You might have noticed many new media announcements recently with super duper mortgage cash back offers for new customers.
What the hell is going on you may or may not have asked yourself.
Well basically Banks are falling over themselves and fighting tooth and nail for your new mortgage business. The new Central Bank mortgage rules came into force earlier in the year and it looks like the result will be lower than expected new mortgage approvals and new mortgage completions in 2015.
All the banks have their own internal mortgage draw down targets that they are desperate to meet. With the lower expected mortgage approvals and draw downs some banks will not meet their targets. In their desperate attempt to meet their targets all of our banks / mortgage lenders are targeting new mortgage business with these seemingly generous offers.
Bank of Ireland for example is now offering new Mortgage customers cash back to the tune of 2% of the new mortgage amount. The downside with this offer are the tax implications. If you take a €300,000 Bank of Ireland Mortgage and get 2% (€6,000) cash back the you could end up being faced with a huge tax bill. Looks like the cash back will be considered as income in the eyes of the revenue. If you are a higher rate tax payer then the Revenue could hit you for over 50%. So you could face a tax bill of €3,250 or more. You could also face a claw back from Bank of Ireland if you move your mortgage or sell your house withing 5 years. This could mean that the cash back offer ends up costing you money.
Much better offers are available from the likes of Ulster Bank and KBC Homeloans. The cash back offers from these mortgage lenders are simply designed to cover your legal and conveyancing costs and thus should not be considered as income in the eyes of the Revenue. With these mortgage lenders you can currently get a better interest rate than offered by Bank of Ireland and thus you save over the long term. You can also avoid possible complications with the taxman.
As with all major financial decisions it is really important to seek Independent Advice. If you have any mortgage questions then please feel free to use the comments below or give us a call.
