A New Year, and a new postbag of your letters and comments – keep them coming…
Ms McC writes: We are paying a total of €823.96 monthly and a 4.5% interest rate to Permanent TSB. There is six and half years remaining on the term and a balance of about €51,000. We are also paying nearly €79 a month for mortgage protection insurance. Could we get a better deal anywhere else? I am 60 and my husband is 64.
Jill replies: Your ages will unfortunately work against you with most of the lenders, says Irish Mortgage Broker, Michael Dowling. KBC bank, which offers one of the best new borrower rates limits it’s lending to a maximum repayment age of 68; AIB requires that its loans be repaid by age 65 “and while Bank of Ireland will allow mortgage terms to age 70, your readers would still have to take out a six year loan and the repayments might not be any better.”
With the exception of AIB, none of the lenders are allowing existing clients to benefit from the lower variable rates on offer for new clients.
Dowling suggested that you approach PTSB “to see if it will do a deal and drop your rate to their new borrower rate, which is under 4%.” He suggests that you also get your mortgage protection policy reviewed. On a decreasing balance of €51,000 over six years, the best joint life quote he found was just over €27 a month.
“At €79 a month,” said Dowling “it looks as if this policy has either been ‘loaded’, perhaps due to a pre-existing medical condition or the bank has added some ‘bells and whistles’, such as indexing the premium and benefit [to keep pace with inflation] or by adding serious illness benefits.”
Mr BG writes: I am a dual Irish/US citizen and contribute to an Irish employer administered pension. I read recently that all pension contributions as well as any annual capital gains may be subject to US tax under FBAR rules. Do you have any information on the situation for people like me?
Jill replies: FBAR is a bank assets reporting compliance requirement for Americans living abroad (and US Green Card holders). There is a great deal of confusion about whether or not employment pension contributions must be included in an annual FBAR return, especially since the introduction of FATCA – the US taxation reporting regulation since 2010 for Americans. FATCA appears to exempt trust-based occupational pension schemes from the annual filing requirement.
You need to discuss your pension position with your scheme trustees and with an accountant/financial adviser who is familiar with FBAR and FATCA filing requirements. I’ve furnished you with two names – good luck.
Ms UC writes: I am a nurse, age 58 who has worked in both the public and private health service. I wasn’t always able to join the private pension scheme. I will only have 25 years accumulated service in the HSE superannuation scheme and while I have been buying back years, I have been told that my pension will only be worth €7,000 p/a. I really don’t know who to ask about my entitlements.
Jill replies: Interrupted service and service in both the public and private sector is very common in your profession.
A spokesperson for the INMO told me that in addition to the superannuation pension value, you will also receive a lump sum payment relative to your years of public service in all the different hospitals.
What you now have to do is find out what your accumulated private sector benefits may be; even a few years of pensionable service in a private hospital scheme will result in some kind of pension benefit at retirement age.
The INMO information office in Dublin (Tel: 01-664 0610) can recommend a fee-based, independent pension adviser who can help you gather and interpret all this information.
Ms DM writes: I was left an inheritance by an elderly relative and am considering buying a nearby bungalow in ‘walk-in’ condition, with an asking price of about €85,000. Do you think property prices will keep going up and would this be a good investment?
Jill replies: House prices did go up in 2014 – by about 14% nationally – but every property and every location is different and you need to be confident that the annual net yield – that is, the rent after ALL costs, charges, taxes and your time as the landlord meets all your costs and expenses and provides a profit that would exceed the net return from a deposit account.
Those costs and expenses will include insurance, maintenance, repairs, wear and tear, advertising, ITB registration (as a landlord), local property tax and void periods when the property is empty. Only some of these expenses, at a 75% rate, can be offset against the rent.
Whatever profit is left will be subject to 20% or 40% income tax, USC and PRSI (if you are under age 65).
Also, do you have the time, energy and inclination to be a landlord? If you use a property management company, expect to lose up to 20% of the rent as their fee.
If you have a personal finance question for Jill, please email her at firstname.lastname@example.org
or write to Jill Kerby, The Munster Express, 37, The Quay, Waterford