Second Property/Claim tax back

ice27

Hi All,

Looking for some friendly advice!

I have a second property on which I have a interest only mortgage. I heard taht you can claim back money on interest only mortgages. Basically the rent that I get puts me in negative against mortgage paymenst. However, the property is increasing year in year out an alarming rate, so Im not so worried about that, looking at it as long term investment. Even If I sold in the morning I would have made quite a few bob after the capital gains tax and the mortgage has been cleared. Anyway how do I go about claiming on an interest only mortgae. Also, its a split mortgage, approx 200k is interest only and €50K is annuity, again this was intended to reduce the interest only side of things.
Any help would be much appreciated!:)

ircoha

If I read the post correctly your interest expense is exceeding your rent on the property, so U are in effect already claiming interest relief and it does not really matter what kind of loan u have, for rental properties, it is rent less interest and all the other stuff.

Now I suspect the Q? u are really asking is can u use the excess of interest on the 2nd property against say ur normal PAYE income, the answer is no.
If u are self employed I believe the answer is still no.

The only circumstances in which u could is if u haad a second RENTAL property where rent exceeded interest.

I think u can carry the "losses" forward to such time as rent less interest etc is positive



Hope that helps, [I believe I am correct, if not at least it will give some ammo tho the others if I am wrong:)]

ice27

ircoha wrote:

If I read the post correctly your interest expense is exceeding your rent on the property, so U are in effect already claiming interest relief and it does not really matter what kind of loan u have, for rental properties, it is rent less interest and all the other stuff.

Now I suspect the Q? u are really asking is can u use the excess of interest on the 2nd property against say ur normal PAYE income, the answer is no.
If u are self employed I believe the answer is still no.

The only circumstances in which u could is if u haad a second RENTAL property where rent exceeded interest.

I think u can carry the "losses" forward to such time as rent less interest etc is positive



Hope that helps, [I believe I am correct, if not at least it will give some ammo tho the others if I am wrong:)]

Hi Ircoha,
Thanks for the reply,

Yes, my loan amount does exceed my rent when you add the interest only and capital loans together (split term loan, 75% interest only and 25% capital), loan amount exceeds rent by about €150, when you add the split term loans together. If you were to look at the rent and just compare it to the interest only part of the loan the rent would then exceed interest only loan amount by about 22%. Probably crazy I know looking at it this way as im sure you look at the whole loan amount regardless of the split term situation. Just looking for some loopholes here!

Its just I was reading something on my home.ie and it stated that you can claim back tax on an interest only mortgage so I said I would throw it out there.
Taken from www.myhome.ie - "Individuals who purchase a second property and rent out what was previously their main residence should inform the Revenue, as they will no longer be entitled to mortgage interest relief at source at the standard rate of tax. Instead they can claim a tax write-off for the full amount of mortgage interest against their rental income. Mortgage relief will be available on their new residence"
Also - "Interest Only: You could also consider a three-year interest-only repayment option. This will reduce your initial monthly outlay and may help to maximise yourtax benefits arising on interest repayments"

I also read in an article in the business post sometime early summer that two banks, cant remeber who!, I think permanent TSB and NIB were giving second time investors unbelievable mortgage rates on interest only loans , apparrenetely 2.5% or something. Anyone know anything about this? Its not to be found on any website or anything!:)

ircoha

ice27 wrote:

Hi Ircoha,
Thanks for the reply,

Yes, my loan amount does exceed my rent when you add the interest only and capital loans together (split term loan, 75% interest only and 25% capital), loan amount exceeds rent by about €150, when you add the split term loans together. If you were to look at the rent and just compare it to the interest only part of the loan the rent would then exceed interest only loan amount by about 22%. Probably crazy I know looking at it this way as im sure you look at the whole loan amount regardless of the split term situation. Just looking for some loopholes here!< Am not clear on what u mean by a split term loan. The bottom line is that only the interest portion of your loan repaymesnts is allowable, no part of the capital is ever allowable against rent, so if u have multiple loans on the 2nd property just get out the interest portion

Its just I was reading something on my home.ie and it stated that you can claim back tax on an interest only mortgage so I said I would throw it out there.
Taken from www.myhome.ie - "Individuals who purchase a second property and rent out what was previously their main residence should inform the Revenue, as they will no longer be entitled to mortgage interest relief at source at the standard rate of tax. Instead they can claim a tax write-off for the full amount of mortgage interest against their rental income. Mortgage relief will be available on their new residence"
its not clear where they are living, the suggestion is that if u have A and buy B and move from A to B, that u can claim interest on the debt for both A and B against ur rent, as well as claim Mortgae interest relief on B [MIR], where as if u buy B but stay in A u can only claim interest on B against rent from B and MIR on A. If this is the case I suspect it to be a loop hole which Cowen will plug unless all the FFrs are at it>
Also - "Interest Only: You could also consider a three-year interest-only repayment option. This will reduce your initial monthly outlay and may help to maximise yourtax benefits arising on interest repayments"< IMO, somewhat misleading as at the beginning of an annuity interest makes up the bulk of the monthly repayment, I dont have time to crunch the numbers but I dont think there is much in it for the first few years

I also read in an article in the business post sometime early summer that two banks, cant remeber who!, I think permanent TSB and NIB were giving second time investors unbelievable mortgage rates on interest only loans , apparrenetely 2.5% or something. Anyone know anything about this? Its not to be found on any website or anything!:)call them, it was prolly a summer promo

As before not an expert here so hopefully someone else will verify or correct my musings:)

ice27

Originally Posted by ice27
Hi Ircoha,
Thanks for the reply,

Yes, my loan amount does exceed my rent when you add the interest only and capital loans together (split term loan, 75% interest only and 25% capital), loan amount exceeds rent by about €150, when you add the split term loans together. If you were to look at the rent and just compare it to the interest only part of the loan the rent would then exceed interest only loan amount by about 22%. Probably crazy I know looking at it this way as im sure you look at the whole loan amount regardless of the split term situation. Just looking for some loopholes here!< Am not clear on what u mean by a split term loan. The bottom line is that only the interest portion of your loan repaymesnts is allowable, no part of the capital is ever allowable against rent, so if u have multiple loans on the 2nd property just get out the interest portion
Sorry I phrased it incorrectly. Its just a split loan, a portion is capital and a portion is interest only, interest only is approx 75% of loan. Same loan but just split into two different payment types!

Its just I was reading something on my home.ie and it stated that you can claim back tax on an interest only mortgage so I said I would throw it out there.
Taken from www.myhome.ie - "Individuals who purchase a second property and rent out what was previously their main residence should inform the Revenue, as they will no longer be entitled to mortgage interest relief at source at the standard rate of tax. Instead they can claim a tax write-off for the full amount of mortgage interest against their rental income. Mortgage relief will be available on their new residence"
its not clear where they are living, the suggestion is that if u have A and buy B and move from A to B, that u can claim interest on the debt for both A and B against ur rent, as well as claim Mortgae interest relief on B [MIR], where as if u buy B but stay in A u can only claim interest on B against rent from B and MIR on A. If this is the case I suspect it to be a loop hole which Cowen will plug unless all the FFrs are at it>
My scenario would be the first scenario outlined above. However I think what they say is that if you do this you obviously loose your tax relief on your first property as this now becomes your investment property. However, it then suggets in a very vague way that you can claim tax write offs on propertty B i.e the full amount of interest paid against rent. I dunno its always a tricky one to get info on!!!

Also - "Interest Only: You could also consider a three-year interest-only repayment option. This will reduce your initial monthly outlay and may help to maximise yourtax benefits arising on interest repayments"< IMO, somewhat misleading as at the beginning of an annuity interest makes up the bulk of the monthly repayment, I dont have time to crunch the numbers but I dont think there is much in it for the first few years

I also read in an article in the business post sometime early summer that two banks, cant remeber who!, I think permanent TSB and NIB were giving second time investors unbelievable mortgage rates on interest only loans , apparrenetely 2.5% or something. Anyone know anything about this? Its not to be found on any website or anything!call them, it was prolly a summer promo
Will give them a buzz!

Many thanks for your responses, it was much appreciated!

Regards,:)