Q&A: I am waiting on planning approval to build a bungalow within the next five months. My understanding is that generous mortgage relief is available now and is given for a seven-year period. In a radio programme today, I heard that this relief ends next January.

Is this true? I am depending on this type of relief and a favourable loan to build my dream home. I am a customer of AIB and I have not met them yet to discuss a loan etc. I also need advice on what is required in securing a loan, and what favourable rates are available from financial institutions. Many thanks.

Mr EW, by email

YOU REALLY NEED to get moving on this. As you have heard, mortgage interest relief on new loans will not be available after December 31st this year.

For those who already have a mortgage or take one out this year, relief will be wound down until it is phased out completely in 2017.

If you do get your planning and get a mortgage before the end of this year, you will receive relief on mortgage interest (up to certain limits) of 25 per cent in the first couple of years (2013 and 2014) as a first-time buyer – compared to 15 per cent for people who have previously owned property. The rate of relief falls to 22.5 per cent in the following three years and to 20 per cent thereafter.

Although first-time buyers are generally entitled to enhanced mortgage relief for the first seven years of ownership, you will get such relief for only six years as mortgage relief disappears altogether in 2017.

In terms of the upper limits, in cash terms, on mortgage interest relief, as a single first-time buyer you are entitled to relief on up to €10,000 of interest this year. At a rate of 25 per cent, this means you will benefit up to a maximum of €2,500 as a result. Naturally, the later you secure your mortgage, the less likely you are to avail fully of this relief.

The thresholds for couples are double the single relief levels.

In terms of applying for a mortgage, there is a copious amount of information available from the banks and online – including at AIB. Most importantly, you will need to show what sources of income are available to you, how secure they are and what amount you will be able to put towards the cost of the project yourself. As a general rule, most lenders will require a minimum deposit of 8 per cent of the value of the property, with many looking for more in these straitened times.

For self-build properties, with your current bank, AIB, for example, you will need an initial valuation report of the site and likely property value before proceeding with a mortgage application. You will also require interim building certificates during the building process in order to draw down your approved mortgage funds on a phased basis.

For the purposes of budgeting, you should be aware that interest accrues only on money drawn down – which will also affect the amount of relief available to you in cash terms. No final decision on a mortgage will occur until you receive full planning permission and get an architect, surveyor or engineer to document the costs of the build process.

Having said that, it is never too early to start the mortgage process. Things will take longer than you think and you may find yourself having to consult more than one lender – with the relevant legal and other costs involved. I would start sounding out lenders now.

In terms of rates, low-cost tracker loans are no longer available, so you will be offered either a fixed or variable rate loan, if successful. The former is useful if you need the security of knowing the amount of your monthly payments for one, two or five years into the future.

In general, a variable rate will be better value given the low interest rate outlook for the medium term. However, this is skewed by banks’ current need to improve their profit margin, which gives less visibility on the outlook for variable rates.

In very general terms, AIB has been consistently competitive on mortgage rates, but you should check out the available rates as you embark on the process.

Are we entitled to relief if we rent out our apartment?

My wife and I are considering moving abroad for work. In doing so, we would need to let our apartment – one that I purchased with a tracker mortgage as a first-time buyer several years ago. Could I continue to receive mortgage interest relief and would I be obliged to notify the Collector General of the change? Similarly, would I be obliged to notify my mortgage lender of the fact that it would no longer be my principal private resident. Though my contract makes no mention of a buy-to-let proviso, I am concerned the bank could attempt to change the conditions of my loan.

Mr DK, Dublin

SEVERAL ISSUES arise here. First, you are not entitled to mortgage interest relief if you are no longer an owner-occupier – ie, if you rent out your apartment. As a landlord, you will be obliged to register with the Private Residential Tenancies Board and will need to file an annual return with the Revenue in relation to tax due on rental income.

In relation to your bank, I am sure your mortgage contract will require you to notify them of any change in circumstances – and they will need to know in relation to stopping mortgage interest relief, which they do at source.

In the current climate, where banks are increasingly worried about being paid their home loans at all, you should not be strong- armed into giving up your tracker mortgage rate. If there is any attempt to do so, I would resist and run through the entire complaints process.

This column is a reader service and is not intended to replace professional advice. Please send your questions to QA, c/o Dominic Coyle, The Irish Times, 24-28 Tara Street, Dublin 2, or to dcoyle@irishtimes.com. No personal correspondence will be entered into.