Cashing in investment

Q&A: Q:I am hoping to buy a house in 2009. I have saved enough for a deposit. In 2006, I invested €24,000 in various investments. At the time, interest rates on savings were very low. Although these investments were low risk, I am sure that if I took them out now, I would lose money on them.

My question is, should I take out this money and take the loss so as to reduce the house loan or should I leave the investments in and take out a bigger house loan?

Mr P.L., Dublin

A:So there is someone out there buying a house in 2009. That is a small glimmer of hope for the rest of us as we battle through the recessionary gloom.

The one thing you don't mention is the mortgage and that, ultimately, will determine what you can or must do with your investment.

With the precipitous decline in the last 12 months, it is highly questionable whether this is the time to cash in a low-risk investment. You are quite correct that any such investment cashed in at this point will certainly be in the red. That would be a shame, especially as a conservative investment in blue-chip companies is likely to recover significantly over the next few years if left alone.

But the decision may not be left up to you. Mortgage lenders have overcompensated for the previous latitude granted to aspiring homeowners and most are now proving decidedly niggardly in the income multiples they are allowing in assessing repayment capacity on home loans. It could well be that a lender decides your investment should be cashed in - even at a loss - to reduce the amount they have to lend you up front.

If that happens, my suggestion would be to shop around. If you don't need to liquidate your investment, the chances are that you will be better off in the long term - though, naturally, there is no guarantee.

Q: With all the furore over the Anglo Irish Bank resignations and its consequent plummeting share price, should I be worried about the money I have in an account at the bank?

Or should I close my account without delay? Please advise as soon as possible as I am very worried about my savings.

P.S., USA

A:Your money is as safe as if it were in Fort Knox - at least until September 2010. The Government has provided a guarantee over all savings held in the six Irish banks covered by the State guarantee scheme until that date - including Anglo Irish Bank.

Even if the bank were to close, your only difficulty would be in going through the inevitable bureaucracy involved in having the State deliver on its guarantee. The people who are really in difficulty are shareholders in the banks.

Anglo Irish Bank shareholders hold an extraordinary general meeting next week to decide whether to accept a Government offer to recapitalise the bank.

Accepting the terms would see the stake of those shareholders diluted to just 25 per cent of their current holdings as the State will get 75 per cent control of Anglo Irish but it seems unthinkable that they will turn down the offer in the straits in which Anglo Irish finds itself.

Q:I have two questions on the subject of medical cards for the over-70s.

1) Is it gross income that is used for the threshold?

2) If you have a company pension and a contributory old age pension, is it the total of the two that is considered your income?

Mr E.G., Dublin

A:The answer to both questions is yes. The guidelines issued by the Government set the income threshold at €700 a week gross income for a single person and twice that for a couple. That translates to annual gross income of €36,500 for a single person over the age of 70 and €73,000 for a couple. Gross income would include income from all sources - pensions, dividends, rental income etc.

Deductions, including for tax and PRSI, are specifically ruled out, although people will still be able to apply on a hardship basis.

Q:A recent column featured a situation which parallels our own - ie loss of investments through collapse in bank shares and therefore loss of dividend income.

The threshold for a couple which was announced in October will still be € 72,800 in March 2009 notwithstanding that most pensioners' incomes/pensions will have risen on January 1st.

I assume the "new" threshold will not therefore have been index-linked - another devious ploy on Minister Harney's point to disqualify as many as she can?

Does the final paragraph of your reply suggest that there will be a means test every year from then on.

Mr T.R., e-mail

A:My understanding is that the threshold put in place when the revised scheme was announced was the relevant one for the starting point - March 2009. I cannot say whether the threshold will be index-linked in future years although I would assume there will be some adjustment made.

As you say, the indication from the Department of Health is that the means test will have to be undergone every year, but on a self-exclusion basis - that you assess your own eligibility and return your card if no longer within the threshold - I again assume it is the previous year's income that will count. That raises its own problems at the outset, with pensioners who often rely on dividend income to boost their earnings seeing a significant drop in that area this year compared to 2008.

Q:I am in the fortunate position of owning a house in Waterford and one in Dublin. Neither of them has ever been let out (or ever will be). I have owned the Dublin house since 1992.

I lived exclusively in the Dublin address until I bought the Waterford house in 2005. I declared this as my primary principle residence (PPR). However, since 2007 my circumstances have dictated that I live in the Dublin address about 60 per cent of the year.

My question is, can I still have the Waterford house as my PPR, even though I spend more time in the Dublin house? In other words can I declare which house is my PPR? I will then pay the €200 fee announced in the budget (with which I have no issue paying) to the appropriate local council.

Mr P.B., Dublin

A:Revenue defines a principal private residence as "the building or part of a building occupied by the individual as his or her only or main residence: during the period of 12 months ending with that time". Even if, for reasons of work, you are away for protracted periods, it remains your principal private residence.

However, in your case, it does appear as though the Dublin property is, strictly speaking, currently your principal private residence. However, in general, where you divide your time between two homes, Revenue will accept your nomination of which one is your main home.

At that point, you will be liable to pay the €200 fee in relation to the other home, which will be designated an investment property, to the relevant local authority.

Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2, or by e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering questions. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.