Jill Kerby

Overpaying wont make you veer off trackers

FM writes from Dublin: My husband and I own a small business. In 2008 we took out a modest, 20 year tracker mortgage with the EBS. In June 2012, we were in a position to pay an additional sum of €300 on our monthly mortgage payment in order to bring down the capital sum we owed. We did this on condition that this was not a permanent over payment and we could keep the flexibility of the full 20 year repayment term and be able to raise and lower our payments so long as the capital sum was repaid by 2028.

This past July, we informed our lender we had a €20,000 lump sum that we wished to use to further reduce the outstanding capital. Our understanding with the lender was that we would still have the flexibility of the 20 year borrowing term.

In September we were able to repay another lump sum of €15,000 off the capital (under the same terms as before) but we also informed the EBS that we wanted to end the accelerated monthly payment and revert to – at least - our original payment of May 2012.

Problems have emerged.  A mortgage balance statement that includes columns of figures for the interest rate, the amount of interest and capital being paid, the remaining months outstanding appears to be littered with errors.  It now appears that we no longer have a 20 year mortgage that ends in 2028 but one that the lender insists ends in May 2022.  Now AIB is involved and say if we want to adjust our monthly repayments downwards at any time, we will have to apply for a mortgage extension from 2022. We are afraid we might lose our tracker if that happens.

We have been trying to sort this out for months. The banks say they are still “investigating” our claim that we never wanted to lose the 20 year term of the original loan and that we wanted to be able to adjust our payments instead. We have never missed a mortgage payment. Can you help?

You have sent me your file of correspondence and statements dating back to 2012, when you began accelerating your monthly payments and with your permission briefed Karl Deeter of Irish Mortgage Brokers and Financial Advisers.

According to Deeter, “Your reader’s first query is about her tracker loan. Accelerating payments or making lump sums under the Consumer Credit Act will not jeopardise her tracker mortgage.

“The letters and balance statements from the lender are confusing, contradictory and frankly don’t make a lot of sense. I wouldn’t bother continuing to engage with the EBS/AIB directly and suggest your reader take her case to the Financial Service Ombudsman for investigation and adjudication on whether this couple’s repayment term ends in 2028 or 2022.” 

You need to prepare your case well, with a clear schedule of events, the various calculations regarding new repayments and interest savings and all cross referenced to the relevant documentation and correspondence. You can then decide whether to engage an adviser to help you prepare your case with the Ombudsman or proceed alone. Good luck.

PD writes from Dublin: I am a recent widower.  I understand that the amount a child can inherit tax-free from each parent is €225,000. In her will, my wife left me her entire estate, mainly assets jointly held with me. What I would like to know is whether an executor can allocate a parent’s unused tax free inheritance threshold to the surviving spouse so that the €225,000 tax free inheritance limit can be added to the surviving spouses’ when they die?  That way, the full €450,000 could be left to the couple’s child upon the death of the surviving parent?

Unfortunately, the tax-free inheritance threshold between parents and children (or any other category of disponer and beneficiary) is not transferrable. Where a couple wishes to maximise the tax-free benefit to their children, they should plan for each parent to leave the maximum sum permitted under capital acquisition tax (CAT) regulations in their respective wills. 

This strategy only works where there is sufficient realisable assets to both make large bequests and permit the surviving spouse to maintain their lifestyle, which may or may not have been feasible in your case. Had it been possible, your wife could have left up to €225,000 tax free to her child in her will, though not at the expense of disinheriting you; as her legal spouse you would have been entitled to 50% of her estate under the Succession Act 1965.

Your query is the first of its kind that I’ve ever received and I can understand why you would favour it, especially if you only have one child who might otherwise face a very large CAT bill upon your death.  Hopefully it will remind others that it is important to get proper legal and tax advice when preparing a will.

GM writes from Kilkenny: I am 60 and only in receipt of a pension worth €30,000 per annum. PRSI is being deducted at 4% from the monthly payments, is this correct?  Last year a total of €1,200 in PRSI was deducted.

If you receive this €30,000 retirement income from membership of an

occupational fund or a private pension fund from which an annuity was

purchased, you should not be paying any PRSI.  However, if your income is

derived from a pension fund that was ARFed -that is switched to an Approved

Retirement Fund from which you are drawing down income, then it will be

subject to tax and PRSI until age 66. Once you turn 66, none of your income

- even unearned income from rents, savings or dividends will be subject to

the 4% PRSI charge.