Net value of Mortgage Relief on Investment property

I have a buy to let mortgage on an investment property. It is an interest only tracker mortgage and it is costing 890 a month.
I know I can claim the interest 100% against my expenses. I was wondering what is the net value of the interest amount in cash terms? I am thinking of repaying some of the mortgage as I have savings on deposit that is earning little interest.

suicra05 said:

I know I can claim the interest 100% against my expenses.

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What do you mean by this? Surely it's a case of possibly being able to write the interest charges off against rental income?

suicra05 said:

I was wondering what is the net value of the interest amount in cash terms?

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Doesn't that depend on your rental income and tax rate? E.g. if you were normally paying 40% tax and receive more than €890 rental income per month then writing the interest off would be worth €890 x 40%?

suicra05 said:

I am thinking of repaying some of the mortgage as I have savings on deposit that is earning little interest.

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You should pay off your mortgage if the net interest rate you pay after tax is higher than the amount of net interest after DIRT you can earn on deposit.

So if your tracker margin is 1%, you are paying 3.5% gross interest, which drops to 2% after 40% tax relief.

Can you earn 2% net after tax on a variable rate deposit?

Looks like 2% before DIRT is the best rate available


So about 1.4% after DIRT.

On a purely financial basis, you should pay off your mortgage.

However, you might consider it worth paying a net of 0.6% or €600 a year to keep €100,000 available to you in case you need it.

For example, if you need to buy a new car next year and had to pay 5% interest to borrow the money, clearly it would be better to have a loan at 2% net instead.

Brendan