Mortgage Interest Relief - How is it calculated?

C

ChunkyLover

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Hi experts,

I jus want to understand how this Mortgage Interest Relief works. I am not a first time buyer but the current home is my family home.

I currently pay €1690 as a Monthly payment on a 25 year loan at AIB. I was told that am eligible to claim Mortgage Interest Relief upto €16000.

The interest and capital breakdown on my current mortgage payment is €1227 Interest + €470 Capital

All I want to know how much relief will I get now per month. Am also considering to increase the mortgage period from 25 years to 32 years so that the monthly installment will fall just below €1500, will this move have any affect on the amount of Mortgage Interest Relief I claim?

Any help is greatly appreciated.

Regards..
Chunky
 
ChunkyLover said:
I am not a first time buyer but the current home is my family home.

...

The interest and capital breakdown on my current mortgage payment is €1227 Interest + €470 Capital
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This implies c. €14K interest per annum. If you are a non FTB or were a FTB more than 7 years ago (are you sure that you are not entitled to the FTB first 7 years preferential relief?) then you are at least entitled to relief on a maximum €6K p.a. interest (or €12K if the mortgage is a joint one) which would translate into a €100 (€200) deduction on your mortgage repayment p.m. See [broken link removed].
All I want to know how much relief will I get now per month. Am also considering to increase the mortgage period from 25 years to 32 years so that the monthly installment will fall just below €1500, will this move have any affect on the amount of Mortgage Interest Relief I claim?
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I don't understand this but bear in mind that extending the mortgage will have a huge knock on effect on your total interest bill. See Karl Jeacle's mortgage calculator for an illustration of how much additional interest you will pay over 32 years versus 25. Remember that each €1 of interest is still costing you €0.80 even if you get relief on it. Fiddling with things just to avail of interest relief doesn't really make sense to me. In general it makes more sense to clear the mortgage as soon as you can in order to minimise your total interest bill rather than worrying about arguably marginal interest relief.
 
The €16000 relief on interest is for a married couple that are first time buyers during the first 7 years of the mortgage. For a non first time buyer the relief is for the first €10160 for a couple, half that for a single person. Tax relief is granted at source on your mortgage interst payemts at 20%, changing the term of your loan shouldn't affect your right to interest relief.

I don't know which case you are, you say you are not a first timer, I take it you are married so at most just over €2000 of relief would be forthcoming (20% of the 10,160), AFAIK
 
clon said:
The €16000 relief on interest is for a married couple that are first time buyers during the first 7 years of the mortgage. For a non first time buyer the relief is for the first €10160 for a couple, half that for a single person.
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Actually - we're both wrong. In 2006 the amount of qualifying interest for non FTB couples was €5,080 (2 x €2,540 single rate) and in 2007 it's €6K (2 x €3K).
Tax relief is granted at source on your mortgage interst payemts at 20%, changing the term of your loan shouldn't affect your right to interest relief.
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But it will affect (increase!) the amount of interest payable over the long run.
 
Hi Clubman,

Got you, thnx for the explantion, am a joint holder of the mortgage so should get €200 per month as relief.

Many thanks
Chunky ...
 
Jus confusion again, we are not FTB and are joint mortgage holders, how much is the relief we get, is it €6K p.a. or €12K p.a. ?

Regards
 
ClubMan said:
Actually - we're both wrong. In 2006 the amount of qualifying interest for non FTB couples was €5,080 (2 x €2,540 single rate) and in 2007 it's €6K (2 x €3K).
But it will affect (increase!) the amount of interest payable over the long run.
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That's right:( , I couldn't remember the rate for non FTB'ers so took the figure from a google link, and got the figure from a mortgage firm [broken link removed] , just shows how unreliable brokers are, all the changes in the budget can be confusing:D
 
ChunkyLover said:
Jus confusion again, we are not FTB and are joint mortgage holders, how much is the relief we get, is it €6K p.a. or €12K p.a. ?
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You get 20% relief on a maximum of €6K so this means a maximum of €6K @ 20% = €1,200 p.a. or €100 p.m. "into your hand" in the form of a reduction at source on your mortgage repayment. If you pay less than €6K interest then you only get relief on the amount that you pay. I would be very wary of engaging in financial gymnastics for the benefit of maximising relief at the possibly cost of a longer term high interest bill overall. At the very least crunch the numbers.
 
Gosh,

6 K is just too little my son, about €100 a month.

I don't know why this government always have dual policies?

One Interest Releif limit for FTB s and a restricted limit for Non FTBs.

No Stampduty for FTBs if they buy from Builders and 3% stampduty if you buy a second hand home.

Why all this?

I am not a first time buyer but have to sell the house and buy another one just because I changed jobs and am peanalised big time by this Government for just doing that.

God help me....
 
ChunkyLover said:
I don't know why this government always have dual policies?

One Interest Releif limit for FTB s and a restricted limit for Non FTBs.

No Stampduty for FTBs if they buy from Builders and 3% stampduty if you buy a second hand home.
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No SD on new houses (under 125sqm) for FTBs and non FTBs!

I guess the preferential rates of interest relief for FTBs in the first 7 years is to help new buyers get on their feet?
I am not a first time buyer but have to sell the house and buy another one just because I changed jobs and am peanalised big time by this Government for just doing that.
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If you didn't previously use up your full 7 years of FTB relief then you are still entitled to the balance even if you were not a FTB on the most recent property.
 
Code: 
 If you didn't previously use up your full 7 years of FTB relief then you are still entitled to the balance even if you were not a FTB on the most recent property.

I guess I haven't previousl use up the full 7 years FTB relief.

I lived in my previous home for just about 2 years and claimed interest relief and now am living in the new home.

Have to get this right! so how much relief am I entitled to?

Thanks Clubman.
 
That means you appear to have five years left on FTB interest relief, which is up to a ceiling of €16,000. Just fill in your TRS form and send it off.
 
Is there a simple calculator somewhere which will allow me to work out what mortgage relief we will get. We're about to move, so are not FTBs. Married. Mortgage will be about 275k.

I just want to have an idea of how much I can knock off the quotes we are getting from our mortage broker??
 
Voda said:
Is there a simple calculator somewhere which will allow me to work out what mortgage relief we will get. We're about to move, so are not FTBs. Married. Mortgage will be about 275k.

I just want to have an idea of how much I can knock off the quotes we are getting from our mortage broker??
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"About to move" doesn't necessarily mean you're not FTBs, if you first bought within the last seven years.

If indeed you do not fall in the FTB bracket, then you can claim relief at 20% on a maximum of €6,000 mortgage interest (even without doing the sums, trust me: you'll be paying more than that), which is a total of €1,200, or €100 per month.

If you are within the first seven years you can claim relief on up to €16,000 interest payments [my top of the head calculations are that your interest bill should probably be in the region of €11-12k - so 20% of that, divided by twelve would be a very rough and ready estimate of monthly tax relief].
 
Voda said:
Is there a simple calculator somewhere which will allow me to work out what mortgage relief we will get.
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Well Karl Jeacle's mortgage calculator will estimate the annual interest bill (Annual Table button) once you enter the mortgage amount, term and rate and then you just apply the relevant TRS relief limit to figure out how much qualifies for relief.
 
Thanks for that - I didn't realise that you still got FTB rate even if you moved. We're only 3 years into the mortgage so that will actually make a big difference. I was assuming we lost the FTB rate since this will be our second home...
 
A lot of people don't realise it... could be something to do with the not-quite-accurate-way they refer to first time buyers interest relief levels. But I suppose "House owners within their first seven years' cumulative eligible mortgage-paying period" doesn't quite roll off the tongue. :D
 
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