Why can't the customer be the one to decide how their TRS is applied?

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PatrickJ

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I came home from work today to find a letter from my mortgage provider informing me that they will be handling the Tax Relief at Source that is applied against my mortgage each month in a different format i.e. the TRS will be offset against my entire loan one day before my mortgage is due to leave my account hence I will be liable to pay the full amount due.
I believe this is called 'the gross payment approach' and is apparently in line with industry standard practice.

I have a high variable rate mortgage and I believe this will finally tip me financially over the edge.

Example: If your normal monthly repayment was €500.00 and the applicable tax relief amount was €50.00 then €450.00 would be debited from your account on the repayment due date. This is known as the 'net payment approach' for TRS payment'. This however is being done away with (with my lender) and is being replaced by the 'gross payment approach' which is pay the full €500.00 a month and have the €50.00 offset against the entire loan i.e. a sip of water into a dessert!!

Surely I should be allowed decide how my TRS is offset against my liability? I feel this is completely wrong.

I understand Revenue are aware of this planned change.

 
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So in the above example, the lender has unilaterally increased your annual repayment by €600 which will shorten the length of the term by a year or two. I wonder if the mortgage contract allows them to do this.
 
You should contact the revenue and ask. It appears that instead of passing on the relief your entitled to they are using your relief to pay down the capital on your mortgage. Is the bank allowed to retain the relief I doubt it, TRS was introduced to assist borrowers not lenders. Anytime I've spoken to a bank about TRS they've been clueless but the TRS section in Revenue were great.
 
Since 1 January 2002 the relief is paid at source (called tax relief at source [TRS]) by your mortgage provider rather than the relief having to be claimed back at the end of the year. The mortgage interest relief is given at source, by your mortgage provider, either in the form of a reduced monthly mortgage payment or a credit to your funding account.
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So they either pay it to the funding account or reduce the monthly payment. Your repayments are set by the terms of the mortgage contract so get onto the bank and tell them that you want the monthly payment reduced by the TRS. This is on the assumption that you are still paying the correct amount every month and are not in arrears.
 
I always understood that TRS was dependent upon the interest payable on a mortgage and as above was to reduce the repayments burden on the tax-payer / mortgagee. I'd talk to Revenue.
 
I will contact revenue today and update the thread with their answer; however, the lender has stated that revenue are aware of the planned change.
 
Are you sure they are not just applying the 50 credit to your current account and then withdrawing the full 500 the next day. So the net will be the same but just 2 transactions to get to 450 rather than 1??
 
Patrick,

I note that you have started this thread under Mortgage arrears & negative equity case studies.

Are you in arrears with your mortgage?
 
Sophrosyne said:
....Are you in arrears with your mortgage?
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Excellent question - if yes, then it is understandable why the lender might want to see the TRS also go against the loan, to help reduce the arrears. A discussion then needs to be held arround the affordability element of the overall level of repayments.
 
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