help needed to work out how much mortgage interest can be offset in a buy to let situation.

[Meath Lady]

I am asking this question for a friend so dont have all the facts.She wishes to buy a house for circa 180000. She will put down a 10 % deposit of 18000 and borrow 162000. Initially friend thought she would live in house and rent out rooms and avail of the 12000 rent a room scheme. However now friend is reconsidering the commute and wondering if she rented out the house in its entirety how does she work out the mortgage interest. So supposing the rent is 1200 a month. The repayments are 692 euro over 35 years @3.75% or 832.euro over 25 years @3.75%. Can you guide me as how to work out the interest per year on either amount. Then do you deduct 75% of the interest from your total yearly rent along with other qualifying expenses and pay tax and prsi on the balance.
I am aware that the interest rate will prob be higher on a buy to let. This was the interest rate quoted for owner occupier.
She is trying to figure how this might work and if she could still afford to rent closer to her work. All help appreciated, Thanks in advance

 

[vandriver]

Buy to let rates are higher (~5%) but the deposit requirements are much higher.
Ulster Bank require 30% ie 54k.

 

[Joe_90]

The interest in the earlier years of such long term loans will be significant as the capital being paid down is small. In both cases at 3.75% around €6,000.

Rent 1,200x 12 = €14,400

Interest 6,000 x 75% €4,500
Insurance €300
Repairs €500
PRTB €90
Sundry €500

€5,890

Taxable "Profit" €8,510

Tax at 50% €4,260

To get a monthly rent of €1,200 on a €180k house would be very good

 

[jim]

How many becrooms in the house? Thats they key to calculating potential rental income. Eg you should be able to command approx 500 per room depending on size and comdition of rooms.

Joes calc above is very indicative of the tax you would likely pay and how to calc it But if btl the rate is closer to 5% and the deposit required is higher.

 

[Meath Lady]

Thanks vandriver Joe 90 and Jim for the very informative post. I didnt realise banks would be seeking 30% deposit. This is a three bedroomed house and currently two bedroomed houses are getting rent of 1100 to 1150 so she reckons 1200 would be reasnoble. Thanks for the informative post as I couldnt get my head around how to work out the interest

 

[Bronte]

She can buy as a home owner and then rent maybe. But they do have clauses in the contracts nowadays apparently.

If you rent to social welfare tenants, 100% interest is deductable.

 

[kaza]

If you rent to social welfare tenants, 100% interest is deductable.

Really? I was not aware of this. I have always rented to someone receiving rent allowance. Does this then mean I should be claiming 100% tax relief on my interest, rather than 75%? Or is it only for people renting to RAS schemes etc..