I am in the process of getting the contract for a second-hand house. Would I be eligible to avail of the Government's new low-interest home loan scheme? I haven't been rejected for a mortgage, but could I still avail of it or any other tax incentives?
The new Government-backed Rebuilding Ireland home loan scheme came into effect nationwide from all local authorities from February 1st, 2018. The scheme can be used to purchase a new or second-hand home or finance the construction of a self-build. The maximum market values of the property that can be purchased or self-built are €320,000 in Cork, Dublin, Galway, Kildare, Louth, Meath and Wicklow and €250,000 for the remainder of the country.
To be eligible for the scheme you must be a first-time buyer, aged between 18 and 70 years, earn a gross income of not more than €50,000 (€75,000 as a couple) and be in continuous employment for a minimum of two years, as a primary applicant, and minimum of one year, as a secondary applicant.
In addition, you cannot be a current or previous owner of residential property in or outside the Republic of Ireland and you must provide evidence of being turned down for a mortgage or that you received insufficient offers of finance from two banks or building societies and consent to an Irish Credit Bureau check.
Therefore, regardless of the fact you have not been rejected for a mortgage, the scheme is unlikely to apply to you on the basis that you own/previously owned other residential property.
Purchase
However, you may be entitled to some tax relief on the mortgage interest. This is dependent on a number of factors. For example, if the acquisition of the property is for the intention of letting it out, you may be entitled to deduct part of the mortgage interest from the rental income received.
In this case, where a loan has been used to purchase, improve or repair a rented residential premises and interest on the loan accrues on or after April 7th, 2009 and up to December 31st, 2020, the interest on the loan is an allowable rental expense deduction, subject to a restriction.
In respect of interest accrued on or after January 1st, 2018, and up to and including 31 December 2018 the interest deduction is capped at 85 per cent of the interest amount otherwise deductible. The interest restriction will decrease by 5 per cent each year, for example in 2019 the restriction will be 90 per cent and 95 per cent in 2020 etc.
The interest can only be deducted during the period in which the premises is let and provided that the tenancy is registered with the Residential Tenancies Board. In respect of commercial properties, a full interest deduction is allowed.
Susan Blake, Tax Manager, RSM Ireland
