Advice on mortgage options for investment property

[delbert]

Here is a summary of my situation.
My PPR has a mortgage of ~€100K, and has a value of approx €1M
I am purchasing an apartment as an investment. Price is ~€350K for which i require a mortgage of ~€300K.

My questions are as follows.
1. Should i keep the 2 mortgages seperate i.e. one for PPR and the other for Investment.

2. If i combine the 2 mortgages into one mortgage for €400K, can i avail of potentially lower mortgate rates given that my PPR is valued at €1M.

Furthermore, when it comes to tax returns for the investment property can i proprtion the mortgage interest that relates to the investment property against the rental income.

If yes, how is the proportion calculated?

3. If I adjust my mortgages so that i increase my PPR to €125K and decrease my investment to €275K so that the LTV on the investment is below 80% and therfore i may get better mortgage options, when it comes to tax returns on the investment, can i use a portion of the mortgage interest on my PPR + the mortgage interest on the investment against rental income.

Many thanks
delbert

 

[Sarah W]

The simple answer to your question is yes - it doesn't matter which property is used as security for the borrowings on the investment property as long as you can show that the money was borrowed for that purpose. Therefore (as long as you are comfortable with the potential risk of borrowing against your home for investment purposes) you should look for the cheapest rate which is going to be from NIB - if they allow it - or BoS on the tracker rates. With the later you can split the mortgage part annuity and part interest only to make the investment portion more tax efficient.

It is also possible, as you suggest, to secure the mortgage partially against the investment with the balance on your home and the interest on the balance can be offset against the rental income.

Sarah

www.rea.ie