I have lived far from Ireland for almost nine years. During this time I have accumulated savings that I can put in to pay off my variable mortgage in full and start saving money in my Irish bank account from my rental income.
So far, I have used this income to make high monthly mortgage payments. As such, I have no savings in Ireland.
I paid all of my taxes as a non-resident owner etc. and I haven’t missed any refunds. I have never had any other loans in Ireland, only this mortgage.
If I decide to pay off the mortgage, will it have a positive or negative effect on my future borrowing power if I decide to return to live in Ireland?
As I am quite young this is a real possibility and I would need a mortgage again in the future if I decide to start a family etc.
Mr. KC, email
You have done everything so far and clearly take the time to think about your options. There seem to be two questions: using the savings accumulated abroad to pay off your Irish mortgage and the impact that a prepayment would have on any future loan application.
As I have said countless times before, the mortgage loan is the cheapest money you will ever have, even at the somewhat inflated rates charged by Irish lenders. This is especially true if you are one of those people who still hold a tracking mortgage rate, however, from what you say about a variable rate, I guess that doesn’t apply to you.
The basic principle is that a rational person will pay as little as possible for credit. Therefore, you shouldn’t be paying off your mortgage while you have other more expensive debt outstanding. The same is obviously true if you anticipate the likelihood of having to take out non-mortgage loans in the future.
But this is not a problem for you. You haven’t lived here for nine years, your only financial implication in Ireland right now also seems to be this property, its rental income and the mortgage.
On the other hand, I’m assuming you don’t have any other loans outstanding in the country where you currently reside. If so, it may make more sense to use any savings or transfer any excess of your rental income to pay it off.
However, since you say that you have accumulated enough savings abroad to fully pay off that mortgage, it would appear that you also have no outstanding debt.
Documentary authorization
Nothing prevents you from using your savings abroad to pay off your Irish mortgage. You have been outside Ireland for nine years and will therefore no longer be a tax resident here. As long as the savings come from income that is properly taxed in your current country of residence, there is no problem.
The Irish lender may require documentary authorization to fulfill their money laundering obligations, but beyond that, there is nothing wrong with this decision.
As for how prepayment will affect you on any future Irish loan, you are already speeding up the payment of that loan. Paying off in full will not hurt your chances of borrowing down the line.
The problem for banks – especially Irish banks over the past decade – is with people who cannot meet minimum requirements for their loan obligations. This would clearly affect future access to finance, but you find that you have never missed a payment: instead, you have shown the lender that you have a higher capacity to pay than you need.
It will come back to you if you need an Irish mortgage in the future. It certainly won’t count against you.
Please send questions to Dominic Coyle, Q&A, The europe-infos.fr, 24-28 Tara Street, Dublin 2, or by email [email protected] This column is a reading service and is not intended to replace professional advice. No personal correspondence will be exchanged
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