Mortgage interest relief may boost the market, but what does it mean for you?
AROUND 214,000 home-owners who bought during the boom are to benefit from a boost to the amount of tax relief they get on their mortgage repayments, with up to €2,000 a year in extra mortgage tax relief.
Q What exactly is mortgage tax relief?
Sometimes called tax relief at source (TRS), mortgage tax relief is given by the Revenue Commissioners for interest paid on a mortgage based on the interest paid. The relief goes to the lender and is paid at source by your bank.
Mortgages taken out from January 1, 2004, and December 31, 2012, are eligible for mortgage interest relief. It will end in 2017.
The tax relief had been due to be radically scaled back for those buying next year, but the relief for 2012 was increased in Tuesday's Budget.
The relief only applies to residential property.
Q So how much can you get back?
At the moment mortgage interest relief for first-time buyers is 25pc of the interest you pay for the first and second tax year in which you pay mortgage interest. This applies to someone who buys this year. There is an upper limit of €10,000 in interest for a single or widowed person, and €20,000 for a couple on the amount of mortgage interest you can claim.
This means that a couple with a large mortgage can get up to €5,000 a year in relief (€20,000 by 25pc).
Q What changes did the minister make in the Budget for those who bought in the boom?
Michael Noonan is to push up the percentage rate that can be claimed for those who bought between 2004 and 2008 to 30pc. The higher 30pc rate will run until 2017.
For those who already have the tax relief, the amount of interest qualifying for relief drops from a maximum of €10,000 for a single (€20,000 for couples) to €3,000 (€6,000 for a couple) after seven years.
So after seven years you get the relief at 30pc of €3,000, or €900 a year, or up to €1,800 (€6,000 by 30pc) for a couple. This works out at a monthly gain of €75.
Q I bought in 2004. Will the changes to mortgage tax interest relief impact on me?
In a word: yes. You could get as much as €900 a year in additional tax relief. The amount of tax relief you get depends on the size of your mortgage and the interest rate. The more interest you pay, the more tax relief you will get.
Mortgage interest relief expires in 2017. If you are a first-time buyer, you will get the higher 30pc rate till then.
Q Will we receive the higher relief automatically or will we have to apply through our mortgage provider for it?
Mortgage relief is applied at source. Those entitled to the higher relief get it automatically.
Q Myself and my wife bought our house in 2008. I was a first-time buyer, but my wife was not. Do I qualify for the higher mortgage interest relief as the mortgage is in both our names?
The person who did not previously own a house may qualify for the relief for their portion of the mortgage, according to Frank Conway of MoneyCoach.ie. Check with the Revenue Commissioners.
Q I bought my first house in 2004 but sold and moved to a second house in 2007 which is now in negative equity. Since my first mortgage was 2004 do I fall under the 30pc tax relief?
Yes. Based on Budget 2012, you will qualify for the increase in relief from 15pc of the interest you pay to 30pc.