Mortgage Repayments net of Tax Relief

B

brianmaybe

Guest
Am I right in assuming that my mortgage repayments will actually increase as the years go by (even if interest rate statys the same) as I will be claiming max interest tax relief in year one and less for each subsequent year, with a large increase in repayments after year 7.

Yearly Repayment
Year 1 22,224
Year 7 22,542
Year 8 25,024
Year 30 26,080

I know it is probably small peanuts really and inflation will mean a drop in real terms.

See table below for mortgage quote for 400,000 for 30 years @ 5.28%
Net repayment = Total Repayment minus Interest Relief

Total Repayment - Interest - Interest Relief (Years 1-30)
26,224 20,486 4,000
26,224 20,183 4,000
26,224 19,864 3,973
26,224 19,528 3,906
26,224 19,175 3,835
26,224 18,803 3,761
26,224 18,411 3,682
26,224 17,998 1,200
26,224 17,564 1,200
26,224 17,107 1,200
26,224 16,626 1,200
26,224 16,119 1,200
26,224 15,586 1,200
26,224 15,024 1,200
26,224 14,433 1,200
26,224 13,811 1,200
26,224 13,156 1,200
26,224 12,466 1,200
26,224 11,739 1,200
26,224 10,975 1,200
26,224 10,170 1,200
26,224 9,323 1,200
26,224 8,430 1,200
26,224 7,491 1,200
26,224 6,502 1,200
26,224 5,461 1,092
26,224 4,365 873
26,224 3,211 642
26,224 1,997 399
26,224 718 144
 
If the rate never changed then your gross repayments would remain the same. However once your mortgage interest relief falls because the total annual interest drops below the relevant maximum relief limit or when the limit falls in year eight then your net repayments may increase due to changes in the effective relief.
 
Sorry bout the table. Looks okay when I copy it in but all goes GaGa when I hit save
 
Where did those figures come from? The interest relief figures don't make sense to me. As long as you are paying more than the relevant relief limit then you get the full relief. So for year 3 why do you have:
Code: 
Repayment    Interest    Relief
26,224       19,864      3,973
 
Forgot to mention that this is an application for 2 people i.e. me and my partner.

2 people together gives a combined tax relief of 10,000 * 2 = 20,000
So we would be under this for year 3

Would be full relief for a single applicant i guess.



Now how did you get your figures looking so pretty!
 
brianmaybe said:
Forgot to mention that this is an application for 2 people i.e. me and my partner.

2 people together gives a combined tax relief of 10,000 * 2 = 20,000
So we would be under this for year 3

Would be full relief for a single applicant i guess.
Click to expand...
OK - I understand now. In response to your original query - yes the net repayments will increase as time goes by (even if the rate does not change) due to the effects of decreasing tax relief.
Now how did you get your figures looking so pretty!
Click to expand...
The and judicious use of spaces (not tabs). I find it easiest to prepare such formatted tablular data in a text editor (e.g. Notepad or similar) using a fixed width font (e.g. Courier) and then copy and paste it into a post surrounded by code tags.
 
You must log in or register to reply here.
Back
Top