Q. My partner and I had planned to go abroad in the summer of 2020 and work between one and two years. Covid has obviously put an end to that – but we hope to be able to travel in early 2022. We have currently saved € 80,000 and are each saving € 1,000 per month. We are considering two options. The first is to buy a two-bedroom apartment, pay the required minimum deposit, and take out a mortgage for the remaining balance. We then put what we had left of our € 80,000 in an investment fund and put this property up for rent. Upon our return to Ireland after traveling we would continue to rent the property and use the money from the investment fund as a deposit for our own home. The second option is to invest our € 80,000 savings in an investment fund and continue to save for the next two to four years. What should we do? Aisling, County Kildare
A. Well done for having managed to accumulate significant savings for your long term financial planning.
Both of the options you have outlined are reasonable and worth considering, but there are several points to develop – which will likely impact your decision.
Your first suggestion to buy a two-bedroom apartment, pay the minimum deposit, and take out a mortgage on the rest is fine.
I’m assuming this is a first-time property purchase for both of you – if so, as first-time buyers 10pc of the purchase price would be the required deposit.
The purchase assistance program (HTB) is also available for first-time buyers.
This program helps first-time buyers to post the deposit they need to buy or build a new house or apartment.
However, you have stated that you intend to rent the property and go on a trip – and you don’t appear to be intending to live there.
It is important to discuss this with your lender at the time of application, as it is likely that such a property will be classified as a rental property and different deposit requirements will need to be met if this is the case.
Also note that your plans to rent the property would exclude you from the HTB program as a number of conditions must be met if you wish to subscribe to the HTB program.
For example, you have to buy or build a new property between July 19, 2016 and December 31, 2021.
More importantly (in the context of your current dilemma), you need to live in the property as your primary residence for five years after you buy or build it.
Your overall planning – if you buy a property and then travel – seems geared towards purchasing a second property in the future, which will be the property you live in when you return home.
As you would not be a first time buyer at this point, a 20 pc down payment will be required when purchasing this second property (if current lending rules remain in place). It is important to take this into account and to budget for it.
Your second suggestion is to invest your current savings of € 80,000 in an investment fund and continue to save for the next two to four years.
For savings and long-term investments, a globally diversified equity investment has always been the best place for those looking for good returns.
Typically though, I wouldn’t consider investing in stocks for a period of less than five years.
Volatility is the cost of growing investments, and investing in stocks for two to four years (as you suggest) is too short a period. This delay greatly increases your investment risk.
For these reasons, I don’t think your suggestion to invest your savings in an investment fund is feasible.
The only reasonable home for your $ 80,000 in savings over two to four years is the deposit.
The yield on deposit products will struggle to keep up with inflation during this time, but your savings will be secure – so you can use your savings to purchase your property when you need them.
I would say your best option would be to defer buying a property until after your trip – so that you maintain your first-time buyer status. In doing so, a smaller deposit will be required when you proceed with the purchase of a property and any first-time buyer incentives will remain open to you.
Failure to follow through on your plans to purchase a rental property would also free you from the owner and tax obligations related to the rental of a property.
If you go ahead with your travel plans and delay your property purchase until you return, continue to save if possible while you are away – to build your deposit.
This will give you more purchasing power when you return from your trip – and reduce the mortgage required and subsequent mortgage payments. Any excess savings at the time of purchase in two to four years can then be used for long-term investments to achieve other goals.
Do I have to change the name of the house now that I’m a widower?
Q. My wife passed away a few years ago, but our house is still co-owned. We both made wills leaving everything, including the house to each other, and ultimately to our children, when I died. Our bank account used to be under common names but is now in my own name only. Is it necessary that I change the house in my name only – because my will leaves everything to be shared equally between my children? Michael, South County Dublin
A. You state that you both made wills and left everything to the other. When the deceased person left a will, the person taking care of the estate is called the deceased person’s “executor”. The executor must take out an approval.
Probate means that the appropriate estate office or district estates registry certifies that the will is valid and that all legal, financial, and tax matters are in order. Wills do not take effect until the probate office accepts that the will is valid.
In this case, the rule of survival applies: the house was jointly owned, so it is automatically registered in your name. You have automatically become the full property upon his death and no tax is applicable.
You are exempt from capital acquisition tax (also called inheritance or gift tax) if you receive a gift or an inheritance from your spouse or civil partner.
You mention that the joint bank account that you held together is now in your name only. The bank has therefore been informed, provided with the necessary documentation and has changed the joint account to a personal account in your name accordingly.
It will not make any significant difference to the financial value or tax efficiency of the estate, but you do need to make sure that the home ownership details are correct. If you want to sell, or even if your children are to inherit your property, not having the right documents in place will slow down and unnecessarily complicate the process.
If the property is registered in the land register, you can file an affidavit (Form 47) to amend the folio.