Used credit cards to part buy an investment property - where can I refinance it?

S

Sean Og

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As some of you may know i have been very successful in switching my mortgage 3 times in 6 months in 2018 to claim €18,000 in cash back. I would consider myself very clued in to mortgages and what way the Banks work. However i am having some difficulties with my latest situation. My wife and I bought an Investment property back in March 2019. It was a last minute decision but the property is in a fantastic location in a rural setting and is very popular as a holiday let on Airbnb etc. The sale prices was €130,000 plus €5,000 for all the furniture . This was amazing value and that is why we bought it. It had to be a quick sale hence the great value. I made a few basic enquiries with a couple of banks but they weren't very promising. Anyway we bought the house with saving of about €75,000 and then €30,000 from C.U @8.2 % and 2 Credit Card loans from Avantcard (€16,000 and €12,000) which were interest free for 9 months then 16.8%.

We have the property let since April and it is going very well for us so far. By March 2020 i hope to have taken in €16,000 in rent from short term Holiday lettings. I now need to refinance this property because (A) I need a mortgage in order to be able to reduce my tax bill from my rental income and (B) to pay off the C.U loan at 8.2 % and the two Credit Cards which will be 16.8% very soon.

The house has been valued at €180,000 so 70% mortgage will be €126,000

The house is actually in my wife's name so what options have we? Should we ask for a joint mortgage to buy the house from my wife?
The banks seem to have a problem with equity release to reduce debt from other borrowings.
We are sitting on an asset worth €180,000 with no borrowing against it and it is generating a great income of €16,000 pa but the Banks are very caggy about lending against this. They can't seem to understand that we borrowed from C.U and Credit cards in order to buy the house. If we get a mortgage we will pay off the Credit cards and C.U loan and use the remaining €65,000 to reduce the mortgage on our family home thus reducing our monthly repayment on that mortgage. We have no other properties :cool: .
 
Sean Og said:
I need a mortgage in order to be able to reduce my tax bill from my rental income
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From Revenue:

You may be allowed claim Mortgage Interest Relief against your rental income. The interest must be from a mortgage that is used to purchase, improve or repair your rental property.
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Sean,

Are you looking for tax advice, or advice on how to get a mortgage?

Tax:
You can only claim interest relief on borrowings that were used to purchase / renovate the property. Refinance of the loans used for purchase would be allowed. An equity release to repay part of PPR wouldn't. So if there's no interest relief, there's no point in doing it since the rate would be higher than on your PPR.

Transferring it between names isn't going to help with tax position as it's not an arm's length transaction.

Mortgage:
Talk to Dilosk or Finance Ireland. They might be happier to look at this than a bank would.
 
Sean Og said:
. Anyway we bought the house with saving of about €75,000 and then €30,000 from C.U @8.2 % and 2 Credit Card loans from Avantcard (€16,000 and €12,000) which were interest free for 9 months then 16.8%.
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Can't believe you did this. But at least you have a lot of equity. Is it that easy to borrow money on credit cards. What actually is a credit card loan.

I fail to understand why you didn't go for a mortgage on the property.

What did you tell the credit card companies and the CU the money was for?

My credit union does loans on property, not sure about investment property, but if you don't suceed with a bank than the CU looks cheap compared ot the credit cards.

Why did you purchase the property in the wife's name?
 
RedOnion said:
Transferring it between names isn't going to help with tax position as it's not an arm's length transaction.
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It's clear to me the property is jointly owned despite being in only the wife's name. The bank will want it in both names though to do a joint mortgage. And I doubt they'll allow one person only on the mortgage.

A broker should be his first port of call as they will have a better idea on what is possible or not.
 
I got approved for a 12 month interest free balance transfer up to 16k with An Post. Just a bit of form filling. It's a very cheap way to finance something!
 
RedOnion said:
Sean,

Are you looking for tax advice, or advice on how to get a mortgage?

Tax:
You can only claim interest relief on borrowings that were used to purchase / renovate the property. Refinance of the loans used for purchase would be allowed. An equity release to repay part of PPR wouldn't. So if there's no interest relief, there's no point in doing it since the rate would be higher than on your PPR.

Transferring it between names isn't going to help with tax position as it's not an arm's length transaction.

Mortgage:
Talk to Dilosk or Finance Ireland. They might be happier to look at this than a bank would.
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Thanks for that RedOnion, I am looking to borrow as much as possible because i want to write off as much income against mortgage interest relief. The property is in rural Donegal so not all banks will look at a BTL outside the big urban areas.
 
misemoi said:
I got approved for a 12 month interest free balance transfer up to 16k with An Post. Just a bit of form filling. It's a very cheap way to finance something!
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That is what my wife and i did in March to get the money to buy the house. We both got Credit Cards from Avantcard with 0% for 9 months. Good man nice one but i think An Post is through Avantcard but i might be wrong. If not i will certainly try. I did try BOI because they had a similar offer of 0% interest on balance transfers but they refused me. No reason why just refused. Should i ask them for a reason? It was just a back up plan because i don't want to be caught with the 16.8% for a few months.
 
Bronte said:
Can't believe you did this. But at least you have a lot of equity. Is it that easy to borrow money on credit cards. What actually is a credit card loan.

I fail to understand why you didn't go for a mortgage on the property.

What did you tell the credit card companies and the CU the money was for?

My credit union does loans on property, not sure about investment property, but if you don't suceed with a bank than the CU looks cheap compared ot the credit cards.

Why did you purchase the property in the wife's name?
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What can't you believe? I had to act fast. Yes very easy to get €16000 from Avantcard, just sent them on bank statements, payslips etc. Not sure what we told CU but we had savings of €20k there so they had no problem giving us the money. Must have said home inprovements.
 
Borrowing on a credit card is so so expensive, you won't be long losing some of the €18,000 you gained last year. Banks know the whole short term lettting thing is volitile, it's tourists dependent and gov policy around it is not favourable.. I would try borrow the money from family to try and pay off that credit card asap.
 
Sean Og said:
What can't you believe? I had to act fast. Yes very easy to get €16000 from Avantcard, just sent them on bank statements, payslips etc. Not sure what we told CU but we had savings of €20k there so they had no problem giving us the money. Must have said home inprovements.
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So neither Avantcard nor the CU know what you actually used the money for.

You might be better off paying the CU the 20K and then just owing them 10K !

Or going back to the CU to pay off the two Avant debts. of 16 + 12 = 18K. I thought CU's gave 3 times your savings. The you should have just borrowed 58K off them in the first place.
 
RedOnion said:
There's nothing at all clear about that, and many married couples separately own assets.
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You may legally separately own assets but still own them jointly. The money to do this was borrowed by both parties, deposit came from both parties etc. In fact I think the husband is doing all the running on this though I can't be sure.
 
You should simply concentrate on getting mortgage on the property to pay off the credit union and credit cards, forget about paying off some of your home loan as that is unlikely to be of any benefit, you're only swapping one repayment for another. Maybe the credit union will give you the lot if a bank won't? They might refinance the credit card ones plus their own into a secured loan on the property. Depends of course on CU and how big it is etc. Credit unions need to lend at the moment as they are getting no return on the money invested hence the hard sell by all of them!

From a bank's point of view, whether you think it silly or not, it's an equity release to clear other lenders debt which is probably not policy for most of them. They don't really look at the specifics, it's kind of 'computer says no' scenario, good broker might help though.
 
I understand that you have only recently just bought the property but would you even entertain the idea of selling it now? A quick €45k pre tax and expenses profit which could be used to reduce your PPR mortgage. I am absolutely not suggesting that you need to sell it but it would be well worth considering the upside.
 
OP can you convert the credit card loans to personal loans with the same company while you are trying to organise a mortgage if that will take a while.
 
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Bronte said:
So neither Avantcard nor the CU know what you actually used the money for.

You might be better off paying the CU the 20K and then just owing them 10K !

Or going back to the CU to pay off the two Avant debts. of 16 + 12 = 18K. I thought CU's gave 3 times your savings. The you should have just borrowed 58K off them in the first place.
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Fair point but i borrowed €28,000 interest free for 9 months ;) .
 
Bronte said:
He is. But I didn’t realise as I missed it. Cream Egg’s post made me go back to re read your OP.

Your problem is you can’t now borrow on your home and write that interest off your rental income. You can for the CU and the two credit card loans. Those monies were to buy the rental.

I know zero about air b&b rental though. Tax wise.
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I am not a tax expert but my understanding is that the borrowings must be an actual mortgage loan. Can you use credit card and C.U. loans?
 
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