Reduction in FTB mortgage interest relief

[Peter Forde]

I took out a mortgage of 210k in 2005. Since then I have made extra payments whenever possible and now my mortgage stands at under 150k.
Last year I got a letter from my mortgage provider to say that the Revenue Commissioners had looked at my mortgage and decided that they would reduce my tax relief by something like 6 euro. Yesterday I got another letter from my mortgage saying Revenue were reducing my mortgage relief by a further 8.50 euro per month.

Is the reason for the reductions because a) I'm now 5 years into my mortgage and there is a sliding scale of tax relief , or b) because I have been prudent (or maybe foolish) enough to make extra payments and so they've decided to give me less tax relief.

If it's the latter I would be absolutely disgusted. I've already taken pay cuts this year and if the government are penalising me further because I want to get on top of my debts I think it would be most unfair

 

[thespecialon]

Its mortgage Interest Relief..Interest is calculated on amount outstanding,so as this reduces so does your mortgage interest relief?I think..So yes in a way you have been penalised for paying extra off

 

[Papercut]

Mortgage Interest Relief is calculated on the interest charged/paid on your mortgage for a given year. Because you have paid off some extra capital outstanding on your loan during that year, the interest that you are being charged by your lender has reduced & differs from what they would have estimated to Revenue in respect of your mortgage interest for that year, therefore your interest relief has been adjusted to reflect this.

You have not been penalised, as the extra amount that you paid has reduced the capital amount owed to your lender, so you will not be paying interest on this amount at all (so you are not missing out on any interest relief), unless there are any penalty charges/fees to take into account under the terms & conditions of your loan agreement.

Interest relief reduces anyway over the seven years, but Revenue wouldn’t under normal circumstances write to you to inform you of this.

Basically you won’t get interest relief for interest that you did not pay.

 

[roberts]

Just calculate the interest that you are saving by overpaying your mortgage as opposed to the loss in tax relief and I guarantee you that in the long run you will be saving money so my advise is keep overpaying where possible especially if your mortgage rate is higher than deposit interest rates.