To switch or not to switch ?

G

glueless

Registered User
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Hi

Can anyone tell me if this make sense.

I have 2 mortgages - one on my main residence and the other on an investment property which I rent out. The main residence mortg. has 18yrs to run and is for 47,000. The investment has 12yrs to go and the amount outstanding is 64,000. The repayments on both is 834euro p.m
A friend has advised me to put the two mortgages together, switch from PTSB to Ulster Bank and take a tracker mortgage.
My question is, if I do this how can I calculate the interest element when doing my tax return for the rental property as only one property qualifies. Anyone any idea what sort of repayments I would have on the new mortgage if it is a tracker.
Any help would be appreciated
 
Have you considered getting an interest only mortgage on the investment property to maximise the amount of mortgage interest that you can offset against rental income? See this topic.

My question is, if I do this how can I calculate the interest element when doing my tax return for the rental property as only one property qualifies.
Click to expand...

If the new mortgage is for €47K (PPR) plus €64K (investment) then you presumably simply split the interest charged on the consolidated mortgage on a pro rata basis (i.e. 47:64 ratio) when claiming owner occupier mortgage interest tax relief (on the PPR) part and when apportioning some of the interest as an investment property expense set against rental income?
 
Thanks for that Clubman. Just one further question having read the link you provided. if I consider an interest only mortgage should I split that and only take the investment property mortgage as an interest only and the ppr mortgage as a tracker. Is that possible or would I be just as well to leave the two together. I suppose I'm taking into account the advice given that you should pay off your PPR first. Have I got this right?
 
I just mentioned the interest only mortgage because there are argument to be made for them in the context of investment properties. For a PPR it usually makes sense to stick with an annuity mortgage such as a low cost tracker. In this case you should assess the pros and cons of staying with separate mortgages - interest only for the investment property and an annuity/tracker for the PPR. In both cases you should go for the most competitive mortgage (lowest interest charges) available. Merging the two mortgages into one may not necessarily make sense. You would need to gather together all of the associated costs and savings and then crunch the numbers to assess which is the most viable/cost saving approach. If in doubt get independent, professional advice and don't depend on possibly inexperienced friends or only slightly more experienced message board posters. :)
 
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