Budget Changes to Mortgage Interest Relief

leonardjos

The April budget is limiting mortgage interest relief to the first 7 years, along with a statement saying that this may be scrapped in the future. How can anybody plan a house purchase under the uncertainty of this? At least if we knew for certain, that could be priced into the valuation of a particular property.

Mortgage interest relief to be cut

Also things look to be getting tighter for buy-to-let owners as the amount of mortgage interest which can be offset against rental income falls from 100% to 75%.

Xiney

leonardjos wrote: »

How can anybody plan a house purchase under the uncertainty of this?

If mortgage interest relief would make or break someone, they shouldn't even be considering the purchase of a house.

Blazer

The worst thing I heard was some guy complaining on the radio about not being able to pay his 300K mortage..he was only on 16k a year..how the fcuk did someone like this get a mortage..

heebusjeebus

Mathew Reilly wrote: »

The worst thing I heard was some guy complaining on the radio about not being able to pay his 300K mortage..he was only on 16k a year..how the fcuk did someone like this get a mortage..

That was on Newstalk right? I think he said his wife had recently been made redundant so that could explain the huge mortgage.

seamus

heebusjeebus wrote: »

That was on Newstalk right? I think he said his wife had recently been made redundant so that could explain the huge mortgage.

To be fair, he said he was on €25k with a €250k mortgage and his wife has been recently made redundant. His wife may have been on €40k before being let go so suddenly €250k doesn't look so stupid in that context.

Blazer

It was on Newstalk this morning but they specifically called out he was earning 16k..

Westwood

still uncertain as to when my mortgage will not have tax free allowance..took it out in 2004..so ive 2 years left correct?

blast05

Also things look to be getting tighter for buy-to-let owners as the amount of mortgage interest which can be offset against rental income falls from 100% to 75%.

And who will this hurt the most ? Not the long established landlords with loads of properties but the punter who has 1 extra house ...... usually a case of middle class husband and wife each of whom had a house before they both married and decided to hold on to the second property as a pension investment as government policy supported this. Now they find themselves in probably negative equity on the 2nd house and facing an increased tax bill with more increases to come.
What do you do ? Hold out and pay the taxes on an ongoing basis - along with your primary mortgage plus child care plus more taxes coming down the line plus having to probably pay part of the mortgage on the 2nd property as the rent certainly won't cover them - or else bite the bullet and sell accepting the negative equity hit and a noose hanging loosely around your neck for the followng 30 years while you pay it off.

There are dozens of such couples in my place of work and these people aren't the speculators that have caused the overall problem. They tried to take a degree of financial responsibility and use the vehincles provided by the government to do so. Now the government has put that vehicle in reverse and the middle class guy gets screwed.

There needs to be a smarter way of operating these taxes.

El Stuntman

blast05 wrote: »

And who will this hurt the most ? Not the long established landlords with loads of properties but the punter who has 1 extra house ...... usually a case of middle class husband and wife each of whom had a house before they both married and decided to hold on to the second property as a pension investment as government policy supported this. Now they find themselves in probably negative equity on the 2nd house and facing an increased tax bill with more increases to come.
What do you do ? Hold out and pay the taxes on an ongoing basis - along with your primary mortgage plus child care plus more taxes coming down the line plus having to probably pay part of the mortgage on the 2nd property as the rent certainly won't cover them - or else bite the bullet and sell accepting the negative equity hit and a noose hanging loosely around your neck for the followng 30 years while you pay it off.

There are dozens of such couples in my place of work and these people aren't the speculators that have caused the overall problem. They tried to take a degree of financial responsibility and use the vehincles provided by the government to do so. Now the government has put that vehicle in reverse and the middle class guy gets screwed.

There needs to be a smarter way of operating these taxes.

blast, if they weren't speculating (as you say) then property prices and resultant NE are irrelevant to them as they are yield-focussed investors - why should they deserve our sympathy?

your post lacks internal consistency

also, anyone who saw a house as their 'pension plan' is seriously lacking in financial intelligence

El Stuntman

Westwood wrote: »

still uncertain as to when my mortgage will not have tax free allowance..took it out in 2004..so ive 2 years left correct?

yes, as things currently operate

sliding scale downwards to 15% TRS in year 7

DJDC

The government have to try break the Irish obsession with property investment and this is one step along that path. Having reasonably priced housing will be a key feature of any future recovery. With income taxes now approaching 40% for those who have still have jobs, removal of MIR etc. the slide in house prices will continue until we go back to internationally normal house prices. I guess prices around 2000 nominally adjusted. In other words, any people who bought in 2005-2007 are in serious trouble, those who bought in 2003-2004 may be able to escape losses if they get out soon and those who bought pre-2002 should be ok throughout this bubble. However many over on propertypin and economists like morgan kelly are more pessimistic than me and generally see prices returning to 1998 levels(inflation adjusted) i.e. before all this madness began.

El Stuntman

DJDC wrote: »

The government have to try break the Irish obsession with property investment and this is one step along that path. Having reasonably priced housing will be a key feature of any future recovery. With income taxes now approaching 40% for those who have still have jobs, removal of MIR etc. the slide in house prices will continue until we go back to internationally normal house prices. I guess prices around 2000 nominally adjusted. In other words, any people who bought in 2005-2007 are in serious trouble, those who bought in 2003-2004 may be able to escape losses if they get out soon and those who bought pre-2002 should be ok throughout this bubble. However many over on propertypin and economists like morgan kelly are more pessimistic than me and generally see prices returning to 1998 levels(inflation adjusted) i.e. before all this madness began.

that's a good summary DJDC

we are never going back to bubble territory again, people need to get this into their heads. Also the sooner we get the rest of the downward adjustment in house prices over and done with, the better for the wider economy and society.

Kipperhell

blast05 wrote: »

And who will this hurt the most ?....

...There needs to be a smarter way of operating these taxes.

I see the point your making and it does make sense but I think you may have too close a view of it. The property market can effectively be a pyramid scheme and you can't really blame the people at the top without acknowledging the compliance of those in the middle.

The cut seems relatively well thought out in order not to shock the market entirely. Somebody will always get hurt in a gamble at some point.