who gamed the system as people who didn't buy at all but equally are feeling the effects of those individual's personal choices!

Many did not over extend themselves, nor did they exaggerate on the forms. They saw good value in a product (tracker mortgages), although clearly did not foresee the fall in property values. They are now paying increased taxes and USC to pay the debts incurred by banks. They are continuing to pay their mortgages. With growing families, they now need to move, although they cannot do so without renting out the existing property, as the negative equity would make a sale impossible. And you want these people to voluntarily request an increase in their interest rate, something that would make moving impossible as well? Talk about kicking a man when he's down...