Q&A: Mortgage interest relief

Q. So what exactly is happening with mortgage interest relief?

A. From today, the only people receiving mortgage interest relief will be those in the first seven years of their current mortgage. The change was announced by Minister for Finance Brian Lenihan in his emergency budget.

Q. I bought my home five years ago so I should be alright then?

A. Yes, you are entitled to mortgage interest relief for seven tax years, including the year you draw down the mortgage. You will continue to be eligible for mortgage interest relief until 2011.

Q. This isn’t my first home. Does that make any difference?

A. It makes no difference to your entitlement. As long as this is your main home, your “principal private residence” in Revenue terms, you are entitled to seven years’ relief on mortgage interest.

Q. At the moment, the relief is credited to my mortgage by my lender. Will that continue to be the case?

A. Ultimately yes. However, in the short term, the Revenue has said it will suspend payments from today for many mortgage holders until it can ascertain whether they remain eligible for the relief.

Q. Is this happening to everyone?

A. Not everyone. Payments to first-time buyers will be uninterrupted. Thereafter, Revenue will continue payments to any mortgage holder where it is certain they meet the new criteria.

Q. As I am in my second home, will my mortgage interest relief be frozen?

A. That’s quite likely, until Revenue can ensure you are still entitled to it.

Q. So what will happen when the bank draws down my mortgage this month?

A. If you are a second-time buyer, it is likely your mortgage payment will be about €37.50 higher this month than it was last month for singles. For working couples who hold a joint mortgage, the shortfall will be €75.

Q. Are lenders making any allowance for this?

A. That is unclear but borrowers are being advised to make sure they have adequate funds in their accounts to manage their mortgage payments. If it looks like this will not be the case, you should contact your lender.

Q. So what happens next?

A. The Revenue will send out letters to all borrowers where it is unclear if they are still entitled to interest relief. Holders of the 118,000 mortgages that switched lenders will certainly receive letters and the figure could be as high as 232,000.

Q. Does this mean that if I switched my mortgage I am likely to lose out?

A. No, although your interest relief will be suspended for a couple of months. Once the Revenue is satisfied that you have had the mortgage for less than seven years, it will reinstate the payments and pay the arrears.

Q. How long will all this take?

A. The Revenue is waiting until it has a dedicated website up and running before sending out the letters. This is likely to be in the week beginning May 11th. The Revenue hopes to reinstate mortgage relief, where valid, in June but it could be later.

Q. What information will they be looking for?

A. The Revenue has been somewhat coy about this. However, at a minimum, they will want to know the date on which the mortgage on your current home was first drawn down, the mortgage account number, whether you have ever switched mortgage provider since taking down the loan and whether you have ever topped up that mortgage.

Q. Following everyone’s advice, I switched my lender two years ago to get a more competitive rate on my mortgage. Will the seven years date from the time of the switch?

A. No. The seven years dates from the time you first took out the mortgage. If you first borrowed to finance your current home in 2004 before switching lenders two years ago, your entitlement to mortgage interest relief will run for the seven tax years from 2004 – at the end of 2011.

Q. I topped up my mortgage last year to cover the cost of building an extension as well as funding the cost of my daughter’s wedding. Will that money qualify for mortgage interest relief?

A. Top ups drawn down explicitly to improve, extend or repair your home will be covered. The rest will not. It never has been.