Saving for a Mortgage/ Rental income

Luca G

Hi I'm currently saving for a mortgage. Another year of saving if all goes to plan should have enough for a mortgage.
I have a granny flat rented out that I got built awhile ago on the side of my mothers house its paid off.

Should I put the rent i get from it into my savings account with the money I have been saving for a mortgage or leave it out.

I know it could impact how much I can borrow. But if I put it in along with my savings i should be able to get a mortgage in less then a year.

silent_spark

I’m a little confused. Why would you not use all of your disposable income toward your savings? It doesn’t matter whether it comes from earned or unearned income.

wyndham

Put 50% of it aside to cover the tax and the rest into savings.

punisher5112

Luca G wrote: »

Hi I'm currently saving for a mortgage. Another year of saving if all goes to plan should have enough for a mortgage.
I have a granny flat rented out that I got built awhile ago on the side of my mothers house its paid off.

Should I put the rent i get from it into my savings account with the money I have been saving for a mortgage or leave it out.

I know it could impact how much I can borrow. But if I put it in along with my savings i should be able to get a mortgage in less then a year.

Legally standing how can you rent it. It needs planning and must be used by a family member,big it's not for that purpose anymore it's own entrance from outside must be removed.

Luca G

punisher5112 wrote: »

Legally standing how can you rent it. It needs planning and must be used by a family member,big it's not for that purpose anymore it's own entrance from outside must be removed.

I was allowed build to a certain size that didnt need planning permission, its connected to the house.

What do you mean how can I rent? It has been rented out over 4 years now to two different tenants.

Luca G

silent_spark wrote: »

I’m a little confused. Why would you not use all of your disposable income toward your savings? It doesn’t matter whether it comes from earned or unearned income.

I have heard different which is why I'm not sure if I should just keep saving and wait a year to get a mortgage and keep rental income separately.

silent_spark

Luca G wrote: »

I have heard different which is why I'm not sure if I should just keep saving and wait a year to get a mortgage and keep rental income separately.

Someone has told you that you can’t use your post-tax rental income to save for your deposit? That’s nonsense. A lender might not use the income when calculating what you can borrow (3.5 times your income), but you can absolutely use it to build up your deposit savings.

Luca G

silent_spark wrote: »

Someone has told you that you can’t use your post-tax rental income to save for your deposit? That’s nonsense. A lender might not use the income when calculating what you can borrow.

Yes they might not but they could easily . Not that I cant use it it would make sense to me to put rental income in with my other savings but it can impact how much you can borrow.

And I will be a first time buyer

silent_spark

Luca G wrote: »

silent_spark wrote: »

Someone has told you that you can’t use your post-tax rental income to save for your deposit? That’s nonsense. A lender might not use the income when calculating what you can borrow.

Yes they might not but they could easily . Not that I cant use it it would make sense to me to put rental income in with my other savings but it can impact how much you can borrow.

And I will be a first time buyer

The savings from your post-tax rental income (where ever you keep it) will have absolutely no impact on how much you can borrow.

punisher5112

Luca G wrote: »

I was allowed build to a certain size that didnt need planning permission, its connected to the house.

What do you mean how can I rent? It has been rented out over 4 years now to two different tenants.

Check your planning, does it have its own private door in/out. As in it may well be against planning laws. If this was the case we could all build a granny flat and rent it out.

Luca G

punisher5112 wrote: »

Check your planning, does it have its own private door in/out. As in it may well be against planning laws. If this was the case we could all build a granny flat and rent it out.

Not everyone has room to build on the side of there house though. Didnt come to ask about planning anyway it's been up over 4 years no problems.

punisher5112

Luca G wrote: »

Not everyone has room to build on the side of there house though. Didnt come to ask about planning anyway it's been up over 4 years no problems.

I think you are mixing up the exemption once you have enough minimum space left over.

Granny flat falls under planning and when it is no longer used for that purpose and renting it out them it's illegal.

Go check it out.

Brandon75

Luca G wrote: »

I have heard different which is why I'm not sure if I should just keep saving and wait a year to get a mortgage and keep rental income separately.

I would put the rental income in with the savings,
bank cant refuse it . If its helping you save more for a mortgage then go for it .

Brandon75

punisher5112 wrote: »

Granny flat falls under planning and when it is no longer used for that purpose and renting it out them it's illegal.




What about logcabins alot of people are doing them now .
Good few around my area of Dublin some big ones that stick out like a sore thumb but nothing done.

Claw Hammer

Brandon75 wrote: »

punisher5112 wrote: »

Granny flat falls under planning and when it is no longer used for that purpose and renting it out them it's illegal.




What about logcabins alot of people are doing them now .
Good few around my area of Dublin some big ones that stick out like a sore thumb but nothing done.

There are numerous threads about log cabins. It is illegal to use them for habitation purposes.
The income from the o/ps granny flat is his mothers income, not his. He is getting a gift of it from his mother.
There will be a massive tax mess as well as potentially planning enforcement trouble. A mortgage will be the least of the o/ps problems.

punisher5112

Brandon75 wrote: »

punisher5112 wrote: »

Granny flat falls under planning and when it is no longer used for that purpose and renting it out them it's illegal.




What about logcabins alot of people are doing them now .
Good few around my area of Dublin some big ones that stick out like a sore thumb but nothing done.

No issues once not used for housing that's where one will not get planning.

The €14k tax free is for people living under the one roof with access to the complete dwelling, obviously locked rooms for LL but access to communal areas such as hall and kitchen for example.

The house next to mother in law's has similar, it's a huge shed but he has it set up as a two bed, kitchen and bathroom, originally set up for kids and grandkids but they never use it so it's sitting idle

Brandon75

punisher5112 wrote: »

No issues once not used for housing that's where one will not get planning.

I know its illegal but
I would say 90% of them are being rented out or used by there kids while saving for a mortgage. Ones around my area are definitely rented out seen them being advertised. But none of my business not going to report them to the city council.



The house next to mother in law's has similar, it's a huge shed but he has it set up as a two bed, kitchen and bathroom, originally set up for kids and grandkids but they never use it so it's sitting idle

So he rents It out under rent a room as its connected to there house. Does it have its own entrance?

EJC4711

There are myriad of issues here.
1. Does the granny flat have planning?
2. If it does and has its own separate entrance then it would not qualify for the €14k tax free income
3. Who’s name is the granny flat in? Was the folio split?
4. If it’s attached to the existing house it is unlikely to be in the sons name, therefore the rental income is not his.
5. If the granny flat is not in his name, the income cannot be taken into consideration for a mortgage.
6. If the granny flat is a separate property on a separate folio and in the sons name, then he is not a first time buyer and will need a 20% deposit and cannot avail of help to buy.

The rental income (after tax) that is being received can be put towards savings for the mortgage. Having that bit of extra savings is only a help towards buying a house, however the bank will not consider it as regular savings. You would have to show you are saving an amount similar to what the mortgage would be from your regular employment income.

Luca G

EJC4711 wrote: »

There are myriad of issues here.
1. Does the granny flat have planning?
2. If it does and has its own separate entrance then it would not qualify for the €14k tax free income
3. Who’s name is the granny flat in? Was the folio split?
4. If it’s attached to the existing house it is unlikely to be in the sons name, therefore the rental income is not his.
5. If the granny flat is not in his name, the income cannot be taken into consideration for a mortgage.
6. If the granny flat is a separate property on a separate folio and in the sons name, then he is not a first time buyer and will need a 20% deposit and cannot avail of help to buy.






Hi so I don't know why I keep calling it a granny flat think it's just an Irish thing to say .its basically a studio.
No it didnt need planning permission as I was allowed build to to a certain size before planning was needed . Got the drawings done by a family member.

I got a loan and got it built in my early 20s, it's in my mothers name, I paid off the loan over the years and gave her a percentage of the rent until now as she knows I'm saving for a mortgage.

Exactly as to why I dont put rent from it into my bank account where I will be getting a mortgage from . I will still be a first time buyer as nothing is in my name.

That I why I was asking as I will be better to keep saving my employment income as I will be asked questions as to where the extra money is coming from and that will just make things messy.

Caranica

Self contained residential units require planning permission, they do not qualify as exempted development, regardless of size.

EJC4711

My advice is to keep saving as much as you can each month. The bank doesn’t mind where all the deposit money came from. Lots of people get gifts towards a deposit. The rental income could be counted as a gift from your mother.

When it comes to the affordability of the mortgage you will have to show you can afford the monthly savings/mortgage repayments and you won’t be able to use the rental income.

There are two things a Bank will asses. Loan to income (LTI) which 3.5 times your salary and Net Disposable Income(NDI). The NDI will vary depending on your circumstances. The NDI is after “normal living expenses” and stress test. They will also discount your income if you have other loans or dependants. It varies but as a general rule your mortgage repayments should not be more than 35% of your net income.

Claw Hammer

Luca G wrote: »

EJC4711 wrote: »

There are myriad of issues here.
1. Does the granny flat have planning?
2. If it does and has its own separate entrance then it would not qualify for the €14k tax free income
3. Who’s name is the granny flat in? Was the folio split?
4. If it’s attached to the existing house it is unlikely to be in the sons name, therefore the rental income is not his.
5. If the granny flat is not in his name, the income cannot be taken into consideration for a mortgage.
6. If the granny flat is a separate property on a separate folio and in the sons name, then he is not a first time buyer and will need a 20% deposit and cannot avail of help to buy.






Hi so I don't know why I keep calling it a granny flat think it's just an Irish thing to say .its basically a studio.
No it didnt need planning permission as I was allowed build to to a certain size before planning was needed . Got the drawings done by a family member.

I got a loan and got it built in my early 20s, it's in my mothers name, I paid off the loan over the years and gave her a percentage of the rent until now as she knows I'm saving for a mortgage.

Exactly as to why I dont put rent from it into my bank account where I will be getting a mortgage from . I will still be a first time buyer as nothing is in my name.

That I why I was asking as I will be better to keep saving my employment income as I will be asked questions as to where the extra money is coming from and that will just make things messy.

As has been said above the development was not exempt. Effectively your mother is giving you a gift of the income from the studio. If you show this gift as income to the bank they will require a declaration from you mother and probably a tax-clearance cert of some kind. No point in telling the bank the story.

Gumbo

Luca G wrote: »

I was allowed build to a certain size that didnt need planning permission, its connected to the house.

What do you mean how can I rent? It has been rented out over 4 years now to two different tenants.

You were advised incorrectly.

Gumbo

Luca G wrote: »

EJC4711 wrote: »

There are myriad of issues here.
1. Does the granny flat have planning?
2. If it does and has its own separate entrance then it would not qualify for the €14k tax free income
3. Who’s name is the granny flat in? Was the folio split?
4. If it’s attached to the existing house it is unlikely to be in the sons name, therefore the rental income is not his.
5. If the granny flat is not in his name, the income cannot be taken into consideration for a mortgage.
6. If the granny flat is a separate property on a separate folio and in the sons name, then he is not a first time buyer and will need a 20% deposit and cannot avail of help to buy.






Hi so I don't know why I keep calling it a granny flat think it's just an Irish thing to say .its basically a studio.
No it didnt need planning permission as I was allowed build to to a certain size before planning was needed . Got the drawings done by a family member.

I got a loan and got it built in my early 20s, it's in my mothers name, I paid off the loan over the years and gave her a percentage of the rent until now as she knows I'm saving for a mortgage.

Exactly as to why I dont put rent from it into my bank account where I will be getting a mortgage from . I will still be a first time buyer as nothing is in my name.

That I why I was asking as I will be better to keep saving my employment income as I will be asked questions as to where the extra money is coming from and that will just make things messy.

You can call it a pineapple and put it under the sea if you wish.

Doesn’t change the fact it requires planning.

Graham

Mod Note

OP won't be responding so thread closed.