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The Sunday Times - Money Questions 24/05/09

Posted by Jill Kerby on May 24 2009 @ 21:43

CO’C writes from Dublin: We bought our current residence three years ago, and have a variable rate mortgage.  It is our understanding that since the recent budget changes, we will only be able to claim tax relief at source for the next four years. As a consequence, we would like to increase our monthly mortgage payments either by submitting extra money every month or by renegotiating a shorter mortgage term. Our question is: if we increase our payments, can we claim tax relief on the new larger monthly mortgage payments, or will the tax relief only apply to the current amount that we pay?

The amount of interest you pay on a variable rate mortgage in the early years of the loan is proportionately much higher than the principal or capital you pay off:  for example, if your loan was for €100,000 over 30 years and the interest rate (for argument sake) was 5%, your repayment would be about €536 a month of which €416 would be interest and €120 capital, and the capital would increase by tiny increments with each payment.  By the final years of the term, the bulk of the payment would be capital and only a small amount, interest. “I don’t think your reader entirely understands the value of accelerating the payments,” says financial advisor Liam Ferguson of Ferguson & Co in Dublin. “The whole point of accelerating your mortgage payments is to pay off more capital sooner, and therefore avoid future interest payments on that money. The interest payable, should your reader increase the repayment by say, €100 a month to €636, would still be in the region of €416; the extra payment of €100 is being used directly to pay off capital, not interest.”  Very simply, you will still receive the same tax relief on the original amount of interest you contracted to pay, but overall, you will pay far less interest on your total loan. 

 

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Mr JW writes from Limerick: I qualified for a partial UK old age pension having worked there for 10 years. Would you know if I could also claim medical expenses and if so where would I apply.

If you are a resident here in Ireland and are in receipt of a UK pension, then you are obliged to pay tax on your UK pension; if it is already taxed, then you can claim a tax credit for that payment against whatever tax you may have to pay here.  As an Irish resident and taxpayer (if there is a tax payment) you would then make any claim for qualifying tax relief for your medical expenses with the Irish Revenue authorities, not the British ones.  The Revenue website, www.revenue.ie explains how to claim your medical expenses (for up to four years of in arrears) using a Form MED 1. 

 

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JMcC writes from Dublin: I have a small bank account in France with Credit Agricole. I keep a modest few euro in it for emergencies whilst on holidays for car breakdowns etc. Notwithstanding the Government guarantee I was thinking of transferring some of my savings from an Irish bank to Credit Agricole to spread my risk just in case Armageddon comes over the hill. I am wondering if you are aware of how the deposit interest rates in general compare between Ireland and France and more importantly does the French Government provide a guarantee for savings and, if so, does it include savers resident outside France and up to what amount. 

 

The French deposit guarantee scheme, also known as the ‘cash guarantee’ is worth a maximum of €70,000 and it includes all savings accounts in France or held in deposit accounts held in French owned banks outside France. The guarantee applies whether you are a French resident or not. If you do shift your funds from Ireland to France the money will be subject to the same EU anti-money-laundering rules as apply here: You may have to provide the French bank with some proof that you are the beneficial owner of the funds. 

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EM writes from Foxrock: A friend of mine whose husband died last year went to her local solicitor to make her will. The house in which she lives was in the name of herself and her husband. However the solicitor is urging her to have the house put into her sole name. Is this necessary?

According to solicitor Deborah Kearney of Leman Solicitors in Dublin, “transferring the property into your reader’s sole name very much depends on whether it was held under a joint tenancy or as tenants-in-common.  As they were husband and wife it is likely that it was a joint tenancyand in that case nothing will have to be done to the deed.  If however, it is a tenancy in common your reader will have to extract a grant of probate before she can transfer the property into her sole name. If this is the case the solicitor will charge a fee for his or her services.  It appears to me that your reader’s solicitor is being prudent to ensure the title  is tidy in case of any future dealings with the property.”

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