When does tax relief on my mortgage start?
Q As a first-time buyer applying for my first mortgage, I believe you get TRS (mortgage interest tax relief at source) at a higher rate for seven years. If you draw down your mortgage in December and your repayments begin in January, when is your first year for TRS purposes? Is it December (thereby losing all of that year) or January, so gaining the benefit of the full seven years?
A What a timely question and well done for thinking ahead - it shows that long gone are the days when first-time buyers jumped in to a purchase before considering every possible angle. We put your question to financial advisor Liam Ferguson of Ferguson Associates and, according to him, TRS commences from the date you draw down your mortgage, so if you draw down in December, you lose all of 2008 and therefore have only six years TRS at the first-time buyer rates. He suggests that it would be worth while attempting to delay the drawdown until the new year, even it means you miss that psychological deadline of "being in for Christmas". This would seem to be good advice for buyers but more bad news for builders operating at that level of the market and looking at countless empty apartments and houses that are likely to remain so this side of Christmas, despite the good news for borrowers of interest rate falls.