Builders mortgage versus equity release

[liteweight]

My ppr was valued at 2.5m last year with a mortgage of 165k. We released 327k equity in order to buy an investment property which is now valued at 440k approx. Both properties are in Dublin. Investment property is currently rented at 1400 per month. At present the mortgage(interest only) is on our ppr. Is it advantageous to shift some of this over to the investment property? I believe we get same tax relief no matter which property mortgage is on..is this correct?

We have put a deposit on a penthouse in Spain..am wondering whether its best to mortgage property from here or take up the builder's mortgage. Are Irish lenders willing to mortgage spanish property?

 

[DonKing]

My ppr was valued at 2.5m last year with a mortgage of 165k. We released 327k equity in order to buy an investment property which is now valued at 440k approx. Both properties are in Dublin. Investment property is currently rented at 1400 per month. At present the mortgage(interest only) is on our ppr. Is it advantageous to shift some of this over to the investment property? I believe we get same tax relief no matter which property mortgage is on..is this correct?

/QUOTE]

Hello Liteweight,

It doesn't matter which property you have the morgages against. It's what the morgage is used for which is important. The interest of the mortgage or part mortgage used to purchase the investment property can be used to offset against your rental income when calculating your rental profit ie tax.

For the part of the mortgage used to purchase your PPR you can get tax relief at source form your lending instituition.

Therefore inform your Bank that you should get tax relief at source for only part of your morgage (165K.) If you don't inform them, then they may give you tax relief for the full morgage which is incorect.

The interset on the 327K(work this amount out yourself) can then be offset against rental profit.

 

[liteweight]

Thanks DonKing. Do have interest relief on 165k at source just wasn't sure about rest. I use revenue on line so do they just take my word for it that I'm paying interest on 327k or will they look for evidence from bank?

 

[DonKing]

I use revenue on line so do they just take my word for it that I'm paying interest on 327k or will they look for evidence from bank?

I understand from a buddy of mine in revenue that once you pay your taxes on time and your figures are reasonable then you are not likely to be audited. They will only look for evidence of the interest paid if you are audited.

 

[liteweight]

I understand from a buddy of mine in revenue that once you pay your taxes on time and your figures are reasonable then you are not likely to be audited. They will only look for evidence of the interest paid if you are audited.

Hi DonKing,

That makes life easier! What happens if I decide to sell my PPR? Do I transfer the mortgage to the investment property in order to still avail of the tax relief?

Also with regard to Spanish property..am purchasing at mo. The builder already has a mortgage which I can take over or else I can get my own, either here or in Spain. Not sure what the best option is. Was asked when booking property if I'd like to sign up to take over builders mortgage but nice girl in office told me that if I did and later changed my mind, there are penalties attached. Kept my options open but not sure where to go for mortgage now. Think PPR has enough on it but investment property in Dublin is mortgage free. Any suggestions?

 

[DonKing]

Hi DonKing,

That makes life easier! What happens if I decide to sell my PPR? Do I transfer the mortgage to the investment property in order to still avail of the tax relief?

I presume if you sell your PPR then your bank/bs will want you to either repay the whole mortgage or use your new PPR or an investment property as colateral for your mortgage.

I understand that revenue don't care what property/colateral was uesd for the mortgage but what they are concerned with is what the mortgage is used for.

I'm not too sure what your question is in relation to still availing of the tax relief.

TAX relief -> available on a percentage of mortgage interest up to a certain limit for mortgage used to buy your PPR not an investment property.

Please ask me again (in a different way!) if your not happy with the above. Someone else might be able to respond with a bit more clarity!



I don't know anything about Spainish property/banks/mortgages. It sounds a little dodgy to me particularly since it was only by chance that a "a nice girl" in the builders office told you about penalities for changing your mind.

I was considering raisng mortgages in Hungary myself but at the time the interest rates in Hungary were less favourable. I must admit also it's hard enough trying to keep tabs on Irish mortgage providers. I doubt Hungarian/Spanish Banks are any better and the language barrier would maek it even harder.

You've plenty of equity in Ireland, I would suggest you use that and maybe consider splitting the mortgage ie raise 50% here and the other 50% with a Spanish bank.

I think you really need to get a good Spanish tax adviser and solicitor before you embark on your Spanish Investment property. If you can find an Irish based Solicitor/Tax advisor who deals with Spain then that would be ideal as they would cover Irish Law and Tax as well.

 

[liteweight]

I presume if you sell your PPR then your bank/bs will want you to either repay the whole mortgage or use your new PPR or an investment property as colateral for your mortgage.

I understand that revenue don't care what property/colateral was uesd for the mortgage but what they are concerned with is what the mortgage is used for.

I'm not too sure what your question is in relation to still availing of the tax relief.

TAX relief -> available on a percentage of mortgage interest up to a certain limit for mortgage used to buy your PPR not an investment property.

Please ask me again (in a different way!) if your not happy with the above. Someone else might be able to respond with a bit more clarity!



I don't know anything about Spainish property/banks/mortgages. It sounds a little dodgy to me particularly since it was only by chance that a "a nice girl" in the builders office told you about penalities for changing your mind.

I was considering raisng mortgages in Hungary myself but at the time the interest rates in Hungary were less favourable. I must admit also it's hard enough trying to keep tabs on Irish mortgage providers. I doubt Hungarian/Spanish Banks are any better and the language barrier would maek it even harder.

You've plenty of equity in Ireland, I would suggest you use that and maybe consider splitting the mortgage ie raise 50% here and the other 50% with a Spanish bank.

I think you really need to get a good Spanish tax adviser and solicitor before you embark on your Spanish Investment property. If you can find an Irish based Solicitor/Tax advisor who deals with Spain then that would be ideal as they would cover Irish Law and Tax as well.

Again, apologies for the term interest relief rather than expense. I was dealing with an estate agent in Spain initially (mentioned on this forum many times). It was they who advised me to take up the Spanish mortgage from the outset, so I was grateful to the girl who enlightened me with regard to penalties.

I do have an independent Spanish solicitor who speaks perfect English but won't be seeing him again until July. Wanted to sort out the questions to ask him before I make trip. Needless to say, I ditched the estate agent and the properties they recommended.

 

[DonKing]

Liteweigh,

There was an article in yesterday's SBP's Money and Markets supplement called "Getting a mortgage for a Spanish property" by a solicitor called Tom McGrath. His e-mail address is tmsolicitors.ie

He mentions that the decision to raise mortgage in ireland and/or Spain is a complicated one. Costs of setting up Spainish mortgage is about 4%. He mentions tax's in ireland and Spain. His article is only tipping on the iceberg and more of teaser than a comprehensive article.

It might be worth your while contacting him with a view to some consultancy etc. If you ended up spending a couple of hundred euro for good sound advice it could be money well spent. I would imagine if you used him or an associate Spanish lawyer for the conveyancy of a Spanish property then that may cover the cost of the Tax/mortgage advice- perhaps

I don't know this guy or have any connection with him. He seems to occasionally do articles for the SBP and may have come across him at one of the recent property exhibitions.

 

[liteweight]

Liteweigh,

There was an article in yesterday's SBP's Money and Markets supplement called "Getting a mortgage for a Spanish property" by a solicitor called Tom McGrath. His e-mail address is tmsolicitors.ie

Think I'll do that DonKing, thanks. Have mortgage free investment property here and could raise LTV mortgage but that might restrict me from investing easily in Ireland at a later date.

Yes definitely need professional guidance as to what's best for future.