Your property questions answered
Parents going guarantor
I am a first-time buyer (age 26) and my parents have agreed to go guarantor on a house. The bank pretty much insisted on it as my earnings are not enough to get a large enough mortgage. I will be able to meet my monthly repayments on my own (with a tenant). It's a 30-year mortgage and I really don't want my parents to have to think about this at all when they get older in case it worries them. Can a guarantor be removed when a certain period of time is up - say 10 years?
With prices for first-time buyers being so high, this system of "two buyers, one owner" - where the buyer gets a guarantor to come on board - is becoming more common. It is, of course, just another way lending institutions have of making absolutely sure that, no matter what happens, they will not lose.
Your unease about saddling your increasingly elderly parents with worries that they could be in for some sort of complicated financial nightmare is understandable. A guarantor can be removed but the bank is going to be more interested in your earnings and ability to pay then it is in the length of time that has passed.
In even five years time your earnings could very well be higher, you will have a five-year track record of faultless monthly mortgage payments and your loan-to-value ratio should have been reduced. You would then be in a strong position to go back to the bank (or remortgage with another lender) and so remove your parents from the guarantee.
This column has heard of a situation where a lender was prepared to put limits, of sorts, on the guarantor from the outset through the intervention of a solicitor who drafted a mutually agreed document stating that when the borrower's income improved - or the loan decreased to a certain level - then the guarantee would no longer be relied on. You could ask your solicitor about doing this but, in five or 10 years time, you will be in a stronger negotiating position with any bank than you are now.
Selling French holiday home
We bought a small house in rural France six years ago with the intention of using it both as a holiday home for ourselves and for seasonal rental income. We found renting it expensive (in terms of advertising and the cost of getting someone in to clean) and a lot of hassle. For this and other reasons we now want to sell. Can you advise what will be the position on Capital Gains Tax.
Depending on your actual profit - which given that you are talking about rural France and not property boom Dublin could turn out to be quite low - you will have to pay Capital Gains Tax (CGT) in both Ireland and France. This will bring your CGT bill up to a potentially whopping combined rate of 36 per cent.
In France, an overseas investor is fully exempt from CGT after 15 years of ownership - you are only six years into ownership. Ireland's double taxation treaty with France doesn't include CGT so you are going to get caught for that here too. French property law is so different from Ireland, particularly in respect of inheritance and taxes, that you must get specialist tax advice.
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Unfortunately, it is not possible to respond to all questions. The above is a representative sample of queries received. This column is a readers' service and is not intended to replace professional advice. No individual correspondence will be entered into.
