Recently myself and my husband bought a new house together. My husband owns and has lived in another house that been his principal private residence for the past 10 years. When we were shopping around for a mortgage and with the various banking institutions, one of them enquired about the house he already owns – and said that they could see the balance of the mortgage on their screen and that it was registered as an investment property. This was not the bank that he has the mortgage with, but a completely different bank.
Anyway, when I confirmed that it was his principal private residence, they advised that he should look into it as he may be on the incorrect interest rate for an investment property. She showed me her computer screen where it said that his property was an investment property. Just wondering is this something worth checking out, and how we should approach it to get the correct answers?”
Mr T.B., email
It certainly is worth checking out, and not just because of the interest rate.
The first thing you need to check, however, is whether this mortgage was correctly classified at the time it was taken out by your husband 10 years ago, or more. Did he already own a property at that time, or have a share in one? If so, it could have been an investment property when the mortgage was drawn down and he may simply have forgotten to notify his lender of his changed circumstances when it became his principal private residence.
In that case, the fault would be his and there is no comeback on the lender.
But, if he did not own any other property at that time – and most especially if he was a first-time buyer on that occasion – you should certainly pursue it.
As a general rule, a principal private residence will attract a lower rate of interest than an investment property. And in the early years of a mortgage when every penny tends to count – at least for most people – it can make a difference even if the gap between the two rates is marginal.
More importantly, possibly, is the tax relief available – or should that be the relief your husband may have lost out on.
Mortgage interest relief is no longer available on homes bought sine 2012 but, for a first-time buyer who acquired a home between January 1st, 2004 and December 31st, 2008, it is still being paid at a special rate of 30 per cent. Moreover, this rate continues to apply up to and including the 2017 tax year.
The ceiling on the actual financial amount of relief that can be claimed for someone in that position is €10,000 for an individual and €20,000 for a couple.
In your case, the 10-year ownership period appears to place your husband squarely eligible for this rate – assuming he was a first-time buyer back then. As a single man, his upper limit would have been €10,000.
That’s a very generous rate: it’s double the 15 per cent available to non-first-time buyers acquiring a home in that period – and their relief would also be capped at €3,000 per person or €6,000 for a couple.
But, and here’s the rub, there is no mortgage relief available on investment properties.
So, either your husband has lost out badly on relief over the past 10 years, or the property was in fact an investment property because he owned something else at the time and therefore the mortgage was not entitled to relief.
I have to say it would be strange for a lender to mis-classify something like this. Generally – and especially back in the heady bubble days of 2006 – lenders were doing all sorts of funny sums to assure both their customers and their managers that homeloans were affordable.
Mortgage relief is, since 2002, tax relief at source – ie it is applied by the lender – so it would be no-brainer as a way for an anxious bank mortgage official to “cut” the repayments a borrower would have to find from their own pockets.
Still, mistakes do happen and if there is one thing we now know about those heady bubble days, it is that there was some remarkably sloppy paperwork and follow-through carried out in the rush to keep lending.
First stop, check with the lender of the original mortgage. The documentation alone – ie statements on the mortgage account – should indicate if mortgage relief was paid. But it is no harm to approach the lender, assuming they are still in the market. Your husband will have to do this as it is in his name. Was there a mistake? Why? If not, why not? Assuming there is a mistake, what does the lender propose to make it right?
That last would involve paying back the money lost in interest relief together with a sum to cover any loss that arises from your husband’s inability to invest that money elsewhere in those years.
Revenue should also be able to tell him if mortgage relief was applied to the account but the buck stops with the lender if there is a problem.
One final thing. Do everything in writing. And, if forced to communicate by phone, your husband should follow up in writing confirming the content of the call.
Selling Ryanair shares with a certificate
How can I sell shares if I have the share cert? I am looking so sell some Ryanair shares I bought many years ago. I don’t trade in shares regularly so don’t have a broker account.
The other shares I have are from Vodafone and Standard Life. Both of these companies offer shareholder dealing via there registrar but I don’t think Ryanair offer this service.
Mr M.K., email
My understanding is that you’re correct on Ryanair not offering a special shareholder dealing option through their registrar, Capita, in the way that Vodafone and Standard Life do?
However, that should not impede you too much. You have your share certificate. You simply need to approach one of the Irish brokerages and ask them to sell the shares for you.
Yes, this is not the sort of business that stockbrokers welcome. They make their money from added services and regular dealing. A one-off trade, such as this, earns them little. As a result, they will (a) try to persuade you to open an account with them and (b) in any case, charge you a hefty premium for a paper-based transaction – which is what coming certificate-in-hand is called.
If you have no interest in trading generally, it makes no sense to open a trading account and incurring unnecessary charges. If one broker insists, shop around. The same goes on what can be depressingly high charges for selling shares in Dublin on the basis of a share certificate.
The good news, of course, is that the rapid rise in the value of Ryanair shares over recent years means you are likely to enjoy a very healthy return on your investment – although the taxman will have to get his cut, at 33 per cent, on any gain of more than €1,270.
Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara St, D2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.
