Rental Income - Interest Write-off

[Sean Two]

Hi All

Trying to get my affairs in order and some advice would be appreciated.
Here's the scenario:

In May 2001 I bought a house (House A) which was my PPR until April 2006. In April 2006 I bought a second house (House B) which has been my PPR since then.
To part-finance the purchase of House B, I remortgaged House A and borrowed €265k on an interest-only basis to clear the original mortgage on House A(balance remaining at April 06 was €118k) and the remaining €147k (ie €265k LESS €118k) went towards the purchase of House B.
House A is now rented as an investment property.

Can anyone please confirm whether the interest that can be written-off against rental income from House A is the interest on the full €265k remortgage OR only the balance of €118k when House A ceased to be my private residence?

From previous posts, I suspect that the answer is that only the interest on the €118k can be offset but would appreciate a definitive opinion.


Thanks in advance.

 

[Jockey]

Hi,

Only the interest portion for the house that you are renting out can be offset against the rental income, if you had remortgaged the house and used the money to repair the rental property and not purchase a 2nd house then you would been able to offset the total interest charge against the rental income. Simple answer is that you can only claim the interest on the 118k.

Jockey

 

[Sean Two]

Thanks Jockey,

That's as I feared. Badly advised when remortgaging and should have done more research myself.

So now the question I need answering becomes the calculation of the interest on the 118k. (BOI Interest Only Tracker at a rate of 4.35%)

Is it:
a. 118k at the current rate of interest under this mortgage (ie €118k*4.35% per year)
OR
b. is it the interest element of my repayment under the previous mortgage repayment mortgage of 118k at the time I remortgaged (prior to remortgaging the previous mortgage was a straightforward repayment mortgage).

Any takers??