Buying second house but keeping first

phd

Hi there we are looking to buy a house in the west of Ireland but want to keep our house in Dublin. Our broker recommended that we say we are going to live in the house in the west and then we would only need a 20% deposit otherwise it would be treated as an investment property which it is hard to get a mortgage for and you'd need 40% plus of a deposit. Anyone any experience of this? My husband is now permenant remote but I will have to go back to the office probably in the Autumn.

your broker suggested you lie on your mortgage application ? am I reading that correctly?

phd

Jakub Zytecki wrote: »

your broker suggested you lie on your mortgage application ? am I reading that correctly?

This is exactly my reservation

Allinall

phd wrote: »

This is exactly my reservation

Personally I wouldn’t have a problem with it.

Once you can afford it then I don’t see an issue.

SupaCat95

Make a cat or a dog of it. Live in the West or the East. Double the houses, double the bills, double the taxes on the same incomes. Recession is looming on the horizon. It probably wont happen and the Government will offset it with hyper inflation and FIAT currency either way you lose. Have a listen over at the accommodation and property forum, not a good time to be a landlord.

Also get a new financial advisor.

phd

SupaCat95 wrote: »

Make a cat or a dog of it. Live in the West or the East. Double the houses, double the bills, double the taxes on the same incomes. Recession is looming on the horizon. It probably wont happen and the Government will offset it with hyper inflation and FIAT currency either way you lose. Have a listen over at the accommodation and property forum, not a good time to be a landlord.

Also get a new financial advisor.

We can afford it. Our current mortgage is 15% of our take home pay. We have no dependants and never will. We are overpaying our current mortgage and still save more than one salary a month.

Agree about the new financial advisor though

John_Rambo

phd wrote: »

We can afford it. Our current mortgage is 15% of our take home pay. We have no dependants and never will. We are overpaying our current mortgage and still save more than one salary a month.

I'd do what the broker suggests. Sometimes you have to take a few risks and play smart with balls. There's no way I'd be in my house now if I 100% played by the rules.

SupaCat95

John_Rambo wrote: »

There's no way I'd be in my house now if I 100% played by the rules.

Hear the crazy crap they are doing in Australia? They are bidding $Aus 50,000 over their mortgage allowance on houses.... they have a month to find that extra money or they lose that deposit. That is a bubble looming. What do you do if the interest rates change? Now they are rock bottom and the banks will lend you the money hand over foot. Only to repossess them later (or you are forced to surrender, which is almost the same thing like the last recession)

phd

SupaCat95 wrote: »

Hear the crazy crap they are doing in Australia? They are bidding $Aus 50,000 over their mortgage allowance on houses.... they have a month to find that extra money or they lose that deposit. That is a bubble looming.

Affordability isn't an issue for us. I am a rule follower though hence my reservation. I'd rather wait two years and buy with cash but other half wants to buy now.

I would never bid more than I could afford. That is utter nonsense

John_Rambo

SupaCat95 wrote: »

Hear the crazy crap they are doing in Australia? They are bidding $Aus 50,000 over their mortgage allowance on houses.... they have a month to find that extra money or they lose that deposit. That is a bubble looming. What do you do if the interest rates change? Now they are rock bottom and the banks will lend you the money hand over foot. Only to repossess them later (or you are forced to surrender, which is almost the same thing like the last recession)

Yeah, that's crazy.

SupaCat95

phd wrote: »

Affordability isn't an issue for us. I am a rule follower though hence my reservation. I'd rather wait two years and buy with cash but other half wants to buy now.

I would never bid more than I could afford. That is utter nonsense

Keep an eye on UN Agenda 2030. Home ownership will be provided by the state or some other mechanism. Homeownership will be unnecessary.

I see the future as it will be irrelevant where most people will live with our new Covid lifestyles. There will be no service you can get in Dublin 4 that you cannot get Donegal or Kerry as long as you have decent internet (see Elon Musks new satellite internet), anything can be delivered to the front door or travel will still be restricted. Make the most of where you are.

Shedite27

phd wrote: »

Hi there we are looking to buy a house in the west of Ireland but want to keep our house in Dublin. Our broker recommended that we say we are going to live in the house in the west and then we would only need a 20% deposit otherwise it would be treated as an investment property which it is hard to get a mortgage for and you'd need 40% plus of a deposit. Anyone any experience of this? My husband is now permenant remote but I will have to go back to the office probably in the Autumn.

+1 on the "get a new advisor" idea.

You can only have one Principal Primary Residence. If your house in the west is your primary residence, then the Dublin home is an investment and would be subject to CGT when selling. Think of how much your Dublin home has appreciated since you bought it, give 33% of that to the tax man.

Ace2007

Shedite27 wrote: »

+1 on the "get a new advisor" idea.

You can only have one Principal Primary Residence. If your house in the west is your primary residence, then the Dublin home is an investment and would be subject to CGT when selling. Think of how much your Dublin home has appreciated since you bought it, give 33% of that to the tax man.

How do revenue know which is your PPR though? If they kept their Dublin address in revenue files etc

rob316

Shedite27 wrote: »

+1 on the "get a new advisor" idea.

You can only have one Principal Primary Residence. If your house in the west is your primary residence, then the Dublin home is an investment and would be subject to CGT when selling. Think of how much your Dublin home has appreciated since you bought it, give 33% of that to the tax man.

The buyer wants to get around the 40% deposit rule, he said nothing about avoiding CGT. Revenue couldn't care less if you paid 20 or 40% deposit.

AndrewJRenko

Ace2007 wrote: »

How do revenue know which is your PPR though? If they kept their Dublin address in revenue files etc

Do you think Revenue haven't been through this a thousand times before? How would you prove it if it was your job to prove it?

Ace2007

AndrewJRenko wrote: »

Do you think Revenue haven't been through this a thousand times before? How would you prove it if it was your job to prove it?

I dunno that’s why am asking - fair enough this is in west of Ireland - but if the second house was in wicklow or something how would anyone yet alone revenue know where you live.

In this instance, if you commuted to dublin or lived in dublin who would know??

You could just tell revenue that you split your timr but dublin is your PPR

AndrewJRenko

AndrewJRenko wrote: »

Do you think Revenue haven't been through this a thousand times before? How would you prove it if it was your job to prove it?

Is there are restriction on transferring your PPR? Unless the op is trying to evade CGT, which there is no indication in his/her post, why would this be an issue for Revenue?

If the op did transfer PPR to the house in the west and subsequently sold his/her Dublin residence, I’m pretty sure there is an indexation of CGT which takes into account the period it was his/her PPR such that tax would not be due in full on the amount the property has increased in value since it was bought. Those with accounting knowledge can give a more knowledgeable account of that.

phd

I should say our original ask to the broker was if we could get an exemption from a bank so we wouldn't have to wait to have 40%. I would prefer to go down that road and see if it's possible and if not then just wait.

Shedite27

Ace2007 wrote: »

How do revenue know which is your PPR though? If they kept their Dublin address in revenue files etc

If you're audited it's up to you to prove it. Having a mortgage application saying your PPR is in Galway wonldn't help

rob316 wrote: »

The buyer wants to get around the 40% deposit rule, he said nothing about avoiding CGT. Revenue couldn't care less if you paid 20 or 40% deposit.

No, he didn't mention it, but it's an expensive mistake I've seen a lot of clients make. Keep their starter home to rent out, then find out in 5-10 years when they sell it that they've a big unexpected tax bill. It's worth considering

maestroamado

phd wrote: »

Hi there we are looking to buy a house in the west of Ireland but want to keep our house in Dublin. Our broker recommended that we say we are going to live in the house in the west and then we would only need a 20% deposit otherwise it would be treated as an investment property which it is hard to get a mortgage for and you'd need 40% plus of a deposit. Anyone any experience of this? My husband is now permenant remote but I will have to go back to the office probably in the Autumn.

Why don't you go to your current mortgage provider and explain.
They already have all your details and if its feasible will likely fund.
I don't think you need dwell on which is PPR as it will not arise in my view.
If it does just you do not want to make a definite decision until you see how it goes...

athlone573

There are a few things coming into play here

1. Central Bank deposit limits
The central bank enforces deposit limits and quotas for different categories of buyers : first time buyers, second time buyers, and buy-to-let.

2. Lenders may charge different interest rates for holiday homes as compared to primary residences or buy-to-let

3. Tax framework only allows a married couple, under normal circumstances, to have one primary residence and any other residences are taxed for the purposes of capital gains tax. Other taxes may also apply.

It is worth bearing in mind that people have been charged in court for falsifying information on mortgage applications. Your situation may be seen as a little white lie but still.

phd

I've booked in to see a different financial advisor next week. Ultimately I'm confident we can afford a second house but I'm not comfortable lying or breaking any rules. If we can't get a deposit exemption from a bank we'll just wait. Thanks everyone for your comments it helped me to clarify what I thought on it and confirmed I was right to suspect the broker's advice was not right for me.

The J Stands for Jay

Shedite27 wrote: »

+1 on the "get a new advisor" idea.

You can only have one Principal Primary Residence. If your house in the west is your primary residence, then the Dublin home is an investment and would be subject to CGT when selling. Think of how much your Dublin home has appreciated since you bought it, give 33% of that to the tax man.

Only the appreciation which occured after it stopped being your PPR is subject to CGT. All your current gains are safe from Revenue.

3DataModem

OP, I've done this. Two things;

1. Lying to your mortgage provider is a risk you can choose to take. The worst thing that can happen is they find out and reject your application. Once you've drawn down there's nothing they will do (other than perhaps adjust your interest rate).

2. One you are in the house, don't lie to Revenue. Some people tried this in the boom times to avoid the stamp duty (who remembers 30k SD on a 400k house?) but they will eventually catch up with you, and the interest and penalties are not fun.

Ace2007

Shedite27 wrote: »

If you're audited it's up to you to prove it. Having a mortgage application saying your PPR is in Galway wonldn't help

Ok so if you didn’t mention that it was your PPR on the mortgage how would they know? Or if you were a cash buyer.

If you split your time between two properties and state that Dublin property is your PPR how can the disprove it? If you have family with kids and they are living/ going school etc in other country obv you can’t get round that - but single or couple who works in dublin - could easily be splitting time.

maestroamado

SupaCat95 wrote: »

Hear the crazy crap they are doing in Australia? They are bidding $Aus 50,000 over their mortgage allowance on houses.... they have a month to find that extra money or they lose that deposit. That is a bubble looming. What do you do if the interest rates change? Now they are rock bottom and the banks will lend you the money hand over foot. Only to repossess them later (or you are forced to surrender, which is almost the same thing like the last recession)

Yes the madness is back and it is not only in Aus...

Eire Go Brach

Allinall wrote: »

Personally I wouldn’t have a problem with it.

Once you can afford it then I don’t see an issue.

+1 on this.

Let’s be honest here. Its not as if the banks where honest with their customers.
They destroyed our country. And we bailed them out. Go for it. Once you can afford it.

AndrewJRenko

Ace2007 wrote: »

I dunno that’s why am asking - fair enough this is in west of Ireland - but if the second house was in wicklow or something how would anyone yet alone revenue know where you live.

In this instance, if you commuted to dublin or lived in dublin who would know??

You could just tell revenue that you split your timr but dublin is your PPR

It's very hard to hide real life activity. If you want to rent out one or other property, this becomes very obvious through income or RTB or complaint from tenant. If you want to claim that a mostly empty property is actually your PPR, utility bills will show that it was mostly empty.

Dav010 wrote: »

Is there are restriction on transferring your PPR? Unless the op is trying to evade CGT, which there is no indication in his/her post, why would this be an issue for Revenue?

No restriction on transferring afaik. I though the suggestion was to lie to Revenue about the PPR.

3DataModem wrote: »

OP, I've done this. Two things;

1. Lying to your mortgage provider is a risk you can choose to take. The worst thing that can happen is they find out and reject your application. Once you've drawn down there's nothing they will do (other than perhaps adjust your interest rate).

The worst thing would be to get the mortgage, end up in a default situation a few years down the road, and have your bad faith mortgage application played out in Court when you're trying to hold on to the property.

Claw Hammer

maestroamado wrote: »

Why don't you go to your current mortgage provider and explain.
They already have all your details and if its feasible will likely fund.
I don't think you need dwell on which is PPR as it will not arise in my view.
If it does just you do not want to make a definite decision until you see how it goes...

The central bank guidelines won't allow the mortgage provider to bypass the 40% rule.

Claw Hammer

McGaggs wrote: »

Only the appreciation which occured after it stopped being your PPR is subject to CGT. All your current gains are safe from Revenue.

Not correct. When the property is sold the gains are apportioned over the entire period of ownership. if you bough 4 years ago and sell after another 6, 50% of the gain is taxable, irrespective of when it occurred. the house could decline in value from the time of moving out and you could end up having to pay CGT.

phd

Isn't there an allowance banks have for exceptions when it comes to deposits? As two permenant employees with good income no dependants and no other debt I would hope we'd be a safe bet for a bank to give an exception to. Anyway we'll see what this other advisor says next week. For the record I have never and would never attempt to evade tax of any kind. That is pure madness.

athlone573

The banks have quotas for "normal" loans and for exceptions. I believe their quotas fill up mid way through the year. Your broker should know the details.

athlone573

AndrewJRenko wrote: »

It's very hard to hide real life activity. If you want to rent out one or other property, this becomes very obvious through income or RTB or complaint from tenant. If you want to claim that a mostly empty property is actually your PPR, utility bills will show that it was mostly empty.



No restriction on transferring afaik. I though the suggestion was to lie to Revenue about the PPR.


The worst thing would be to get the mortgage, end up in a default situation a few years down the road, and have your bad faith mortgage application played out in Court when you're trying to hold on to the property.

The worser thing would be to be criminally prosecuted for lying on your mortgage application.

I'm not being a holy joe but it has happened.

duffysfarm

I dont understand the chat re ppr.

If you are working in dublin and have a house in dublin and a house many miles away in the west of ireland then it is clear which house is the ppr. Common sense would dictate which house is ppr
Also electricity bills would be used to prove where the majority of time was spent for living time.

Brego888

Claw Hammer wrote: »

Not correct. When the property is sold the gains are apportioned over the entire period of ownership. if you bough 4 years ago and sell after another 6, 50% of the gain is taxable, irrespective of when it occurred. the house could decline in value from the time of moving out and you could end up having to pay CGT.

Where are you getting 50% from? CGT is calculated at 33% of the gain. And you only pay for the proportion that it was not principle residence.
If the gain was for example 100k over this 10 year period, having been non pppr for say 6 years the CGT would be 33% of 60k. Which would be 18k.

The J Stands for Jay

Claw Hammer wrote: »

Not correct. When the property is sold the gains are apportioned over the entire period of ownership. if you bough 4 years ago and sell after another 6, 50% of the gain is taxable, irrespective of when it occurred. the house could decline in value from the time of moving out and you could end up having to pay CGT.

I got some notion in my head that you could value it on the date you moved out and present that to Revenue. It'd be worth a try anyway

wench

Brego888 wrote: »

Where are you getting 50% from? CGT is calculated at 33% of the gain. And you only pay for the proportion that it was not principle residence.
If the gain was for example 100k over this 10 year period, having been non pppr for say 6 years the CGT would be 33% of 60k. Which would be 18k.

You get 12 month's grace from when you move out.
Hence 5 years ppr giving 50% of the gain subject to tax.

wench

McGaggs wrote: »

I got some notion in my head that you could value it on the date you moved out and present that to Revenue. It'd be worth a try anyway

You'd just be wasting the money you spend on it, Revenue don't care about the interim value.

Claw Hammer

Brego888 wrote: »

Where are you getting 50% from? CGT is calculated at 33% of the gain. And you only pay for the proportion that it was not principle residence.
If the gain was for example 100k over this 10 year period, having been non pppr for say 6 years the CGT would be 33% of 60k. Which would be 18k.

Where are you getting 60k from. The last year counts as PPR whether it was the PPR or not thus 4 years occupied and 6 years let means it is deemed to be a PPR for 5 of the 10 years.
The tax man must love you paying in more than you have to!

javaboy

wench wrote: »

You'd just be wasting the money you spend on it, Revenue don't care about the interim value.

Wonder if there's a low friction, low cost way to sell the property to yourself to lock in the non-taxable gains if you don't expect much movement in price in the coming years while it's not your PPR.

Claw Hammer

McGaggs wrote: »

I got some notion in my head that you could value it on the date you moved out and present that to Revenue. It'd be worth a try anyway

It is a self assessed tax. Get it wrong and find yourself stuck with interest and penalties. Not worth "a try".

AngryLips

Everyone is coming down very hard on the broker here. They sound like they're only doing their job, and that's highlighting opportunities for the client to get what they want within the existing rules - and I would say they're doing a good job with the advice given. I mean it sounds like there's scope for OP's partner to live there on a permanent basis, ultimately it's the OP+partner who will need to decide if they want to live that way or to represent themselves in that light on the application even if they choose not to live that way. Ultimately, the lie is inconsequential if both options result in a fully paid up second home.

SupaCat95

I would have to agree with some of the posters in that the broker is doing a decent job, if he's highlighting ways in which you can benefit from different rules/situations.

You went to a broker with the aim of getting a mortgage across the line, and the broker has pointed out ways in which you can do it. Switching broker would be foolish in my opinion.

Besides, what's to say you aren't planning to live there, but something changes upon drawdown and all of a sudden you're stuck in Dublin. Your broker seems good, to me.

SupaCat95 wrote: »

with our new Covid lifestyles

Rolled my eyes so hard I nearly hurt myself.

GerardKeating

phd wrote: »

This is exactly my reservation

but is/was it a lie. What do you plan to do with the second house, it purely a buy to let, then yes, it's a lie.

But if you have long term plans to migrate to the west, then it's not a lie.

GerardKeating

Ace2007 wrote: »

How do revenue know which is your PPR though? If they kept their Dublin address in revenue files etc

Claw Hammer wrote: »

Not correct. When the property is sold the gains are apportioned over the entire period of ownership. if you bough 4 years ago and sell after another 6, 50% of the gain is taxable, irrespective of when it occurred. the house could decline in value from the time of moving out and you could end up having to pay CGT.

Can a husband and wife have differnt PPR's ?

athlone573

athlone573 wrote: »

The worser thing would be to be criminally prosecuted for lying on your mortgage application.

I'm not being a holy joe but it has happened.

When has that ever happened?

Claw Hammer

Deleted User wrote: »

When has that ever happened?

https://www.breakingnews.ie/ireland/man-jailed-for-using-fake-documents-in-mortgage-application-1075213.html

https://www.irishexaminer.com/news/arid-30920295.html

AngryLips

Claw Hammer wrote: »

https://www.breakingnews.ie/ireland/man-jailed-for-using-fake-documents-in-mortgage-application-1075213.html

https://www.irishexaminer.com/news/arid-30920295.html

This example refers to providing third-party documents that have been falsified.

runawaybishop

Ace2007 wrote: »

Ok so if you didn’t mention that it was your PPR on the mortgage how would they know? Or if you were a cash buyer.

If you split your time between two properties and state that Dublin property is your PPR how can the disprove it? If you have family with kids and they are living/ going school etc in other country obv you can’t get round that - but single or couple who works in dublin - could easily be splitting time.

This revenue you are talking about here, they don't need to prove anything, they will fall down on whatever side means you pay more to them and it's up to you to prove otherwise.