Buying a second property instead of renting

gmackk

Hi there,

In the past couple of years my family has decamped back to Munster whilst I have stayed in Dublin mid-week for work. We are building a house at the moment and I am paying ~€1600 pm for rent in Dublin. We are building the family home with a €200k mortgage, and I was considering buying a second property in Dublin to use during the week for work, instead of paying rent. Just wondering if anyone has any experience of this, and if this second property would automatically fall into the "holiday home / investment property" bracket. I am taking it as a given that I will need to have min 25% of property price as a deposit, but just wondered if there's any savings or tax exemptions that I could benefit from. Note that the family home is in my wife's name but we are both listed on the mortgage. If i buy a second property and have just my name on it and on the mortgage, does it still count as a second property if my name isn't on the family home?

Peregrinus

If you're buying it to live in yourself, the bank won't regard any loan you apply for as a loan for an investment property/property to let; you're buying a second home. Central bank rules will allow the banks to lend on just a 10% deposit. But the bank will need to know that you have sufficient income to service both the loan on the Cork property and the loan on the Dublin property. They will be strict about this, because that's a degree of financial commitment that would put the majority of people under considerable pressure.

Pretty sure there are no tax incentives offered for the purchase of a second home.

TheWonderLlama

Sorry, but that is entirely wrong in my experience.

I have done this, and changed mortgage twice, Each time, the banks regard the Dublin property as an investment property and price it accordingly.

The property down the country will have the family home declaration and any other property is seen by the banks as investment, even if you are living in it.

gmackk

Ok, thanks for the reply.

SharkMX

My BIL did this a few years ago. You just tell the bank that this is now going to be your family home. As long as you arent remortgaging the the existing house then the sale will not go through as an investment property with the bank. You'll need 10% deposit and you can even get a BER low rate mortgage.

Then after the mortgage is drawn down you make your current home your family home again.

Another option, but ive not seen this one done is just say you are taking a break from the wife for a while and need to buy your own place.

TheWonderLlama

so you're advice is to lie to the banks? Good luck with that.

SharkMX

https://www.boards.ie/discussion/comment/122148373#Comment_122148373

You say that as if you think it doesnt happen all the time :)

Bass Reeves

https://www.boards.ie/discussion/comment/122148373#Comment_122148373

He would not be lying to the bank. He is taking a break from the wife, however its a mid week thing. Banks will often turn a blind eye to things like that. Not only that he could retain it as his family home and possibly use the rent a room allowance for a tenant.

If he can afford it he be crazy not to buy a small apartment as a second home if he is going to be in Dublin longterm rather than renting

https://www.boards.ie/discussion/comment/122159388#Comment_122159388

Telling the bank the new home is to be the family home and switching back later is one thing. Not a huge issue in my view.

Telling the bank you want a mortgage to buy a new home because you're separating from your spouse would be pretty stupid. You're basically telling the bank you want to get a mortgage at the beginning of a years long legal process which will impact on your income, assets, pension, AND which is likely to absorb a 5 figure sum in legal fees.

Oh, and the property you'd be buying would be part of your assessable assets while going through the legal process. Having actual notice of this, the banks security would be ranked after any judicial decision.

There's a reason you haven't seen this done- there's so many red flags for a lender that it wouldn't get through an underwriter.