From 1 January 2002 tax relief for home mortgage interest is no longer given through the tax system, but instead is granted at source. This means that your tax relief element on the mortgage interest is "built into" the monthly mortgage repayment. For most lenders this is shown in two separate items on your bank account statement. First you will see the direct debit for the monthly mortgage payment and next to it you should see a corresponding credit for the tax relief on the interest.

The interest relief amount is calculated on an annual basis to reflect the reduced interest as your mortgage amount decreases. The lender will then calculate the mortgage interest relief and apportion that over the 12 months.

The maximum relief for non-first time buyers is €2,540 for a single applicant and €5,080 for joint applicants. For first time buyers these figures are increased to €4,000 and €8,000 respectively. These increased limits apply for the first seven years only. Therefore, the maximum relief per month is €66.66 for a single person and €133.33 for a couple in this seven year period.

How do I get the tax relief?
When you take out a new mortgage, your lender will supply you with a form TRS1 to complete. This form will show your mortgage account number as well as your personal details (name address and RSI (personal tax number). This form will need to be signed by you and returned to your local tax office. From there the revenue will contact your lender directly to arrange for the tax credit to be applied. The process may take a couple of months and if you don't see the credit coming through on your bank statement after this period, you may have to contact the local tax office to make sure your form has not been misplaced.

In the case of a loan in joint names, each borrower is entitled to relief in his or her own right subject to the upper limits. Where the mortgage payment is made in full by one of the joint borrowers, the reduction in the monthly payment under this TRS system should reflect the aggregate relief due to all joint borrowers.

This stands for Annual Percentage Rate of Charge and is considered to be the best means of comparing the cost of different types of credit. The Consumer Credit Act defines APR as the total cost of credit to the consumer, expressed as an annual percentage of the amount of credit granted. APR calculates the total amount of interest which will be paid on a loan, and adds to this any other charges which the borrower has to meet. This total cost is then divided by the number of years in the loan term to find out what the borrower will be paying per year. This amount is then expressed as a percentage of the loan, i.e. as the APR.

APR provides you with the 'true' cost of any sources of credit, and enables you compare like with like. As credit agreements may have handling charges and depending on the frequency of the interest calculations, the total number of repayments etc., can make ones monthly repayments and/or nominal interest rate look surprisingly attractive, while hiding charges that are not classed as interest, but still have to be paid by the borrower.

Stamp duty is a tax on written instruments, for example, contacts for sale of property and share transfers. The amount of the tax depends on the type of asset being sold or transferred and in some circumstances on the relationship between the vendor and the purchaser.

Following budget 2002, new rates will apply on transfers on or after 6 December 2001. The table below indicates the applicable rate of Stamp Duty for varying classes of taxpayer.

If you want to use our Stamp Duty calculator, Click Here.

*A first time buyer is one who has not previously owned a house or apartment in Ireland or elsewhere. The reduced rate of stamp duty will apply where a residence is purchased as a persons principal residence, which is not rented for five years after the completion of the purchase.

The reduced rate is also available for (1) first time buyers not purchasing a new house and (2)non-first time buyers purchasing a new house. The consideration used in calculating the stamp duty payable is the higher of (a) the site cost or (b) 25% of the total cost. Effectively, houses costing less than €508,000 will be exempt from stamp duty under these scenarios.

The reduced rate is also available where trustees purchase a property for the benefit of a beneficiary who meets the above conditions and for certain separated/divorced persons.

Pension Mortgages are a tax effective way of paying off capital sums (e.g.. loans). A pension mortgage is similar in structure to an endowment mortgage with the loan set up on an interest only payment and the capital repaid at the end of the term by the lump sum accumulated in the pension fund. Pension mortgages are significantly more attractive than an endowment policy as with the pension investment you / the company can receive tax relief on the pension contributions and the pension fund grows tax free

Following the Finance Act 1999, many individuals have significant flexibility with how they use their retirement fund. Individuals can not only use the 25% tax free lump sum portion to repay a capital sum, but can also encash some of the remaining retirement fund, which would be subject to income tax to repay the loan also.

An important point to note is that one must have a guaranteed pension income of €12,697 p.a. at retirement or one is obliged to invest €63,487 into an AMRF.

The key tax advantages are the interest payments are kept high throughout the term of the loan, which can be written off in full for tax purposes against rental income on that property, be it residential or commercial property. In addition, the individual or company can avail of generous tax relief on pension contributions, plus the fact that the pension fund is growing tax free.

The tax advantages are well documented at this stage, but securing loan approval for a pension backed loan is not that easy in practice. While the lending institution have the deeds of the property, but given that the loan is on an interest only basis and the fact that they cannot take a lien on the pension fund (under current legislation) many banks are slow to approve pension backed loans unless the client has a high net worth and the loan to value ratio of the deal is relatively low, circa 40-50%.

Pension backed mortgages attract significant tax advantages, given the tax reliefs associated with pensions mainly. However, one can still avail of all the tax advantages associated with a pension plan without having to get involved in financing a property purchase.

Therefore, if linking in a pension plan with a property investment makes the sums work when otherwise they didn't go for it. However if an individual had the wherewithal to optimise their pension funding separately and are keen on property investment and can finance it separately, we would recommend this approach as it best maximises net worth.

All the majority of lenders now subscribe to a credit bureau (Irish Credit Bureau). The first step most lenders now take prior to making finance available, is to check the applicants credit rating with the Bureau, thus identifying, with a reasonable degree of certainty, the applicants "rating" with finance companies.

A good credit rating is critical in arranging finance and the maintenance of this good rating is essential for everyone who will require finance in the future. A borrower should be aware that the consequences of being slow in making payments or missing payments will effect later applications.

If in doubt about your rating or if you want to know what your record looks like, all you have to do, is contact the Irish Credit Bureau and for a fee of €6.35 and you will then be able to see the information that any potential lender will be able to access about you. If the information is incorrect, on suitable advice, the Irish Credit Bureau will amend your records on their files.

The address of the Irish Credit Bureau Ltd. is:

ICB House
Newstead,
Clonskeagh Road,
Clonskeagh,
Dublin 14,

Phone:(+353)-1-2600388
Fax:(+353)-1-2600390

Indemnity bonds are a form of insurance that covers the lender in the event that they make a loss on the sale of a repossessed property. Indemnity bonds are charges on varying degrees by all Lenders today, however as a guide where the loan amount exceeds 75%-80% of the purchase price or valuation (whichever is the lower of the two) an indemnity bond may apply. Some Lenders pay the cost of the bond for the borrower, while others when negotiated may reduce the cost.

PrimaFinance's Mortgage Advisers can advise you on how to reduce or preferably avoid paying this Indemnity bond altogether, which can be as high as €635.

If you think interest rates are going to rise and the current fixed rates haven't yet factored this in yet, then certainly you should consider fixing. Is this likely? Alternatively, if you like the certainty that your mortgage repayments are fixed for a specified period, fixed rates are an attractive option.

In addition, if you take your current rate and monthly repayments, and consider the implications of a 1-2% rate rise, if these increased repayments would pressurise your cash flow considerably then opting for a fixed rate until such time as you are a little more comfortable, would be well advised.

Fixed rates are popular amongst many first time buyers, as it provides that degree of certainty and security that are very important for the first few years of the mortgage.

If your main priority is bargain hunting, then history has shown over the years that variable rates have provided better value on average than fixed rates.

The big downside to a fixed rate, is should you want to repay part or all of your mortgage most lenders will charge a hefty penalty for breaking out of a fixed rate during its term.

• If you earn overtime, get bonuses or receive expenses, pay these into your bank. Do the same with any part-time or secondary positions.
• Your employers confirmation of your income must be backed up with either payslips or bank statements and a P60. Don't exaggerate your earnings - lenders can verify them.
• If you are in line for a pay rise, ask your employer to confirm this in writing as most lenders will take this into consideration.
• If you intend letting a room in your new house, say so, now that you can earn up to €7,618 per annum tax free.
• Reduce your outgoings, such as loans for cars, holidays or computers. If you earn €30,000 but have a car loan that amounts to €3,000 a year, a lender may estimate your "real" salary at €27,000. This reduces your borrowing capacity to €87,750 rather than €97,500 (based on a salary multiple of 3.25 times).
• If possible avoid taking out loans over more than a 12- month period, or use your savings to repay them before closing on your purchases.

Customers can decide to increase their monthly repayments by a set percentage each year. The additional amount each month is offset against the capital Balance, which reduces the interest charged and the mortgage is paid off quicker.

Even indexing your repayments by 1% can make a difference and customers should be able to return to the original repayment at any time. There are generally no restriction for variable-rate borrowers who avail of this facility but fixed rate customers may only be able to avail of this up to a limit.

On a €100,000 mortgage over 20 years at a variable rate of 5.85%, indexing the repayments by 1% per annum would reduce the term by 32 months and save €7,823 in interest.

However, if you decide to increase your mortgage repayment or maintain your repayments even when rates decline, it is important to inform your lender. The risk is that unless you inform the lender, your increased repayments amount may sit in a non-interest bearing account.