Advice on second property purchase

thedirtydevil

So we have our home paid off mortgage last month. Paid 160k and currently worth 295k and have it 8yrs. We are looking for a bigger house not far from our current home in East cork.We are thinking of purchasing a new property in the area going for 450k. We would have about 140k of deposit and we have emough to cover stamp duty solicitors etc. I'm not sure we could take the stress of trying to do both deals at the same time or moving twice in terms of sell rent somewhere and then buy. Is it an option to take out mortgage for the 310k plus and maybe fix it for year or two and in that time sell the first home and then pay a lump off the mortgage. Haven't considered if we would rent it for the year or two as might not need to and just sell. All advice welcome

elperello

Watch out for the CGT relief rules.

If you have any doubts take legal advice.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cgt-reliefs/principal-private-residence-ppr-relief.aspx#:~:text=A%20Principal%20Private%20Residence%20(PPR,the%20property%20as%20your%20home.

SSeanSS

would you consider keeping on to it and renting it out? It will help pay the mortgage of new house, will be a nice little retirement earner and can pass on to kids if you have any. I’m in a very similar situation to you.

thedirtydevil

https://www.boards.ie/discussion/comment/122190859#Comment_122190859

Thanks. We should be ok. Put about 30k into it ourselves and with the time it was our PPR as well as conveyancing both sides we have little to pay. Thank you

thedirtydevil

https://www.boards.ie/discussion/comment/122190881#Comment_122190881

Considering that option alright. We are not a couple who like risk but it does make financial sense and might try rent it for the year or two maybe and see how goes. Just wondering will bank for the mortgage be wondering what we intend doing with the house we have.

etuzyuk

https://www.boards.ie/discussion/comment/122190897#Comment_122190897

"might try rent it for the year or two maybe and see how goes"

Be extremely careful OP, revenue will be very anal about what they consider PPR and capital gain if you go down this route.

Gregor Samsa

OP, I'm in a similar situation. Mortgage paid off on current house, looking to move. Have cash for healthy deposit, and will finance the rest with a new mortgage that we plan to pay (all or most) off with the sale of the current house once we move.

As mentioned, CGT is the thing to look out for, as you are required to pay CGT on profits from selling property that isn't your Principal Private Residence. Obviously, during the time that you own the two houses, only one of them can be your PPR.

However, Revenue have accounted for this situation. Assuming your current house is your PPR now, the last 12 months of ownership of it will be included in your period of occupation.

Note

The last 12 months of ownership of a PPR is considered to be included in your period of occupation.

This allows for the possibility that you have moved into your new home, but have not sold your previous home.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cgt-reliefs/principal-private-residence-ppr-relief.aspx

So you basically have a year to sell it after you move into your new home.

From that point of view, a fixed mortgage might not be to your advantage, as they're usually penalties or restrictions on paying it off early. So it may be that you take your chances with a variable rate mortgage as it will be for a short period of time (assuming everything goes according to plan).

But I would assume that if you rent out at all, then you're basically giving up any notion of it being your PPR (unless you were to move back in for a period of time, in which case your new house would cease to be your PPR).

Just wondering will bank for the mortgage be wondering what we intend doing with the house we have.

I don't think they will. I mentioned to our bank that we'd be planning to sell the current house after and pay off the mortgage. They said that it wasn't something they could take into account in terms of mortgage approval, as anything could happen with the sale, the house, the market, etc. It would be the same with a plan to rent it out.

Kurooi

^ Well now, after the 12 months you just pay a portion of the CGT for the time that the property was not your PPR. For example if you own and live in a house 10 years, move out and sell it 2 years after moving out - it was your PPR for 10+1 of the 12 years so you only pay 1/12th the CGT. It's not that bad.

By all means OP nothing is stopping you from taking on a new mortgage, for whichever property you want actually. Be aware you're not a FTB anymore so they're going to be a little bit extra fussy about your application but you will do fine.