Maximising mortgage interest relief

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construct_06

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Ok, Currently Mortgage Interest Relief is available up to €8000 per year for a single person.

So me and my girlfriend are currently paying off mortgage on our newly built house, and we would be allowed Mortgage interest relief of up to €16,000.

We are about 2 years in to Mortgage.

35 years term, €190k borrowed, Fixed till Dec. '07 at 3.39% with BOI.

Now we get our tax relief at source into bank each month.

Our current monthly repayments are about €785 per month and we get about €101.57 back for TRS.

My question is are we maximising our Mortgage Interest relief.

I know that you are classed as a first time buyer for 7 years. So we are in our 3rd year at present but i wonder if we changed mortgage to an interest only repayment mortgage for the term of the First time buyer status (and associated Mortgage Interest Relief) would we benefit as it is only on the Interest paid and not the principal repaid that relief is available on....
 
Bear in mind that if you switch to interest only:

(a) the lender may require you to change to a level term cover life policy which is more expensive than a basic mortgage protection policy
(b) going interest only increases the total interest payable over the life of the mortgage
(c) if you break a fixed rate mortgage you may be subject to a penalty
 
but if you got over those hurdles would it be worth my while as there is huge gains to be gotten from the interest relief but not if your not maximising it and it runs out after 7 years..
 
construct_06 said:
but if you got over those hurdles would it be worth my while as there is huge gains to be gotten from the interest relief but not if your not maximising it and it runs out after 7 years..
Click to expand...

I don't think there would be a benefit. With an Interest Only mortgage you're just paying the interest instead of the same amount of interest plus the capital. There's no extra TRS benefit in going IO.
Plus you don't pay enough interest on 190 grand to get the maximum TRS relief on €16,000 interest p.a.
 
Bear in mind that even interest that qualifies for relief is still costing you €0.80 in the €1 so maximising the interest payable on your loan just to avail of relief may not always make sense since it still costs you money! And some people might save more simply by moving to another lender or mortgage products that offers a lower rate than they are currently getting.
 
I would like to ask a question on this topic please.

My partner and I took out a 282000 mortgage over 30years with PTSB in Dec '05.

We have gone about switching to NIB (going through at the moment). Rather than save the few bob each month we are reducing the term (from 29years to 22 years).

I never considered the interest relief implications of reducing the term. Currently we get about €190 interest relief at source a month. If we reduce the term by 7 years thereby reducing the interest we're paying each month, will our interest relief amount go down as well?

Thanks
 
Your relief will go down once you are paying less interest than the relevant annual TRS threshold amount. Use Karl Jeacle's mortgage calculator to estimate what your current interest bill is or check your statements/ask your lender. Why worry about it though since even after relief each €1 in interest is still costing you €0.80 so reducing your interest bill even if it means "losing out" on relief is saving you money?
 
lexus said:
I would like to ask a question on this topic please.

My partner and I took out a 282000 mortgage over 30years with PTSB in Dec '05.

We have gone about switching to NIB (going through at the moment). Rather than save the few bob each month we are reducing the term (from 29years to 22 years).

I never considered the interest relief implications of reducing the term. Currently we get about €190 interest relief at source a month. If we reduce the term by 7 years thereby reducing the interest we're paying each month, will our interest relief amount go down as well?

Thanks
Click to expand...

Yep - you'll only get relief at 20% of the lesser amount of interest paid each month.

For the OP, the benefit of maximising your relief at 20% on interest paid is far outweighed by the cost of doing so at 80%, don't you think!!!
 
thanks guys

I see what you mean, TBH I had not thought about the interest relief going down and had factored in the amount we currently receive each month when deciding on the new term 22years.

Hopefully it wont make that much of a difference each month between the two of us.

Thanks again for your help and advise.
 
my apologies, i replied to that last post on my colleagues PC and under her User name :eek:
 
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