TRS and Overpaying Mortgage

C

ccbkd

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If you decide to pay lump sums against your Mortgage does this effect your TRS in anyway -say for example my Mortgage is currently 330,000, 2 years old I am a first time buyer and owner occupier, is there a point when I overpay it will effect my TRS - i.e I like to chip away at my mortgage every year, I have a big enough lump sum this year but I don't want to loose TRS by overpaying- I need some advice
 
Remember that each €1 in interest is still costing you €0.80 even if you are getting full tax relief. So it doesn't make sense to avoid making accelerated capital repayments just because you might miss out on some marginal tax relief on some interest.
 
The TRS is granted on the interest. If you chip lump-sums off the mortgage then the interest will drop somewhat ( probably not a lot if in early years ). If the interest drops then so will the TRS. But remember if you pay €1000 in interest, you get €200 in TRS so you have paid out a net €800. If your interest drops to €900 you get TRS of €180 and you have paid out €720. It is still a saving on interest paid by chipping off the mortgage.
 
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What is the value of the TRS (interest @ 20%) versus the reduction in interest by chipping away at the mortgage. Tax should not be your only consideration. Your overall wealth base should be considered. Your wealth base is enhanced by reducing the overall cost of your mortgage over it's life by paying it off as quickly as possible.


 
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