Easier to get mortgage if planning to rent one/some of room(s)?

NeptunesMoon

im thinking to try my hand at getting approved for a mortgage. im 30 years old, single, no kids, self employed, no debts and always pay my rent on time and could afford to pay more if it meant owning my own place.

id much rather live in a house than an apartment and given most houses are more than 1 bedroom, would probably mean id have rooms to rent out to help pay the mortgage.

ive briefly heard of something like a rent a room scheme and then i think there might be some first time buyer relief or something too (yep, im clueless as a whole) so was wondering at what point, if any, does rent received have to have tax paid from it, so i cant just put it all towards the repayments without having paid tax from it?

Is there a stage where the amount of tenants affects this and if he im getting money from the likes of airbnb instead of a longterm tenant, does this change things? What if I decided to live in another country and rented out my room too and used the money from this tenant to pay rent on a place abroad?

im currently paying 550 for a bedsit per month, i could probably afford to pay 800 per month quite comfortabl for a mortgage and then id have income from rent, id ensure id have a funds for any non rented periods of tenants moving out abruptly etc, but my current area which id like to stay in, has a very high rent demand so i should be ok mostly.


also, is the 10% deposit requirement just a case of having 10% of the mortgage total in an account to show the bank, or does this 10% have to be paid off from the mortgage immediately? As in, if I had 20K in my account, can I keep it, or do I need to put it towards the mortgage and be left with none of it?

cheers for any help!

Sarn

There is no first time buyer relief, apart from a DIRT refund on savings used to pay the mortgage (up to a limit).

You can't keep your deposit, it has to be paid to the seller of the property with the mortgage money to make up the total cost of the purchase.

In relation to rent a room, you must occupy your home as your sole residence during the year of assessment. This means that it is your home for the greater part of the year and is where people would normally expect to make contact with you. Living in another country wouldn't work. The rent received still needs to be declared in your annual tax return.

Rental income from renting a room in your home (and related services) is exempt from tax, up to a maximum limit of €12,000.

You will not qualify for the relief if:

Your gross income from rent and related services is over €12,000. In this case, Revenue will treat your rental income minus allowable expenses as part of your total income for tax purposes and should be included in your tax return.

You are renting the room in your home to your son or daughter (but there is no restriction in the case of other family members).

You are renting the room to short-term guests e.g. Airbnb.


I am not sure if the banks take rent into account when considering ability to repay the mortgage, I don't think they do.

NeptunesMoon

cheers for the reply, very helpful, although not the best news. When you say I won't qualify for the relief if income is over 12k, does the first 12k still qualify?

If I was still using the address as my main residence, but may at times decide to move to another country for a few months, so as long as I'm living there for 183 days out of 365 I'm ok?

I've seen campaigns trying to get income from the likes of airbnb to be included in the rent a room scheme, I wonder will this change soon?

athtrasna

NeptunesMoon wrote: »

cheers for the reply, very helpful, although not the best news. When you say I won't qualify for the relief if income is over 12k, does the first 12k still qualify?

If I was still using the address as my main residence, but may at times decide to move to another country for a few months, so as long as I'm living there for 183 days out of 365 I'm ok?

I've seen campaigns trying to get income from the likes of airbnb to be included in the rent a room scheme, I wonder will this change soon?

Rent a room applies to a resident landlord and is for income up to 12k (including bills). It is not designed to be abused.

The government have stated clearly that Air BnB will not be included in the rent a room scheme. The rent a room scheme is designed to help alleviate the long term accommodation crisis, not to provide an alternative to hotels or hostels.

All the info you need on rental income can be found here http://www.revenue.ie/en/tax/it/leaflets/it70.html

4ensic15

Go a cent beyond the 12k and the whole lot is taxed. Income tax at marginal rate, USC and possible exposure to CGT. At the present time the banks will not take income from rent a room into account in asesssing ability to pay. As for the frequent absences abroad you may as well have the word chancer branded on your forehead and stamped on all the paperwork you send to the banks and the revenue.

CIARAN_BOYLE

4ensic15 wrote: »

Go a cent beyond the 12k and the whole lot is taxed. Income tax at marginal rate, USC and possible exposure to CGT. At the present time the banks will not take income from rent a room into account in asesssing ability to pay. As for the frequent absences abroad you may as well have the word chancer branded on your forehead and stamped on all the paperwork you send to the banks and the revenue.

I thknk the threshold is actually 12,012 or amni mixing jt up with something else?

Greyian

CIARAN_BOYLE wrote: »

I thknk the threshold is actually 12,012 or amni mixing jt up with something else?

Pretty sure €12,012 is for USC.

L1011

Sarn wrote: »

I am not sure if the banks take rent into account when considering ability to repay the mortgage, I don't think they do.

They haven't for some time, as its not guaranteed at all - and was a common lie in the old days also.

CIARAN_BOYLE

Greyian wrote: »

Pretty sure €12,012 is for USC.

Yeah it i thought it was the same for both but no

NeptunesMoon

cheers again for the replies. What way does it work with bills on the 12k? If I had two rooms to rent for example, and having the two extra tenants meant an increase in electricity and bin charges, say if each tenant was paying 450 a month, that's 10,800 a year between them, so if bills were €1,199 I'd not be taxed on any of that income, but if bills were €1,201, I'd be taxed 20% on the whole lot? Is it even possible to have 2 tenants or is it just one?

athtrasna

NeptunesMoon wrote: »

cheers again for the replies. What way does it work with bills on the 12k? If I had two rooms to rent for example, and having the two extra tenants meant an increase in electricity and bin charges, say if each tenant was paying 450 a month, that's 10,800 a year between them, so if bills were €1,199 I'd not be taxed on any of that income, but if bills were €1,201, I'd be taxed 20% on the whole lot? Is it even possible to have 2 tenants or is it just one?

You can have two or even more but total income (including bills) cannot exceed 12k or it becomes taxable. You need to complete a return to Revenue every year even when availing of Rent a Room.

NeptunesMoon

cheers thanks for that. So it's better to take in €11,500 in the year than €13,500 as you'd only end up with €11,250 from the €13,500 after paying the tax?

4ensic15

NeptunesMoon wrote: »

cheers thanks for that. So it's better to take in €11,500 in the year than €13,500 as you'd only end up with €11,250 from the €13,500 after paying the tax?

It depends on your marginal rate and there is USC. Also CGT implications.

NeptunesMoon

NeptunesMoon wrote: »

cheers thanks for that. So it's better to take in €11,500 in the year than €13,500 as you'd only end up with €11,250 from the €13,500 after paying the tax?

You would most likely end up with a lot less than 11250, probably closer to 7k if you are paying tax at the higher rate.

Its simple really just keep tabs on what you are taking in every month, the rent will be fixed anyway so you will know how much you are going to get from that but keep an eye on what you are taking in and if you think you will go over the 12k don't take money for a bill or two or whatever way you want to work it.

unless you are renting a few rooms or the rent is very high you shouldn't be going over 12k too easily anyway. If you think you might be close to it in advance another option is to take a fixed amount every month from the people which will include bills even if its less or more than the bills actually are thus you can fix it to stay under 12k.

Personally if I were operating a rent a room scheme I would prefer to keep rent and bills separate i.e. fixed rent and divide up all bills as they come in but some favor the fixed amount approach.

Greyian

Joey Prehistoric Bunny wrote: »

You would most likely end up with a lot less than 11250 from the 13500.

its simple really just keep tabs on what you are taking in every month, the rent will be fixed anyway so you will know how much you are going to get from that but keep an eye on what you are taking in and if you think you will go over the 12k don't take money for a bill or two or whatever way you want to work it.

Or, simpler still, just include the bills in the rent.

If you have 2 people, €500/month per room (assuming you can get that much, it would depend where you live). That way you maximise your income, without exceeding the €12,000 limit, and there is never any awkwardness with figuring out how much of the various expenses you can pass on each month without going over the limit.

Greyian

Greyian wrote: »

Or, simpler still, just include the bills in the rent.

If you have 2 people, €500/month per room (assuming you can get that much, it would depend where you live). That way you maximise your income, without exceeding the €12,000 limit, and there is never any awkwardness with figuring out how much of the various expenses you can pass on each month without going over the limit.

I edited my previous post to mention this option also. As I said though I would personally prefer having a fixed rent and dividing up bills as they come in as in most situations its unlikely you are going to get 12k per year doing rent a room. Basically it up to personal preference what way you want to work it.

Mrs OBumble

4ensic15 wrote: »

As for the frequent absences abroad you may as well have the word chancer branded on your forehead and stamped on all the paperwork you send to the banks and the revenue.

I don' think this is necessarily true. If you have a job that sends you abroad for 2-3 months at a time, but you keep your home here and clearly live in it when you home, and are in the country for the threshold number of nights per year (think it's 183), then I cannot see how it could not be called your primary residence.

NeptunesMoon

cheers everyone. it's a real pity they dont take prospective rental income into account when assessing your ability to pay back, this would be a huge contribution to paying off a mortgage for a single person with a spare bedroom or two