No second home exemption

Q My husband owns our first family home near my current place of employment. We moved our family home for job reasons (three changes in interim). Our family home is owned by me - and is near my husband’s last employment (he recently retired).

In other words, we each own one property. We use both ourselves (linked to job needs).

We cannot get clarity as to whether we need to pay the €200 sum. We do not want to fall foul of the requirement but, as we are individual owners of individual property, we are not sure of our obligation. We are taxed jointly. The website does not answer this.

Ms P.C., Co Galway/Co Clare

A

As a married couple, you can only have one family home, or “principal private residence” as far as the Revenue is concerned. The only exception, as far as I am aware, is where there is a formal separation or divorce in place which certainly does not seem to be the case here.

The fact that neither property has been been rented during its period of ownership is not material. My understanding is that you are obliged to pay the €200 charge by the end of this month on one or other of your homes. In cost terms, it does not matter which you choose for the purposes of this charge - although you do have to state on the form (or website www.nppr.ie) the address of the “second” property.

However, there could be implications in tax terms down the line. As you are probably aware, you are entitled to sell your “principal private residence” or family home without facing a charge under the capital gains tax regime.

Any other property is seen in tax terms as an “investment” property and subject upon sale to capital gains tax. When you acquired either property, and its value then and now, are factors that might inform your decision on which property to delegate as your second home.

You are right in trying the ensure you do not fall foul of the regulations as there are increased costs for those who do not pay this charge on time.

Should we get a credit union loan?

Q We are having twins and are considering extending our home. Currently we have an AIB tracker mortgage which has a loan to value ratio of 25 per cent (principally due to 10 years of overpayments).

We are now considering a top-up to our mortgage to build an extension to our house. In the current market, I am concerned about approaching AIB in the knowledge that it will probably request that we switch to a standard variable rate in order to get the top-up.

Would it make more sense to approach our credit union for a short-term loan? I accept that their interest rates will be higher but I am loath to give up the tracker mortgage.

Ms Y.M., e-mail

A I can certainly understand your reluctance to surrender a tracker mortgage rate, especially at a time when Irish lenders have made it clear that they see no alternative to raising their margins on mortgage lending.

Indeed Irish Life & Permanent has already moved to boost margins by half a percentage point, which is significant in the context of the current level of mortgage interest rates.

The credit union is certainly an option, although no more than anyone else, they are having to tighten their lending criteria as they face mounting loan losses. The bill for an extension could be a reach for your local credit union.

However, it does not necessarily have to be a case of either/or.

You have a very low loan-to- value ratio thanks to what appears to be very responsible management of your mortgage debt during the boom years. It should be possible to leave your existing tracker loan in place and take out a separate second mortgage to execute the top-up necessary to fund your extension.

If you are staying with the same banks, particularly, this should not be a problem as there are no potentially conflicting claims to the underlying security - ie your home.

Of course, you will not receive a tracker rate on any new top-up - as I understand it, tracker mortgages are no longer available to the vast majority of the Irish residential mortgage market.

Your new loan will likely be at the standard variable rate unless you opt for a fixed rate.

However, the existing mortgage loan will remain in place as a distinct tracker loan.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2 or by e-mail to dcoyle@irishtimes. com. This column is a reader service and is not intended to replace professional advice.

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