Mortgage/Rental

[onlyonpaper]

Please excuse if I have some of this in the wrong location but its a bit complicated.

A friend has a tracker Mortgage on a residential property with PTSB (ECB +0.8%).It costs approx 950 euro per month and there is approx 5 yrs left so up to 90% of payment is on the principal. The house is empty at the moment but he would like to rent it out. Opinons on a few issues would be appreciated.
1) Is renting the house likely to lead to the PTSB to state that he has broken the current agreement and convert him to standard mortgage.
2) Will he have to change his house Insurance with change of status
3) Is tax on rental at the marginal rate if he is already paying at that rate in his job.
4) Are there other costs which could in total reduce or eliminate the advantage of renting versus the very cheap mortgage which he currently has.
He should be able to get a rent of approx 800 euro per month gross. Thanks

 

[Mrs Vimes]

A friend has a tracker Mortgage on a residential property with PTSB (ECB +0.8%).It costs approx 950 euro per month and there is approx 5 yrs left so up to 90% of payment is on the principal. The house is empty at the moment but he would like to rent it out. Opinons on a few issues would be appreciated.

If he is not living there he is liable for non-PPR tax regardless of whether the house is let out. He may also be liable for CGT when he comes to sell it.

1) Is renting the house likely to lead to the PTSB to state that he has broken the current agreement and convert him to standard mortgage.

Probably, check mortgage agreement to be certain.

2) Will he have to change his house Insurance with change of status

Yes, he should have informed his insurer anyway that it is vacant, they will almost certainly refuse a claim if he doesn't inform them and they will probably insist that he turns off water and electricity.

3) Is tax on rental at the marginal rate if he is already paying at that rate in his job.

Yes, it is added to his other income

4) Are there other costs which could in total reduce or eliminate the advantage of renting versus the very cheap mortgage which he currently has.

PRTB 70, insurance will probably go up, wear and tear/maintenance could be significant

He should be able to get a rent of approx 800 euro per month gross. Thanks

In this case his taxable rent will be 9600 - 855 (1140 interest @ 75%) less prtb, insurance and any maintenance costs (say 1000 total) less capital allowances (say 1000) = 6745 @ 41% = 2765 plus 5% prsi and 2% levy = 472 leaving him with net of (9600-1140-1000-1000-2765-472-200nppr) 3023 per annum.
Of course the figures would be different with a higher mortgage rate but it sounds like the mortgage interest is so low anyway that even doubling it would still leave him with a profit. It comes down to whether he needs the hassle of being a landlord.

 

[onlyonpaper]

Mrs. Vimes; Thank you for your comprehensive reply