Home economics: Sinead Ryan answers your property questions

We have €163,000 outstanding on a fixed- rate mortgage on our home which we estimate to be worth €380,000. There are two years left on the loan at an interest rate of 4.1pc and the bank is charging us an early redemption fee of €6,000 to get out of the mortgage. The entire term has 18 years left. Would we be better off paying the fee and switching to a much lower fixed rate or sticking it out by which time interest rates will have risen?

A. Your loan to value (LTV) ratio is 43pc, which makes your mortgage an attractive candidate for switching since banks reserve their best rates for LTVs under 60pc. You can definitely do better than your current rate, either with a standard variable or on a new fixed-rate contract.

For example, AIB’s variable is 2.75pc, resulting in repayments of €957.59pm, which is over €100 less than you are paying now. On the fixed side, KBC’s two-year fixed rate of 2.8pc would cost you €961.56 while Bank of Ireland is at 3pc on €977.55.

Obviously you have to take the €6,000 charge into account. Switching now would only save around €1,300 in the first year, and €2,600 over two years and you’d have legal/switching costs also. While you are correct in saying interest rates will be increased by the time your contract comes up for renewal, it’s unlikely to be at a rate which would mitigate against you staying put.

It’s annoying, but my advice would be to stay put until the end of the fixed term and review the entire mortgage at that stage based on prevailing fixed and variable rates.

You could, in the meantime, approach your own bank with the above quotes (you can find them on ccpc.ie) and threaten to switch at the end of the term, unless it agrees to move you to a better rate. It might concentrate the mind.

Q. My husband and I are applying for our first mortgage. We both work hard and have been saving so much over the years, so we are now in a position to approach banks. My husband had been putting this off for some reason but I suspected he was just too busy with work, so I gathered all the paperwork and set everything in motion. To my utter shock the bank has refused the application on the basis that they discovered a loan my husband took out which I wasn’t aware of – it turns out was to pay off a gambling debt which I also wasn’t aware of. What can we do to regroup? He has completely given up gambling, removed his account and this loan is being paid off soon.

A. Joey Sheahan, of Sheahan Financial Planning says ‘financial infidelity’ is unfortunately quite common.

“It’s contentious, and the perils of gambling have been well documented, however, the impact on people’s finances to do with online shopping, hidden bank accounts and apps cannot be over-estimated.

“Being honest and open about your finances when you’re in a relationship is very important, particularly if you are married are entering into a huge financial commitment like taking out a mortgage.

“It’s good news your husband has closed the account, definitely the first step in the right direction.

“Sometimes a bank will decline a mortgage because the loan was not disclosed, rather than because you didn’t qualify as applicants.

“Your next step should be to contact the provider of your husband’s existing loan and explain that you want to reduce your monthly payments by as much as possible. An increased term could significantly reduce your monthly repayments, which would minimize the impact of the loan on the mortgage application.

“Then, contact a good broker who will be able figure out how much of a monthly payment your income can carry, without affecting your borrowing capacity for the mortgage.”

The Ryan Review

It’s anti-Dublin and anti-‘Protestant’. So why hasn’t Inheritance Tax been tackled properly in budgets over the years?

Property forms the majority of most people’s estates when they pass away. If you live inside the M50, and are the offspring in a “gentleman’s family”, that is, a singleton or one of two children, then you’re going to get hammered for tax compared to the large ‘Catholic’ family down the country.

Capital Acquisitions Tax is payable by an inheriting child on any asset over €310,000. So, a singleton inheriting the family home worth say, €550,000 (the average price of a South County Dublin family home), pays €79,200 to Revenue on this alone, leaving many having to sell the house they grew up in, just to pay the tax.

Contrast the situation with a family of five who can inherit a property worth up to €1,550,000 and not pay a cent on it.

It is unfair, and it’s not quite clear why it should be so. Tax is a blunt instrument at the best of times and families have become much smaller over the decades, so bills are increasing. Michael Noonan edged out tax-free thresholds a little, but they’re still a long way from the €542,554 each child could inherit tax free in 2009.

There is an argument, and it’s a good one, about why the State should protect inheritances at all, save for farms and family businesses, but if we do, then surely it shouldn’t discriminate against those who happen to be from small families.

It’s unlikely to be top of Paschal Donohoe’s list in October, but with the surge in house prices, someone should be thinking about it.