Monday 5 December 2016

Does taxman owe me tax refund for mortgage relief?

Published 30/09/2011 | 05:00

Three years ago, before I married my husband, he had bought his own house and claimed mortgage interest tax relief (MITR) as a first-time buyer. We married two years ago. Last year when we thought prices would continue to fall we sold and moved into rented accommodation. Now that prices appear to be bottoming we are considering buying again in joint names. As I have never claimed MITR, can I claim it when we buy and if so what about my husband?

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Some wives who marry into a house think they lose out on first time buyer (FTB) mortgage tax relief but there have been some who have got it. Technically your husband is no longer an FTB but he has seven years of tax relief allowable. Frank Conway of moneycoach.ie says he should be able to claim relief, assuming he was renting for two years. As a first-time buyer you yourself also qualify for MITR provided you never owned a home before anywhere in the world.

Conway explains: "Let's say your husband owned a house for two years, rented for two years and now wants to buy again. Well he gets the next three years of relief based on the current rules. However, Revenue tells me that he may be able to get back those two 'lost' years. He will have to contact them directly and make his case inorder to get it at the lower rate.

Furthermore you should also make a separate application for MITR in order to secure your "portion" at the higher relief. Contact your local tax office and explain the situation and that others have succeeded with similar claims.

I am in the last two years of a five-year fixed rate mortgage. With interest rates expected to drop, I'm losing out as my fixed rate is already higher than the equivalent variable rate. If I moved to a variable rate now, would I be charged?

The European Central Bank has signalled that it will start a controlled lowering of interest rates this year, which is welcome news for mortgage holders everywhere.

Those on fixed-rate loans enjoyed stability at a time when interest rates were rising, so really they can't expect to be helped out when they are falling. You can't have it both ways.

That said, you can, of course, crash out of your fixed-rate deal. Most banks will facilitate this, but will charge you interest lost for doing so.

Bank of Ireland says: "In order to provide a fixed-rate mortgage to a customer, the bank itself borrows the money at a fixed rate -- if the customer breaks their fixed-rate contract with us, there is a cost to the bank, which we must pass on to the customer."

Similarly, AIB has a formula for early breakage costs and they've given us an example for a customer with €100,000 mortgage at 7pc on a five-year fixed rate, with full repayment after three years. The early breakage cost works out at €4,000.

After that, only you can decide if it's worth it, but honestly, I'd say stick with the fixed rate until the term is up and shop around then.

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