I’m on a 4% variable interest rate, paying €1,507 per month.

I have the option of 2yr fixed at 2.45%, paying €1,318 per month or 4yr/5yr fixed @ 2.75%, paying €1,368 per month.

I’m currently receiving €2000 per month rental income = €24,000 per year gross rental income earned.

Approx mortgage interest for next year would be as follows:

- €12,560 @ 4%
- €8,600 @ 2.75%
- €7,660 @ 2.45%

I’ll be paying tax on the higher rate on the rental income so using an overall income tax rate of 52% gives the following tax bills (not taking into account other allowable expenses):

- (24000 – 12560) * 52% = 5950 tax owed
- (24000 – 8600) * 52% = 8010 tax owed
- (24000 – 7660) * 52% = 8500 tax owed

Monthly gain from changing mortgage rate would be as follows:

- 0
- €139 per month = 1668
- €139 per month = 2268

Even though getting the lower mortgage rates would mean a lower monthly mortgage repayment it would also mean a higher tax bill at the end of the year.

So based on this it seems to make more sense for me to stay on the higher mortgage rate.

Am I correct here or am I missing something ?

Thanks