Buying 2nd property - renting out current property

[amg63]

I am considering buying a 2nd property. I have been in my current home just over 5 years as owner/occupier.

I am wondering are there any pitfalls in renting out the house I have been living at and becoming owner/occupier of the 2nd property.

My current mortgage is down to less than €140k on a €380k house but would this have to change to an investment mortgage if the house effectively becomes that?

Also I am assuming I would have no stamp duty to pay on the new property as I would be owner/occupier there if it was new and met the floor space requirements.

I presume I would also be liable for CGT on the original property if and when I was to sell it.

Would appreciate any info to see if my assumptions are right. Thanks.

 

[NorfBank]

Yes, you should change it to an interest only investment mortgage.
Yes, there is no stamp for owner occupiers on a new property <125sq m.
You have 12 months grace from when you cease living in the original property to avoid CGT.

 

[landlord]

Yes, you should change it to an interest only investment mortgage.
Yes, there is no stamp for owner occupiers on a new property <125sq m.
You have 12 months grace from when you cease living in the original property to avoid CGT.

If you rent it for 11 months and then sell it in the 12th month, are you still exempt from CGT?

 

[BigM]

If you rent it for 11 months and then sell it in the 12th month, are you still exempt from CGT?

Yes.
You can only have 1 PPR so once you move in to your new house it becomes your PPR.
When you go to sell your old house the time you lived in it as PPR is exempt CGT. You also get 12mths deemed occupancy. So you lived there for 6 years as PPR, rent it out for 12mths and then sell it. Total ownership = 7yrs. PPR = 6yrs, Deemed occ = 1yr => CGT exemption = 100%
If you rent it for 2 yrs and then sell it, your PPR exemption is still 7yrs out of total 8yrs => 87.5% of the Gain is exempt. etc etc

 

[ubiquitous]

Yes, you should change it to an interest only investment mortgage.

This may be beneficial in some cases but I would argue strongly that interest only mortgages are not a good idea in the majority of situations.

If you rent it for 11 months and then sell it in the 12th month, are you still exempt from CGT?

Do bear in mind that the sale of a property will normally take longer than 1 month between the date it is vacated until the date the sale closes.

 

[Howitzer]

Yes.
You can only have 1 PPR so once you move in to your new house it becomes your PPR.
When you go to sell your old house the time you lived in it as PPR is exempt CGT. You also get 12mths deemed occupancy. So you lived there for 6 years as PPR, rent it out for 12mths and then sell it. Total ownership = 7yrs. PPR = 6yrs, Deemed occ = 1yr => CGT exemption = 100%
If you rent it for 2 yrs and then sell it, your PPR exemption is still 7yrs out of total 8yrs => 87.5% of the Gain is exempt. etc etc

A point to note on that is that IF the price of the property was less than or equal after year 8 than year 7 then you become CGT liable for gains that you would have had no liability for a year previously. The CGT is calculated on a proportion of the total increase in price of the property, not on the increase that occured whilst the property was CGT liable.

As each year passes a greater proportion of the gains that were achieved, tax free, whilst the property was a PPR will become liable for CGT. When you're talking about big numbers these things matter.