Eddie Peters
Registered User
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Assuming rental income of 9,600 per year on the higher rate of tax, and in the fortunate position of being able to fully repay mortgage by cashing Post Office Certs, I'm trying to decide if having a mortgage is more tax effective than being mortgage-free. The following figures are based on Karl’s Mortgage Calculator:
Option A - Mortgage amount 170K, over 19 years with an interest rate of 3.70%.
Monthly mortgage repayment €1039, or €12468 per year.
75% of interest is €4713 per year.
Option B - Mortgage amount 61K, over 19 years with an interest rate of 3.70%.
Monthly mortgage repayment €373, or €4473 per year.
75% of interest is €1664 per year.
Repayment difference between option A and option B is (12468 – 4473 = €7995.
Assuming no capital allowances or expenses and being taxed at 52%, taxable amounts are:
Option A: (9600 – 4713) x 52% = €2541
Option B: (9600 – 1664) x 52% = €4127
Based on the above figures, am I correct that it’s best to reduce the mortgage to a minimum, or am I missing something?
Thanks in advance.
Eddie
PS Just realised that I should have posted this in the Property Investment forum but I'm not able to move it now. Apologies
Option A - Mortgage amount 170K, over 19 years with an interest rate of 3.70%.
Monthly mortgage repayment €1039, or €12468 per year.
75% of interest is €4713 per year.
Option B - Mortgage amount 61K, over 19 years with an interest rate of 3.70%.
Monthly mortgage repayment €373, or €4473 per year.
75% of interest is €1664 per year.
Repayment difference between option A and option B is (12468 – 4473 = €7995.
Assuming no capital allowances or expenses and being taxed at 52%, taxable amounts are:
Option A: (9600 – 4713) x 52% = €2541
Option B: (9600 – 1664) x 52% = €4127
Based on the above figures, am I correct that it’s best to reduce the mortgage to a minimum, or am I missing something?
Thanks in advance.
Eddie
PS Just realised that I should have posted this in the Property Investment forum but I'm not able to move it now. Apologies
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