Our property finance expert answers your questions

I have been involved in property investment for years by way of a buy-to-let which I purchased in 2004. It has done quite well despite everything, but at this stage it’s almost impossible for me to make any return on it with the restrictions on rental income and rent pressure zones, which it is in. I’ve decided to sell up before the market flattens, but my question is what to do with the gain.
 

I anticipate around €186,000 and would very much like to look for property-related investment, possibly commercial but I’m not really sure. What is available for me?  

This is indeed a thorny topic. First things first, I assume your gain is net of Capital Gains Tax which will be payable on the uplift since 2004 and any sale price you achieve.

You also have obligations under the RTB toward tenants, and indeed, longer notice periods are being agreed through the agency at the moment, which will have to be cemented by the Oireachtas, but you should keep yourself abreast of these as they develop.

I know you remain interested in property as an investment vehicle, but wonder whether this is for sentimental or ‘gut instinct’ reasons, which can be an Irish nuance, or whether in fact you ought to be seeking the highest return across all asset classes, or a mix.
I asked Brendan Costello, of Galway-based Talk Financial about his recommendations for property investment. “Very few people still like property who don’t want to physically buy property,” he says. “Most just want out at this stage. The challenge for someone who wants to remain in the market but not in its current mix, is to access property funds on an insured basis. It’s a very slow market in recovery, with downward pressure on retail and commercial buildings as Covid put the market under serious pressure.”

He cites me the example of a pub which fetched €12.5m just before the pandemic hit, while the entire frontage of a nearby shopping centre with nearly 20 units, is currently pricing at €9.7m.

“If you don’t want to buy direct, and I would strongly dissuade from it at the moment given the heat in the market, what you’re buying into is a property fund in the likes of Irish Life or Zurich [insurance company] or buying into retail wholesale over the next four to six years as a passive investor, and there’s not much yield at all”.

Mr Costello adds that if ESG factors (environment, social and governance) are important to you, funding social housing, largely in the UK is also available through investment funds.
“A lack of government support has closed a number that were here such as Arena Capital partners which were identifying and financing secure long-term tenancies”.
As ever, this is an area where specific expert advice is strongly recommended from an independent financial broker, preferably.
 

First-time buyer here. I just want to ask if there’s a possibility of getting an approved joint mortgage for me and my husband if one of us has just been accepted to a job? Or do we need to wait six months to be approved?

I’m going to say it depends, because there’s no hard and fast rule laid down by lenders, or the Central Bank for this, however, good financial management along with the ‘prospects’ of applicants are all taken into account. I’ve seen people get over the line when they’re not yet permanent, because their qualifications and CV are such, that they’re bound to be a good risk.

Think of professionals like a doctor, or pharmacist, for instance. In addition, if they’re not looking for the full 90pc, and the property on which the loan is based is worth far more than the loan being requested, lenders aren’t so hard and fast on certain rules.
I don’t know your precise circumstances, but I’m going to assume that as first-time buyers you’re looking for the maximum loan available. Joey Sheehan, author of The Mortgage Coach agrees there is a ‘possibility and maybe a probability’ you won’t need to wait six months.

“If there is no probationary period then some banks would have no issue approving you once you can provide one payslip from the new employer on the basis that your husband has moved straight from a similar role with similar wages. If a probationary period applies, they may want him to complete it before they will advance funds, unless your husband is a higher earner and works as a professional or is state employed. Depending on your income it may determine if [the] bank would waive probation also, as if you are close enough to qualifying for the full loan on your own, they may waive completion of [the] probationary period.”

Source: https://www.independent.ie/life/home-garden/ask-the-expert-whats-the-best-way-to-reinvest-now-that-im-selling-my-buy-to-let-property-41840038.html

Q My wife has inherited a home with her two siblings. They have made the decision to sell it. We expect to have €200,000 in cash in six to nine months’ time. We have not been saving. She is self-employed and her salary fluctuates, but she has made a minimum of €50,000 in the last three years. I work as an engineer in a global software company and my salary is €90,000. I also take home €30,000 a year in bonus payments and shares. Can we use the €200,000 as our deposit, and still get a mortgage, even though we haven’t been saving?

A Yes, absolutely, you can use the €200,000 you are about to inherit as a deposit, is the answer from Joey Sheahan, head of credit at online broker MyMortgages.ie. If you have been paying rent, then the monthly rental payments will serve as proof to the lender of your ability to meet monthly mortgage repayments, he said. If you are not paying rent, then you have ample time, between now and when you receive the inheritance funds, to start saving now to be able to show the necessary savings record of six months to the mortgage provider, Mr Sheahan said.

Q My wife and I are currently insured under Vhi One Plan Extra. This plan has an annual cost of €1,646.78 each. She is aged 71 and I am 75. We are both relatively healthy and have full medical cards. Vhi Healthcare recently sent me an email saying that my plan is being replaced by a plan called Enhanced Care Complete 75. No details of this plan, or its cost, were provided by the health insurer. Could you recommend an alternative plan, or an alternative provider if necessary? We have been with Vhi Healthcare for almost 50 years now.

A The One Plan Extra scheme is one of the many plans that have now been retired by Vhi Healthcare. It covers up to semi-private in private hospitals with some refunds on eligible out-patient expenses, according to Dermot Goode of TotalHealthCover.ie. Before considering the alternative plan proposed by Vhi, which is the same cost as your existing plan at €1,641 per adult, Mr Goode said you should consider an alternative Vhi corporate plan called PMI 3613. This costs €1,340 per adult. He said this is an excellent scheme covering the same hospitals, subject to a small excess for each private hospital admission (€75 per claim). It includes excellent high-tech cardiac cover and higher refunds on eligible out-patient expenses with no excess to pay first, the broker said. If you are open to switching insurer, you could also consider the 4D Health 2 scheme from Irish Life Health at €1,351 each, or the Simply Connect scheme from Laya Healthcare at €1,361 each, Mr Goode said.

Q I contribute 25pc of my income towards my pension, which is with Irish Life. I’m fully conscious of how markets can fluctuate, particularly this year. That said, I am losing money at the moment, which is hard to accept. I wonder should I stop my contributions altogether or should I keep going? Any advice would be appreciated.

A Stock markets are volatile and will fluctuate up and down over time. They are particularly volatile at the moment given what is happening in the world. A long-term view is best, according to Joey Sheahan, director of MyLifeCover.ie. He said he would not worry about a loss like this in the short term, as it is inevitable that you will see losses for some of the years over, say, a 30 or 40-year period. When values fall in the market, that is the best time to buy as there is an opportunity to buy units at a lower level, which will hopefully recover to previous levels over time, the financial adviser said. Mr Sheahan said you should continue your contributions to your pension, on the basis that you are buying at a lower level than previous values. It is also important to review your risk profile and ensure that you are invested in the appropriate funds. For example, somebody with a high-risk appetite could invest in funds which could show much higher movements. This might include, say, a 20pc increase or decrease in values in a short period. Someone with a low-risk appetite could invest in lower-risk funds, which would have much smaller movements, maybe moving 3pc or 5pc up or down in a short period. Mr Sheahan recommends that you seek advice from a financial adviser before making any decision about your pension.

Source: https://www.independent.ie/business/personal-finance/can-an-inheritance-be-used-for-a-deposit-as-we-have-no-savings-41825924.html

A leading mortgage broker is calling on the country’s eight main lenders to increase the mortgage approval timeframe from 6 to 12 months.

Experts at online brokers MyMortgages.ie are reporting swathes of borrowers getting on average two or three mortgage approvals from lenders because of the time lag between their initial approval and finding a property.

Joey Sheahan, Head of Credit at MyMortgages.ie and author of The Mortgage Coach explained the situation.

“The most recent BPFI statistics showed that there were 5,355 approvals in May 2022 alone – 2,640 of which were for first time buyers,” he said. “From what we’re seeing on the ground, there’s a probability that up to 40% of these applicants were also approved for a mortgage in the last 12-24 months, but have not been able to find a suitable property in the intervening period.

“These volume of these reapplications could be reduced and could significantly lessen the workload of both borrowers and lenders alike, and could, in many cases, result in quicker turnaround times for mortgage approval in the market overall.”

MyMortgages.ie contend that only around two-thirds of the €1.45bn approved in May is likely to be drawn down, based on the current approval process and due to the lack of housing supply.

“The dearth of supply of housing in this country is likely to be with us for many years to come unfortunately. In the meantime, we have to look at other ways of alleviating the stresses of potential purchasers, and expediting the process, where possible, for those who are fortunate enough to be in a position to buy,” Mr Sheahan said. “If banks were to introduce a 12-month approval as standard, which some banks previously offered, it would have a significant impact on the marketplace. Some estate agents won’t allow borrowers to even view properties if they do not have a current approval, meaning that borrowers are forced to keep renewing their approval.

“As far as I can see, there’s really no impediment to banks offering a 12-month approval. There would be no risk to lenders because prior to issuing a loan offer, which is the formal contract between the lender and the borrower, the bank can always request an update from borrowers on any change of employment or other circumstances in the interim that would have a negative implication on their financial status. A mortgage approval is always subject to change prior to draw down.”

Source: https://www.independent.ie/life/home-garden/ask-the-expert-whats-the-best-way-to-reinvest-now-that-im-selling-my-buy-to-let-property-41840038.html

On this episode of The Home Show: The Mortgage Coach gives his tips and tricks for what to consider when switching; if you’re looking to get away from it all this summer, we’ll be chatting about self-building campervans; The Holistic Gardener joins Sinead to help you create a low-allergy garden, and Optimise Design’s Denise O’Connor will be busting interior design myths and showing us how to curate our bookshelves!

Listen here: https://www.newstalk.com/podcasts/the-home-show-with-sinead-ryan/mortgage-switching-interior-design-myths-and-low-allergy-gardens

Ireland’s mortgage switching market is exploding and not ahead of time – this is according to MyMortgages.ie, the online mortgage brokers who are reporting a 39 percent increase in their own levels of switching activity between March 2021 and March 2022.

The mortgage experts say there are a few main drivers to the avalanche of people looking to switch – namely KBC and Ulster Bank leaving the market, a sharp increase in competition, and some awareness around possible oncoming rate rises from the ECB. MyMortgages.ie are reporting that in the last 12 months alone

ICS and Avant Money introduced interest rates at 1.95 percent for up to five years fixed.

Finance Ireland and Avant introduced long term fixed rates up to 25 or 30-year fixed terms.

Haven Mortgages introduced a green rate of two percent fixed (all the way to 90 percent Loan to Value for four years with €2,000 cashback for switching.

The mortgage experts say they expect the volume of switching activity to ramp up to an unprecedented level as the year progresses. MyMortgages.ie have set out four examples of average cases in which the mortgage holder in question was able to make big, but not uncommon, savings:

Case 1

Currently on a standard variable rate of 4.25 percent with KBC or Ulster. Loan amount owing is €200,000 and value is €400,000 = 50 percent Loan to Value. Term remaining 30 years.

New interest rate 1.95 percent meaning repayments reduce by €249 monthly or €3,988 annually or €89,530 over 30 years.

Case 2

Currently on standard variable rate of 4.25 percent with KBC or Ulster. Loan amount is €300,000 and value is €400,000 = 75 percent Loan to Value. Term remaining 30 years.

New interest rate 2.15 percent meaning repayments reduce by €343 monthly or €4,116 annually or €123,480 over 30 years.

Case 3

A customer that owes €300,000 on a variable rate of 4.25 percent with KBC or Ulster Bank, with 30 years remaining, would have monthly repayments of €1,475.

A 0.5 percent interest rate rise would increase this to €1,564, which is an annual increase of €1,068 or €32,040 over 30 years.

A one percent rise in the ECB’s benchmark rate would increase the monthly repayments to €1,656 which is an annual increase of €2,172 or €65,160 over 30 years.

Tracker Mortgages MyMortgages.ie have observed that, in recent months, they have seen a steady increase in tracker rate mortgage holders enquiring about long term fixed rates, fearing that future interest rate rises could wipe out the benefit of their low margin trackers.

Case 4

A borrower that has €300,000 outstanding on a tracker rate of one percent, with 20 years remaining, would have a monthly repayment of €1,379.

A 0.5 percent interest rate rise would increase this to €1,447 – which is an annual increase of €816, or €16,320 over 20 years.

A one percent rise in the ECB’s benchmark rate would increase the monthly repayments to €1,517, which is an annual increase of €1,656 or €33,120 over 20 years.

Source: https://www.independent.ie/business/personal-finance/do-i-have-to-tell-my-insurer-we-have-ukrainians-living-in-our-home-41557829.html

The average price of buying a residential property increased by 14.8 per cent nationally between January 2021 and January 2022 according to figures released by the Central Statistics Office (CSO).