Making sense of the mortgage interest relief promised in Budget 2024

The Government’s plans for mortgage interest relief of up to €1,250, announced in Budget 2024, have drawn a fairly full postbag, so this week we will try to rattle through a range of queries on different aspects of the relief and who is eligible for it.

I have a mortgage but am now on social welfare. I have no arrears, but am negotiating with the bank. What does the mortgage interest rate relief announced in the budget mean to me?

Ms GR

Most likely nothing. The mortgage interest relief measure is a one-off just for this year – although, if history is anything to go by, it might be extended. The key thing is that it is relief against your tax bill, so if you do not pay tax, you will not be in a position to benefit.

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I am drawing down a second (fixed rate) mortgage on my primary residence since March 2023 to do home renovations. While my first mortgage (also fixed) will see lower repayments year-on-year, my overall interest bill has gone up by virtue of the second mortgage to fund the works. Can I avail of the Mortgage Interest Relief scheme?

Mr NB

This is an interesting one, and the Finance Bill is not crystal clear on it. However, it does define what a “qualifying loan” is.

The legislation says it means a loan or loans from a lender being used “solely for the purchase, repair, development or improvement” of a qualifying property, or a loan/loans being used to “pay off another loan or loans used for such purpose”.

The reference to a “qualifying property” means your family home or principal private residence. Any other property is not eligible

That would seem to cover your position, as long as the second loan is purely for renovations. What would be excluded, for instance, would be people who remortgaged at higher rates to release equity in the property for more general uses.

However, we will have to wait to see if new loans taken out this year for renovations – as against setting a new rate on existing borrowings – will be excluded at any stage of the bill. It would not be surprising if the measure was limited to borrowings that were drawn down on or before December 31st last but, as of now, the Bill is mute on that.

It’s not something that you need to know now, as the relief will only be available when you file a return after year end, by which stage the Finance Bill will be finalised and passed into law, and we will be very clear on what is and is not covered. The money is borrowed by you either way, and that decision was not dependent on this measure as it did not exist at the time.

Even assuming the actual second loan qualifies, there are some other conditions that must be met. The reference to a “qualifying property” means your family home or principal private residence. Any other property is not eligible. The loan must be secured against the property to qualify.

Finally, the balance on the borrowings at the end of last year must be between the limits of €80,000 and €500,000.

Will I be allowed to claim the mortgage interest relief if my mortgage is (a) with a vulture fund (Pepper), (b) in arrears, and (c) I am not meeting the full payment amount each month? The total balance outstanding, including arrears, is below €500,000.

Ms OP

As long as the balance is within the limits – €80,000 and €500,000 – which it is in your case, you should be okay.

There are a couple of other requirements, notably that you are up to date with your local property tax payments. So if you are currently in arrears there, it might be worth your while getting that record in order.

Any violation of planning permissions would also exclude you.

You will be entitled to mortgage interest relief, as long as your borrowings were more than €80,000 but less than €500,000 at the end of last year

On the basis that when the rent tax credit was introduced, it did not apply to non-resident Irish taxpayers paying rent on their principal residence or student child’s accommodation outside Ireland, as they do not satisfy the LPT requirements, will the same apply to the new once-off mortgage relief for non-resident Irish taxpayers?

Mr PF

The relief applies only to principal private residence – ie, your family home. If you are non-resident, it is most unlikely you would qualify.

You can get principal private residence relief when you sell your home if you have been absent abroad because of work. If that were the case, you might still qualify but we will have to wait for the final passing of the bill to be certain.

I took out a new mortgage in June 2022 on a variable rate. I only paid six months’ interest in 2022 and, with the increased rates, I have naturally paid more interest in 2023. When calculating the relief, will I need to pro rata the refund in any way?

Mr OC

It’s not a refund, but a relief against your tax. But yes, it will be calculated on a pro-rata basis as you only paid interest for part of 2022 – the final six months of this year against the six months of last year, or whatever.

We have a fixed mortgage on our home. The three years were up in September, and we have fixed again for five years. As a result, our mortgage went up by €100 a month from September 2023. Are we entitled to mortgage interest relief?

Ms SC

You will be entitled to mortgage interest relief, as long as your borrowings were more than €80,000 but less than €500,000 at the end of last year. But it is likely to be a modest benefit.

The mortgage interest relief measure is a one-off just for this year – although, if history is anything to go by, it might be extended

If you look back up at the second question in this thread, you squarely fit within the terms of a qualifying loan. There is no question of you having taken out additional borrowings this year: you have simply fixed a new rate on your loan when your old fixed rate expired.

You say the loan is now costing you €100 more a month. That means you will be paying €400 more this year than you did at the end of last year. As the relief is granted at 20 per cent, you will benefit to the tune of €80. Worth having, for sure, but it won’t make a huge dent in your tax bill.

I took a mortgage on 2018 at a fixed rate. Am I entitled for a mortgage interest relief announce on budget 2024?

Mr AT

If you took out the loan at a fixed rate in 2018 and you are still paying the mortgage at the same rate, there will be no increase in interest payments for you to claim relief on. If you updated to a more costly fixed rate some time last year or this your, you should qualify, as you can see in the question above.