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Mortgage Interest Tax Relief

Mortgage interest tax relief is granted at source i.e. by the lender. TRS (Tax Relief at Source) replaces the system where interest relief was administered through the tax system. The new system means that the borrower's account will be debited with the amount of the full mortgage repayment when due and credited at the same time with the amount of interest relief.

Once you are into a tax paying category, stamp duty is charged on the full consideration, not just on the excess.

The stamp duty rates payable by first time buyers who are owner occupiers of second-hand houses up to €635,000 have been reduced. The revised stamp duty rates, which will apply to instruments (e.g. deeds of conveyance or transfer or leases) executed on or after 5 November 2007, are set out in the table below.

Revised First Time Buyers' Rates from 2007

A First Time Buyer is a person, (or, where there is more than one buyer, each of such persons):

• who has not on any previous occasion, either individually or jointly, purchased or built on his/her own behalf a house (in Ireland or abroad) and

• where the property purchased is occupied by the purchaser, or a person on his behalf, as his/her only or principal place of residence and

• where no rent, other than rent under the rent-a-room-scheme, is derived from the property for five years after the date of the current purchase.

Yes. There are two particular situations where a person is deemed to be a First Time Buyer.

(a) The trustees of a trust (to which section 189A of the Taxes Consolidation Act, 1997, applies), whose trust funds are raised by public subscriptions for the benefit of permanently incapacitated persons, in respect of the first house(s) bought after the establishment of the trust, for occupation by the beneficiary or if more than one, each of the beneficiaries.

b) A spouse to a marriage the subject of a decree of judicial separation, a deed of separation, a decree of divorce or a decree of nullity in the case of the first acquisition of a house by the spouse following the separation or divorce provided that the spouse had, in relation to the former marital home,

• left that home;

• not retained an interest in that home;

• whose separated/former spouse continues to occupy that home, which home was occupied by both spouses prior to the separation or dissolution of the marriage.

Irish Revenue - Rates of Duty for Residential Property

The rates of duty applicable for residential property (whether new or second-hand) are as follows:

* Transactions, where the consideration (or the aggregate consideration) does not exceed €127,000, are exempt from stamp duty.

Former Rates of Stamp Duty

Aggregation applies in determining the stamp duty liability where a transaction forms part of a larger transaction or of a series of transactions involving residential property. The stamp duty liability is calculated on the basis of the aggregate consideration. The duty is then apportioned between the separate properties which are transferred by separate instruments and the apportionment is pro rata to the consideration for each property.

Contents

In relation to instruments executed on or after 5 November 2007, the contents of residential property are no longer to be taken into account in determining the stamp duty liability on the consideration attributed to that residential property. However, the total consideration must be apportioned on a bona fide basis between the property and the contents, and surcharges may apply in the event of undervaluation. It should be noted that stamp duty transactions are subject to audit by Revenue.

Mortgage Deed Duty

This duty of 0.1% as detailed below, was abolished in Budget 2007.

If the mortgage exceeds €254,000, duty is charged at €1.27 (0.1%) for every €1,270 borrowed. On an €317,435 mortgage, for example, duty of €317 is payable, subject to a maximum duty of €630.

Legal Fees

Besides the solictor's customer service reputation, it can be worthwhile to compare charges. Plan for between 1% and 1.5% of the purchase price before VAT of 21%, if you're buying a home, or between 0.75% and 1% (before VAT) of the combined purchase and sale price if you're buying and selling at the same time. The solicitor will also charge you for administrative expenses such as telephone and fax charges together with third party costs- for example payments to the Land Registry or Registry of Deeds office.

Land Registry and Registry of Deeds

Indemnity Bond

Where a loan generally exceeds 75%-80% of the purchase price of the property, a once-off indemnity bond payment has to be provided by the borrower. The bond protects the lender in the event of a loss arising on any future sale of the property.

For example, a bond on a €182,842 mortgage where the property costs €203,160 and the lender's limit is 80% of the purchase price, costs €622.

Property Valuation

A Valuation Report on the property is required from a registered valuer. The valuer's fee is usually about €95 including VAT.

The Valuation Report is not a full structural survey which should also be arranged before contracts are signed. This should certainly be done at least in respect of an older property. The surveyor's report typically costs about €380 including VAT

Insurances

Lenders also generally require that a property is covered by building insurance and a mortgage protection life assurance policy. 

Early Redemption Charges

Some years ago, early repayment of a mortgage or a reduction in the outstanding balance via the payment of a lump-sum, invariably led to a charge by the lender called a redemption fee. The advent of greater transparency and competition began a trend towards reductions to nominal levels or the elimination of the charges.

Lenders have agreed a code of proctice wherby customers can on request:

a) seek information about the redemption fee charged in the case of an early settlement or partial settlement of a loan. This information is to be provided in writing where specifically requested. To avoid misunderstanding, it will be clearly stated that the quote is only valid on the date it is given.

b) information on how an additional repayment, made as a partial settlement of a loan, will impact on the account for interest calculation purposes (e.g., immediately, at year-end, etc.).

Where a borrower wishes to end a fixed-interest mortgage contract, a penalty is charged. A lender may charge a flat penalty equivalent to a range of three to six months of the value of the interest payments or the actual cost incurred when the contract is broken. Some lenders have the option of applying whatever provides the greatest compensation.

PermanentTSB sets out its rule as follows:

Whenever repayment of a loan in full or in part is made before the expiration of the Fixed Rate Period the applicant shall, in addition to all other sums payable, as a condition of and at the time of such repayment, pay whichever is the lesser of the following two sums:

• a sum equal to one half of the amount of interest (calculated on a reducing balance basis) which would have been payable on the principal sum desired to be repaid, for the remainder of the Fixed Rate Period, or

• a sum equal to Irish Permanent's estimate of the loss (if any) occasioned by such early repayment, calculated as the difference between on the one hand the total amount of interest (calculated on a reducing balance basis) which the applicant would have paid on the principal sum being repaid to the end of the Fixed Rate Period at the fixed rate of interest, and on the other hand the sum (if lower) which Irish Permanent could earn on a similar principal sum to that being repaid if Irish Permanent loaned such sum to a Borrower at its then current New Business Fixed Rate with a maturity date next nearest to the end of the Fixed Rate Period of the loan, or part thereof, being repaid.

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