I am currently living with my parents and am trying to save a deposit to buy a house. I am independent and have great flexibility in where I work.

When looking for properties to buy, my plan is to try to get either a twin bedroom, where I will rent the other bedroom under a room rental relief, or a triple bedroom, where I will rent out the other bedroom. will also rent the second under the one bedroom rent relief and use the third as a home office.

Will mortgage lenders consider my plan to have bedroom rent relief income when determining borrowing limits?

Also, can I get a tax deduction using a third bedroom as a home office? I would also consider sharing the home office with the person in the second bedroom. I know I can get a deduction for some of the cost of broadband, electricity, and heating by working from home. My query is more about the notional rental / lease costs of using the third bedroom as a home office. Considering that the use of a third bedroom as a home office would have no impact on the main private residence statute for capital gains tax, I would understand why a deduction might not be available.

Mr ML, e-mail

As real estate prices rise as they are in a tight supply environment, it’s no wonder people are getting creative in trying to maximize their income or relief to increase their chances of persuading a business. bank to lend them enough to close the deal. However, the rules are pretty strict and the banks – for all their glossy advertising – are absolutely risk averse at the moment.

This is not surprising as they are still trying to get rid of the sour loans from the latest housing crisis, but it is little consolation for people like you looking to buy their first home.

Lenders are only interested in one thing: whether you can make your repayments.

For self-employed people like you, they will generally want to see two years of deposited accounts to get a feel for your income.

The Central Bank also imposed mortgage rules to ensure people don’t expose themselves to too much financial risk. The rules of the Central Bank state that in general, banks can only lend you 3.5 times your salary and 80 percent of the value of the property. This figure rises to 90% for first-time buyers like you.

There are possibilities for “exceptions”, but banks are limited in the number of these they can grant. Most tend to be used early in the year.

Strict criteria

Outside of these strict rules, banks will want to see evidence of sensible money management in recent years (i.e. bank statements with no evidence of arrears or unsolicited borrowing) and proof of income. They will check your credit history.

On the income side, things are easier for those with a PAYE job who will need payslips and confirmation that they have a permanent job rather than a trial period, contract work, etc. For people like you who are self-employed, they will generally want to see two years of deposited accounts to get a feel for your income.

Lenders will have different rules on how they value income, but on the issue of “variable income” all will be more careful in their approach than the average borrower would like. You will not get full recognition of bonuses, commissions or contract payments and, for PAYE employees, overtime.

Essentially, unless it’s guaranteed income, it will be viewed with a little yellowish eye.

While there is no doubt of your best intentions, it is not certain that you can rent a room in this new home.

If this is the case with income that you have actually guaranteed, it’s no surprise that lenders are even more risk-averse when it comes to projected income, such as your plan to rent a room in a new house.

Rent a room

It’s a good idea, and the banks will no doubt be happy to see that you actively ensure that you can meet your mortgage commitments. . . but they probably won’t give you any credit in approving your mortgage for income you don’t currently have.

To be fair, while there is no doubt about your good intentions, it is not certain that you can rent a room in this new accommodation, or that you can rent it without gaps that would undermine a repayment capacity. ready .

Whether it was getting credit on such income if you had to change your mortgage down the line, or if you reorganized – then there would be at least one balance sheet the bank could assess – I would be surprised that a mortgage lender now accepts a mortgage on this basis.

Home office

As for the home office, I am not convinced that you would be able to charge for renting a room in your house as office space.

The revenue commissioners establish the zones they deem eligible. If a business provides office furniture and equipment, such as computers and ancillary equipment, telephone / broadband, etc. supplied primarily for professional use.

You would like to be persuasive in arguing with Revenue that you only acquired the largest house for its office potential.

Even if this were allowed, there would be an impact on the primary private residence (owner-occupant) capital gains tax relief when you eventually sell the property.

What should be available to you as a first-time buyer – assuming you are purchasing a newly built home – is the Help-Buyer’s incentive. This allows you to recover income tax and Dirt (interest retention tax on deposit) paid during the four years prior to the purchase of the home up to a maximum of € 30,000 or 10% of the rental price. ownership, whichever is less.

Since you’ve already saved, Buyer’s Aid can help you bridge the gap between what your current income will secure in a mortgage and what you are looking to raise.

Please send questions to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email [email protected] This column is a reading service and is not intended to replace professional advice. No personal correspondence will be exchanged