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Mortgage Interest Relief – Wednesday Club

Posted on | June 9, 2010 | No Comments

Mortgage Interest Relief

Wednesday Club Blog – Mortgage Interest Relief

If you are one of the many people who took the plunge and bought your home since 2002, during the infamous Celtic Tiger, you would have been entitled to claim Mortgage Interest Relief or tax relief at source (TRS). With effect from 1st May 2009 the number of tax years in respect of which mortgage interest relief may be claimed is 7 years for first time and non first time buyers from the start of your mortgage. If you haven’t claimed already you may claim back from 2006 to 2009.

What is a qualifying loan?

A qualifying loan for the purpose of mortgage interest relief (TRS) is a secured loan which must be used solely for the purchase, repair, development or improvement of your principal private residence. It must be used solely for the purchase, repair, development or improvement of a principal private residence (PPR), i.e. where you live, within the State. TRS can also be claimed on a mortgage you are paying for a separated spouse or dependent relative for whom you are claiming a dependent relative tax credit. A loan used for the purchase of an investment property or holiday home does not qualify for mortgage interest relief (TRS). Switching lender or mortgage type to achieve a better interest rate does not equate to a new loan but it does not affect your entitlement to the tax relief if you are already claiming it.

See some examples of mortgage interest relief  in action.

 

Amount of mortgage interest relief (TRS) available

The rates of relief were changed in January 2009. If you are a single first time buyer in years one and two of your mortgage you can get relief at 25% of your interest up to a ceiling of €10,000, i.e. €2,500. In years three, four and five it is 22.5%, i.e. €2,250 and in years six and seven it is 20%, i.e. €2,000. If you are married or widowed the same figures apply only the ceiling is doubled to €20,000. If you are a single non-first time buyer, i.e. you previously had a mortgage and wish to purchase a new house, the ceiling is €3,000 with a flat rate of 15% across the first seven years of your mortgage, i.e. €450. Again if you are married or widowed the ceiling is doubled to €6,000. Mortgage interest relief is given, by your lender, either in the form of a reduced mortgage payment or a credit to your funding account. Relief is calculated on the qualifying interest on your loan, or on your ceiling, whichever is the lesser. 

Mortgage Interest Relief Timeline

Changes were made in 2009 and in 2010 to TRS entitlements. Your entitlement to mortgage interest relief depends on the start date of your mortgage. Below is a guide to entitlement based on when you took your mortgage out.
• If you took out the mortgage in 2003 or earlier, your entitlement expired in 2009 under the provisions of the Supplementary Budget of April 2009.
• If the start date of your mortgage is between 1 January 2004 and 31 December 2011, the Finance Act 2010 provides that your entitlement to relief will continue at the current rates until the end of 2017.
• If you take out a mortgage between 1 January 2012 and 31 December 2012, there will be a 15% rate of relief for first-time buyers and a 10% rate for non-first-time buyers. The maximum amounts of interest that will qualify for relief will be €6,000 for married or widowed people and €3,000 for single people. These ceilings will be the same for first-time buyers and non-first-time buyers. For mortgages taken out after 31 December 2012, no mortgage interest relief will be allowed.
• Mortgages taken out on or after 1 January 2013 will not qualify for mortgage interest relief.
• Mortgage interest relief will be abolished completely after 31 December 2017.

Procedure

This is a hugely complicated area and we’ll do a number of case studies on the area going forward to highlight how complicated it can get!  But here is the general application procedure:

 
To apply for TRS, you need your Personal Public Service Number (PPSN) and your mortgage account number(s) as provided by your bank. You should not apply to register your mortgage until after the date of your first mortgage repayment. Payment for prior years is made directly into a bank account nominated by you.

If your property ceases to be your Principal Private Residence and the mortgage account is not cleared and paid, or if your loan’s qualifying percentage changes you must notify Revenue immediately.   In particular, if you separate from a partner and move out, then you should no longer be receiving mortgage interest relief – even though your partner and children may still be living there.

Hope you get the most out of your interest payments on your mortgage and if you have any questions you can call me on 05991 36031

Best Regards,

Ray

 

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Category: Mortgage Interest Relief, Paye Tax, Tax Refunds, Wednesday Club

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