Wednesday, 6 December 2006

Budget changes to Mortgage Interest Relief

In today's Budget, Brian Cowen announced increases to Tax Relief at Source (TRS) for mortgage customers, with the biggest increases for First Time Buyers.

The current annual ceiling on the amount of interest that can be allowed on a mortgage is being doubled for first-time buyers from €4,000/€8,000 single/married to €8,000/€16,000 single/married. The increased relief will be available to all first-time buyers who are in the first seven years of their mortgage.

The ceiling for non-first-time buyers is also being increased, from €2,540/€5,080 single/married to €3,000/€6,000 single/married.

For a couple buying their first home, the new €16,000 limit means that their maximum allowable relief is €16,000 at 20% or €266.66 per month jointly in a full tax year, provided that they pay at least €16,000 in interest in that year. Assuming a sample interest rate of 4.5%, their mortgage would need to be in excess of ~€350,000 to qualify for maximum relief.

The increase to €6,000 for a married couple on an existing mortgage (i.e. not First Time Buyers) is less generous - in a full year a couple paying at least €6,000 in interest will now get €100.00 per month TRS jointly, up from €84.66 per month.

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