How do you qualify for a sub-2pc mortgage switcher deal?

The tax implications of moving to the Canary Islands

Charlie Weston Twitter Email

March 13 2021 02:30 AM

Q. We have owned our house for several years now, still have a large mortgage but decent amount of equity and growing incomes. We have read a lot of about these sub-2pc interest mortgages. Can people really qualify for them and if so who qualifies?

A. In simple terms, a rate of 2pc or slightly less is the best available in the market, according to Stephen Hamilton of Mortgageline. Just one lender offers this rate, so it is free to cherry-pick those applicants that it deems the safest, in terms of financial risk, he said.

Applicants would need to have a loan-to-value of less than 80pc, and a loan-to-income (LTI) ratio of 3.5 or less. From the description of your circumstances (income and equity in your home), it sounds like you might qualify, Mr Hamilton said.

He recommends you have a chat with a qualified mortgage broker that has an agency with Avant and other mortgage lenders offering the lowest mortgage interest rates. There is an opportunity to save thousands over the lifetime of your mortgage.

Q. I am moving to the Canary Islands and selling my home. I am 66 years of age, and will have no property in Ireland. I have investments with Bank of Ireland, from which I get an income, which is deposited into my account every year. I intend to live permanently in Spain as I suffer from severe rheumatoid arthritis. What taxes would I have to pay on my investments, even though I won’t be a resident of Ireland?

A. Your exit date and residency in the year prior to moving to Spain will determine the treatment of the income from Bank of Ireland, according to Marian Ryan, consumer tax manager at Taxback.com. For the first three years you will be deemed as non-resident, but ordinarily resident here in Ireland.

You are resident in Ireland for tax purposes if you are in Ireland for a total of 183 days or more in a tax year, or 280 days or more in a tax year plus the previous tax year taken together, with a minimum of 30 days in each year, Ms Ryan said.

If you leave Ireland after this time, you continue to be ordinarily resident for three consecutive tax years. For these three years you must pay Irish tax on your worldwide income except for income from a trade or profession, no part of which is performed in Ireland; income from an office or employment, where all the duties are performed outside Ireland; other foreign income, for example, investment income, if it is €3,810 or less.

If it is more than €3,810, the full amount is taxable. If your annual investment income from Bank of Ireland is above €3,810, you would be taxable in Ireland on the full amount for the three years after your departure.

Assuming you are Irish domiciled (Ireland is your country of origin), you will become non-resident, non-ordinarily resident and domiciled in Ireland after you have been resident in Spain for three years. Then you will only pay Irish tax on the Irish income, income from a trade, profession or employment performed in Ireland, and any gains made in Ireland.

Q. I gave up smoking 20 months ago. I read that smokers pay higher premiums than non-smokers for their life insurance cover, which makes sense because of the health risks. As I have a life insurance policy already in place, am I committed to continue to pay more expensive premiums because I took out the policy when I was a smoker?

A. Provided you have not used any tobacco products for more than 12 months, you are entitled to apply for cheaper rates from your insurer, according to Colette Houton, underwriting and claims lead at Royal London.

She says smokers pay far more in premiums for life insurance than non-smokers. So, if you have given up smoking, it’s worth contacting your financial broker or insurance provider. Non-smokers can benefit from a reduction in premiums of up to around 50pc.

A 44-year-old smoker will pay €115.71 a month for €300,000 worth of level term life cover over a 25-year term, this decreases to €54.78 per month for a non-smoker, Ms Houton said. Over the term of the policy that’s a difference of €18,279. To be classified as a non-smoker for insurance purposes you must not have used any tobacco products in the last 12 months.

Your insurance provider may ask you to complete a cotinine test (smoker test) to confirm.