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About to buy new house - mortgage interest relief

  • 07-12-2011 1:08pm
    #1
    Zane97
    Registered Users Posts: 306 ✭✭


    Am I better waiting till January to buy a house I have deposit on. Or is it the same buying now?


Comments

  • #2
    Oh_Noes
    Closed Accounts Posts: 2,512 ✭✭✭Oh_Noes


    I'm no expert on this area by any means but I do know for sure that when he announced this measure yesterday he announced it "from midnight tonight until January 2013". So whatever your position is it won't be improved by waiting until January.


  • #3
    beertons
    Hosted Moderators Posts: 23,146 ✭✭✭✭beertons


    In the same boat Robbie. Just waiting on the BER cert to sign contracts. Do we wait till January, or just sign now. Am scouring the internet for confirmation it was from midnight last night.


    Just found this thread with a quick google, and it seems like you/we can go ahead.


    http://www.boards.ie/vbulletin/showthread.php?threadid=2056474893


  • #4
    D3PO
    Registered Users, Registered Users 2 Posts: 7,879 ✭✭✭D3PO


    In short and easy terms

    before the end of the year you will get 30% TRS .

    if you get the mortgage next year it will be 25%

    so its not a significant difference but depends on the size of the mortgage and interest rate you have on it I guess.


  • #5
    BlueIsland
    Registered Users Posts: 487 ✭✭BlueIsland


    D3PO wrote: »
    In short and easy terms

    before the end of the year you will get 30% TRS .

    if you get the mortgage next year it will be 25%

    so its not a significant difference but depends on the size of the mortgage and interest rate you have on it I guess.

    Im pretty sure you have got that wrong. The 30% TRS has nothing to do with anyone who is not in the 2004-2008 era of purchasing.

    OP, as others said sign now or Jan its all the same. You be getting 25% interest relief or basically the current rate. It was meant to go down to 15% in 2012 but the government have rowed back on that and left it at 25% until 2013!


  • #6
    D3PO
    Registered Users, Registered Users 2 Posts: 7,879 ✭✭✭D3PO


    BlueIsland wrote: »
    Im pretty sure you have got that wrong. The 30% TRS has nothing to do with anyone who is not in the 2004-2008 era of purchasing.

    OP, as others said sign now or Jan its all the same. You be getting 25% interest relief or basically the current rate. It was meant to go down to 15% in 2012 but the government have rowed back on that and left it at 25% until 2013!

    My bad your right :o


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  • #7
    TheFarneyman
    Registered Users Posts: 117 ✭✭TheFarneyman


    It was 25% on 10,000 euro of your interest in 2011 and 15% on 3000 of your interest in 2012 before yesterday, didn't specify if its now 25% on 3000 or 10000 in yesterday's budget not sure i presumed it remained at 25% of 10,000. Haven't seen it anywhere yet. However if its 25% on 3000 first time buyers still loose out!! If it came into effect last night there's not much can be done now!!!


  • #8
    subway
    Closed Accounts Posts: 6,131 ✭✭✭subway


    You will lose a year of trs if you sign in December.
    Buy in January or you will get roughly 1/12 of your entitlement fr year 1


  • #9
    killers1
    Registered Users, Registered Users 2 Posts: 1,443 ✭✭✭killers1


    subway wrote: »
    You will lose a year of trs if you sign in December.
    Buy in January or you will get roughly 1/12 of your entitlement fr year 1

    Completely incorrect... You will be entitled to 7 years TRS no matter when you close the purchase, whether it's this side of Christmas or anytime in 2012. It'll make no difference to whether you sign for the house in December or wait till the New Year. TRS next year is remaining unchanged in 2012 as it is this year. If the previous Government's intention to reduce TRS was implemented then there would be an urgency to close the sale before 31/12/2011 but as it stands now 2012 reliefs are the same as 2011 for FTB's so it is exactly the same. TRS will be paid for the next 7 years regardless of whether you close in 2011 or anytime in 2012


  • #10
    Zane97
    Registered Users Posts: 306 ✭✭Zane97


    Grand, I got a solicitor today so hope to be sorted soon


  • #11
    wench
    Registered Users, Registered Users 2 Posts: 1,651 ✭✭✭wench


    killers1 wrote: »
    You will be entitled to 7 years TRS no matter when you close the purchase, whether it's this side of Christmas or anytime in 2012.
    This is technically true, but misses the point subway was making.

    You get TRS for 7 calendar years, not 7 years from the date of the mortgage. Therefore if you buy today, your first year consists of one month, and is therefore a waste. Buying in Jan would maximise the tax relief.


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  • #12
    killers1
    Registered Users, Registered Users 2 Posts: 1,443 ✭✭✭killers1


    wench wrote: »
    This is technically true, but misses the point subway was making.

    You get TRS for 7 calendar years, not 7 years from the date of the mortgage. Therefore if you buy today, your first year consists of one month, and is therefore a waste. Buying in Jan would maximise the tax relief.

    Incorrect. If you bought mid-year Revenue gave you the full years entitlement over the remaining months in the year e.g. you bought in June 09 you got 12 months TRS over the remaining 6 months in '09. If you buy in Dec the TRS won't kick in till January in any case.


  • #13
    wench
    Registered Users, Registered Users 2 Posts: 1,651 ✭✭✭wench


    killers1 wrote: »
    Incorrect. If you bought mid-year Revenue gave you the full years entitlement over the remaining months in the year e.g. you bought in June 09 you got 12 months TRS over the remaining 6 months in '09.

    Yes, but it would want to be some mortgage to use up €10,000 of interest on one mortgage payment.


  • #14
    subway
    Closed Accounts Posts: 6,131 ✭✭✭subway


    Thank you wench :)


  • #15
    killers1
    Registered Users, Registered Users 2 Posts: 1,443 ✭✭✭killers1


    Robbie, in answer to your query it'll make no difference to your TRS if you close in Dec or Jan as it'll take Revenue at least 6 weeks to apply your claim for TRS. Subway & Wench I suggest you seek clarification from the Revenue....Think about it logically, if what you are saying is true (which it's not) why would anyone buy a house in the second half of the year & apply for TRS....?


  • #16
    subway
    Closed Accounts Posts: 6,131 ✭✭✭subway


    killers1 wrote: »
    If you buy in Dec the TRS won't kick in till January in any case.

    My understanding is that the first year would be considered 2011.
    The buyer would not have trs applied until 8 weeks or so, but the relief will still be given for an entire year for the december mortgage payment?


  • #17
    subway
    Closed Accounts Posts: 6,131 ✭✭✭subway


    killers1 wrote: »
    Robbie, in answer to your query it'll make no difference to your TRS if you close in Dec or Jan as it'll take Revenue at least 6 weeks to apply your claim for TRS. Subway & Wench I suggest you seek clarification from the Revenue....Think about it logically, if what you are saying is true (which it's not) why would anyone buy a house in the second half of the year & apply for TRS....?
    Well, I study tax part time and this is a scenario that came up in class.
    I am open to correction as I haven't passed my exams yet :)

    One of the first things we learn is that tax isn't always fair and doesn't always make sense ;)


  • #18
    wench
    Registered Users, Registered Users 2 Posts: 1,651 ✭✭✭wench


    killers1 wrote: »
    If you bought mid-year Revenue gave you the full years entitlement over the remaining months in the year e.g. you bought in June 09 you got 12 months TRS over the remaining 6 months in '09.
    killers1 wrote: »
    Think about it logically, if what you are saying is true (which it's not) why would anyone buy a house in the second half of the year & apply for TRS....?

    If its not true, then why did you agree in your earlier statement?

    You still get your full allowance, but your opportunity to use it all up diminishes as the year winds down.

    Link to Revenue (for any doubters!)
    http://www.revenue.ie/en/tax/it/leaflets/tax-relief-source-mortgage-interest-relief.html#section6


  • #19
    killers1
    Registered Users, Registered Users 2 Posts: 1,443 ✭✭✭killers1


    The tax year that your claim falls into is dependent on the date of your first mortgage repayment & not the date of the purchase. If you drawdown a mortgage in Dec 2011 the date of the 1st repayment will be 1 month from that date i.e. sometime in Jan 2012 so therefore you will not lose out by completing the purchase this side of Christmas...


  • #20
    subway
    Closed Accounts Posts: 6,131 ✭✭✭subway


    killers1 wrote: »
    The tax year that your claim falls into is dependent on the date of your first mortgage repayment & not the date of the purchase. If you drawdown a mortgage in Dec 2011 the date of the 1st repayment will be 1 month from that date i.e. sometime in Jan 2012 so therefore you will not lose out by completing the purchase this side of Christmas...
    Are you absolutely certain? Again, my understanding is that The revenue definition is from when interest is first incurred.
    There are lots of other posts asking the same question, but in reverse, ie if I buy in December will I still be eligible for trs. This is from when it looked like no one would get it at all after 31/12.
    The answer they received is that they would get it.


  • #21
    Zane97
    Registered Users Posts: 306 ✭✭Zane97


    Bit hard to understand now


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  • #22
    beertons
    Hosted Moderators Posts: 23,146 ✭✭✭✭beertons


    I'm lost too. Friend suggested emailing the query to Newstalk tomorrow, they'll have someone in from PWC to answer the budget questions. Think I'll hold off for another day or so, till this all becomes clear.


  • #23
    Zane97
    Registered Users Posts: 306 ✭✭Zane97


    Solicitor might know?


  • #24
    CJ1
    Registered Users Posts: 92 ✭✭CJ1


    We are in a similiar position to the OP, gone sale agreed but have not drawn down mortgage just yet. I called Revenue today for clarification on rates of TRS, We are not first time buyers, she confirmed that 2011 and 2012 is same at 15 % for us. She said we can not apply for TRS until after we make our first mortgage payment so I assume that our TRS will start in 2012 and run for 7 years. This is what Killers said I think. I did not ask this specifically though so I am open to correction.


  • #25
    Supercell
    Registered Users, Registered Users 2 Posts: 15,483 ✭✭✭✭Supercell


    This was asked on askaboutmoney before and the answers from the revenue that people got there was:-

    1) You apply for TRS after your first payment
    2) TRS is calculated from drawdown, not first payment.

    Its my understanding that the revenue do use the calendar year for calculation , so this change is a kick in the nuts to those of us that went all out to close in December to try and get the 25% for 2012 instead of 15% TRS as it was before the budget :(
    https://www.loughlinstown.ie/

    Have a weather station?, why not join the Ireland Weather Network - http://irelandweather.eu/



  • #26
    CJ1
    Registered Users Posts: 92 ✭✭CJ1


    Now I am totally confused, I may call TRS section tomorrow again and clarify what are the implications between drawing down in december or january.


  • #27
    Supercell
    Registered Users, Registered Users 2 Posts: 15,483 ✭✭✭✭Supercell


    CJ1 wrote: »
    Now I am totally confused, I may call TRS section tomorrow again and clarify what are the implications between drawing down in december or january.

    CJ , I just found this link on the revenue website which explains it pretty well - http://www.revenue.ie/en/tax/it/reliefs/tax-relief-source-mortgage-rates.html

    I hadn't realised that TRS ends for everyone in 2017 regardless of when you buy.
    So working out the relief in our case (borrowing 210K over 25 years) :-

    1) Buy December - loose out TRS of roughly €350 from 2012 - 2017
    2) Buy January - Gain €350 TRS extra 2012- 2017 however loose out about €145 TRS from December 2011

    So a total net loss of about €205 overall by buying in December instead of January.
    However we currently rent so to buy in January would mean an extra months rent which makes it a no brainer, we are still better of buying this December by Rent - €205 :)
    https://www.loughlinstown.ie/

    Have a weather station?, why not join the Ireland Weather Network - http://irelandweather.eu/



  • #28
    killers1
    Registered Users, Registered Users 2 Posts: 1,443 ✭✭✭killers1


    CJ1 wrote: »
    Now I am totally confused, I may call TRS section tomorrow again and clarify what are the implications between drawing down in december or january.


    For anyone closing in December, wait till your first repayment goes through in Jan. When you're completing the TRS application online you enter the date of first repayment. You also enter that 2012 is the first year of your claim. You will get TRS for the next 7 years and not lose out... I assure you...


  • #29
    Supercell
    Registered Users, Registered Users 2 Posts: 15,483 ✭✭✭✭Supercell


    killers1 wrote: »
    For anyone closing in December, wait till your first repayment goes through in Jan. When you're completing the TRS application online you enter the date of first repayment. You also enter that 2012 is the first year of your claim. You will get TRS for the next 7 years and not lose out... I assure you...

    Actually killers, if you buy in 2012 you will get 6 years TRS not 7
    If you buy in December you will get 6 Years plus 1 month

    TRS ends for all in 2017, doesnt matter if you buy in Dec 2011 or Jan 2012
    https://www.loughlinstown.ie/

    Have a weather station?, why not join the Ireland Weather Network - http://irelandweather.eu/



  • #30
    killers1
    Registered Users, Registered Users 2 Posts: 1,443 ✭✭✭killers1


    Supercell wrote: »
    killers1 wrote: »
    For anyone closing in December, wait till your first repayment goes through in Jan. When you're completing the TRS application online you enter the date of first repayment. You also enter that 2012 is the first year of your claim. You will get TRS for the next 7 years and not lose out... I assure you...

    Actually killers, if you buy in 2012 you will get 6 years TRS not 7
    If you buy in December you will get 6 Years plus 1 month

    TRS ends for all in 2017, doesnt matter if you buy in Dec 2011 or Jan 2012

    Apologies, when I said 7 yrs I meant till TRS is abolished. Your post above answers all the queries so there should be no further confusion. If you close and claim in Dec you get an extra month of TRS...the reason they are abolishing it in Dec 2017 is to prevent the discussion and decisions people are making as to whether they should close now or not. Simple answer is yes!


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  • #31
    cgarrad
    Registered Users, Registered Users 2 Posts: 1,611 ✭✭✭cgarrad


    Rent for a year, get 25% off the price of the house not 25% interest relief :rolleyes:


  • #32
    killers1
    Registered Users, Registered Users 2 Posts: 1,443 ✭✭✭killers1


    cgarrad wrote: »
    Rent for a year, get 25% off the price of the house not 25% interest relief :rolleyes:

    Quite possibly. But the people looking for answers on this thread are the ones who have signed contracts or are ready to close...


  • #33
    Treehouse72
    Registered Users, Registered Users 2 Posts: 1,003 ✭✭✭Treehouse72


    The amount you save in taxes one way or the other will in all likelihood pale into insignificance beside the drop in value your new house is likely to suffer in the next year or two.

    In my opinion (and in the opinion of just about everyone from the ESRI to the Central Bank to the Troika).


  • #34
    beertons
    Hosted Moderators Posts: 23,146 ✭✭✭✭beertons


    I emailed them for their answer, to my question, and this is the reply I got.

    In reply to your email TRS applies from when interest accrues on your loan and not when you sign the contract.
    The 25% rate is available in 2011 and would apply to 2011 and 2012.
    If 2012 is your first year the 25% rate would apply to 2012 and 2013.

    So we're waiting till January to sign for the house


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