Any tax implications in paying down investment mortgage

T

Trivia

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Hi everyone
We have a residential mortgage that is 1%tracker. We have a interest only 180k investment variable mortgage that is costing 684 pm. rent 600pm we are considering paying 50k off the mortgage. We bought the house for 230k value at 120k at present. We are in no rush to sell. I plan to hold onto it for next 10 years? Are we doing the right thing by paying down the mortgage? I know we can only claim 75% of mortgage interest against rent.
 
The rate seems to be just north of 4.5%. If you don't need the €50k, a 4.5% guaranteed net (i.e. after tax) return makes paying it off a no brainer.

Yes, 75% is deductible, but that just makes your guaranteed return around 3%. Still a no brainer (unless you need the loot). Also gets you closer to positive equity.

There are no tax consequences, except for losing your interest deduction.
 
Hi Trivia

Can you clarify please as I think that Gordon has misread your post?

If you pay off €50,000 on a mortgage with a 1% rate
You will save €500 a year
You will get relief on 75% of it or €375
You will save around €200 tax.

So you are saving €300 net by paying €50,000 off an investment property mortgage.

If you have a mortgage on your home, it would make more sense to pay down that mortgage instead as the rate would be in excess of 0.5%.

If you have any plans for the money e.g. upgrading your home or buying a car, then you are better off holding onto the money.

If you own your own home and don't have a mortgage and you have a reasonable income, then I think you should invest the €50k in shares. The long term return should be in excess of 0.3% net. Of course there is a risk that the shares might fall in value, but I assume you can handle that risk.

Brendan
 
Trivia said:
Hi everyone
We have a residential mortgage that is 1%tracker. We have a interest only 180k investment variable mortgage that is costing 684 pm. rent 600pm
Click to expand...

Hi Brendan

Unless I'm mistaken, there seems to be two properties (and two mortgages)...his/her home at 1% and an investment property at around 4.5%.

Gordon
 
Hi Gordon. OK. It struck me as the one mortgage, as he gives one interest rate and not the other. But maybe it is I who has misread it.

Brendan
 
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