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Mortgage or cash for buying a buy-to-let

  • 25-09-2014 4:59pm
    #1
    Irishder
    Registered Users, Registered Users 2 Posts: 946 ✭✭✭


    Hi I am looking at buying a house to rent out. I am in a posistion to buy with cash but would I be better off getting a mortgage of say 30k over 5 years so I can claim tax relief on rental income against the mortgage.


Comments

  • #2
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,286 Mod ✭✭✭✭The_Conductor


    Irishder wrote: »
    Hi I am looking at buying a house to rent out. I am in a posistion to buy with cash but would I be better off getting a mortgage of say 30k over 5 years so I can claim tax relief on rental income against the mortgage.

    You can claim up to 75% of the mortgage interest, as an allowable expense, against rental income, before determination of taxable income.

    So- sit down and do the sums.

    Say it costs you 4% interest.
    3% is allowable as an expense.
    1% is not.
    What could you earn with your lumpsum elsewhere?
    If its not significantly in excess of that which is not allowable as an expense- the obvious step would be to invest it in the property (unless you had some other upcoming events that you might need the cash for, of course).

    All-in-all- where normally we'd advise people to mortgage to the max, in order to max out allowable expenses- where returns are pretty awful elsewhere- you really have to sit down and count your chips. It just might be more profitable to pay in cash- but you need to sit down, equip yourself with knownledge (e.g. what a 10 year interest rate is etc, alongside what return you might get for your lumpsum by investing it elsewhere)- and plug the sums into your calculator.

    Keep in mind- it may not just be a financial decision- you might have a legitimate reason for attaching a preference to going with one or the other option- other than looking at it from a cold and clinical financial perspective- you have to decide that though.........


  • #3
    CIARAN_BOYLE
    Registered Users, Registered Users 2 Posts: 14,599 ✭✭✭✭CIARAN_BOYLE


    Irishder wrote: »
    Hi I am looking at buying a house to rent out. I am in a posistion to buy with cash but would I be better off getting a mortgage of say 30k over 5 years so I can claim tax relief on rental income against the mortgage.

    Can you do something else with the money. Remember its only 75% of interest that is allowable against income and who knows how long that will be available for.


  • #4
    Eldarion
    Registered Users, Registered Users 2 Posts: 484 ✭✭Eldarion


    Irishder wrote: »
    Hi I am looking at buying a house to rent out. I am in a posistion to buy with cash but would I be better off getting a mortgage of say 30k over 5 years so I can claim tax relief on rental income against the mortgage.

    Why a BTL? Why not an Irish REIT if you're that confident in the Irish property market? All the benefit of a booming property sector and none of the headaches of being a amateur landlord with a single unit.

    Or alternatively, investigate other investment vehicles. There's more out there than just Irish property!


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