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Relief for Struggling Homeowners but Bad News for First Time Buyers

Posted on by Stephen Hamilton

Yesterday  Fine Gael announced their plans to help struggling homeowners. Most of what they had to say is really just a rehash of things that are, in reality, already happening. For instance they have pledged that homeowners struggling with their mortgage repayments should be allowed to repay just two thirds of their monthly mortgage interest, with the other third rolled up for 5 years. This is nothing new as it has already happening in practice afte being recommended by the government Expert Group on Mortgage Arrears in 2010. However, despite the rehash of ideas, they have included a proposal to give some extra relief to over indebted homeowners. This proposal is worth talking about.

The Fine Gael proposal is to increase Mortgage Interest Relief to 30% for First Time Buyers who bought their properties between 2004 and 2008. This group of homeowners are undoubtedly the worst affected by boom time over inflated house prices and, if introduced, the extra interest relief will be a big and much needed help. However in the Ireland of today we dont have extra funds lying around to throw at struggling homeowners and so the money needed will have to be cut from somewhere else.

The plan is to cut Mortgage Interest Relief for new First Time Buyers from June of this year. This is a blow for First Time Buyers looking to get their foot on the ladder but the money has to come from somewhere and there is perhaps some justification for the proposal. It can be argued that at current prices First Time Buyers just do not need Mortgage Interest Relief and I think there is some merit in this. Property prices are now more affordable than they have been in a long time (if you can get a mortgage that is) and so there really is no need to incentivise homebuyers. However with the uncertaintly created by EBS and PTSB pulling fixed rates it has not come at a great time for First Time Buyers.

Overall I think the proposal to increase Mortgage Interest Relief for Homeowners has some merit and is workable. In an ideal world the government should implement the idea proposed by the United Left Alliance. Under their proposals negative equity homes would be revalued at todays prices and have their mortgages written down accordingly. To a negative equity homeowner (me included) this sounds great. However unfortunately we are not in an ideal world and we just dont have the money for such a plan. That said I really do think that some form of debt forgiveness will have to be introduced at some future point. Potential buyers of EBS have openly discussed writing down homeloans and hopefully this will happen with other Irish Banks too. However untill a well funded foreign institution takes over our banks it looks like we will have to make do with the sticky tape measures proposed by our political parties.

Whats your thoughts on the proposed new Mortgage Interest Relief for struggling homeowners?

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Bad Banks, Dealing with Debt, First Time Buyer, Mortgages
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  • Paul

    How bad will this news be for first time home buyers? Has there been any whispering around what they might cut it to for new purchasers? Are the government likely to apply this to those who have bought in the last year (or some predefined period) or only those who buy from when the proposal is formally passed onwards.

    • http://www.mortgageline.ie/blog Stephen Hamilton

      Fine Gael have said that they plan to abolish Mortgage Interest Relief for new Home Buyers from June 2011. Looks like existing homeowners up untill the cutoff point will still get mortgage interest relief. Nothing confirmed yet though and wont be till after the election.

  • Kellytk

    I agree with them trying to help out people who are affected by todays current climate and helping to relieve the strain of trying to meet the demands of their mortage but as I am to be a first time buyer im keeping fingers crossed to keep the mortage relief for first time buyers in todays climate… I wish there was ahappy medium for us all…

    • http://www.mortgageline.ie/blog Stephen Hamilton

      If you are buying in the next few months you should be ok but there is a danger that mortgage interest relief will be gone from June for all future home buyers

  • Anonymous

    I agree that people who bought houses in those years should receive assistance, but that help should come from the Banks, Financial Institutions and Financial Regulator whom are ultimately responsible. I don’t agree that today’s FTB should be penalised as we are struggling to 1. get mortgages in the first place 2. Have to repay from day 1 of the mortgage high interest rates that are only going to continue to rise over the coming years. Some of those potentially in scope for receiving this additional mortgage interest relief are also holding tightly on to the envious Tracker mortgage and won’t be at the mercy of the banks over the coming years as they rapidly increase rates.

    • http://www.mortgageline.ie/blog Stephen Hamilton

      I agree it will be harsh if Fine Gael abolish Mortgage Interest Relief for new home buyers. Rising interest rates and the withdrawal of the relief will make it more expensive for First Time Buyers. Unfortunately mortgages are getting more expensive accross the board. Even tracker rates are expected to go up later this year. I can only speculate but I think when people look back in years to come that the first half of 2011 wll have been a good time to buy a home. If you can get a mortgage that is! Thanks for your comment.

  • mary j

    I would really welcome this lifeline of increased mortgage interest relief – at present over 58% of my income goes on paying the mortgage – sacrifices have been made to do this, no holiday, car etc. I think it would be very unfair if some people have their loans marked down because they have fallen into arrears and are in negative equity and perhaps have other priorities and reckon on a deal down the line while others have sacrificed so much to reduce their debt and keep up payments and would be overlooked on paper. The fairest way is the mortgage interest relief increase.

    • http://www.mortgageline.ie/blog Stephen Hamilton

      As someone in negative equity I totally agree that extra tax relief is a good way to help those who bought their homes on boom-time incomes at boom-time prices. I also think that there is room for debt forgiveness when foreign institutions, like the one led by Wilbur Ross interested in EBS, take over our banks and write-down negative equity mortgages and buyout trackers.

  • Mary j

    meant to say have lost over seven thousand euro per year in salary due to public services salary cuts and take home 500 per week after fourteen years as a teacher in a disadvantaged school with honours degree, honours dip in education and other courses in psychology etc. Tired of just trying to survive on the remaining 200 after the mortgage is paid but grateful to have a job at the same time. have one simple question, why do average people like me have to pay for the banking losses. The logic has never been properly explained/

    • http://www.mortgageline.ie/blog Stephen Hamilton

      I feel your pain and its an almighty struggle and ordinary people like me and you should not have to pay for the banking losses. Our only mistake is buying a home at a time in our lives when we were ready to do so. I don’t believe investers who speculated on property should be helped in any way but solutions have to be found for homeowners. The extra tax relief will be a start and I think the only other help available after that will come when banks get real and writedown homeloans in the same way that Nama has been writing down Developer loans. The banks don’t have the capital to do this now but I think that our banks will inevitably be taken over by well capitalised foreign institutions at some point. Normal practice in places like the USA is to writedown negative equity homeloans and I think this is coming down the tracks for us too.

  • Capricorn269

    my mortgage is in arrears and if I can’t fix it it will go into foreclosure. I have a plan to sell my house and get a new job that pays better, but until then, is there anyone that can help me pay the arrears so i can renew my mortgage at a better interest rate so I can manage the payments. I just need that small helping hand to get me back on track so i can start again. Is there anything out there that can help

    • http://www.mortgageline.ie/blog Stephen Hamilton

      thanks for your comment but please note that we can only really offer you advice on Irish Mortgages. If you had an Irish Mortagage I would say that you need to negotiate a lower payment with your lender. Not sure what it is like in Canada/USA but Irish Mortgage Lenders will work with customers who are struggling with payments.

  • http://www.mortgageline.ie/blog Stephen Hamilton

    Good news for First Time Buyers. Mortgage Interest Relief now unlikely to be scrapped till end of 2011. See this recent update on RTE http://ow.ly/4ouSC

  • http://www.mortgageline.ie/blog Stephen Hamilton

    End of mortgage interest relief in june back on the cards? http://www.irishtimes.com/newspaper/ireland/2011/0409/1224294302478.html

  • Karl

    High Stephen,

    Myself and my partner bought a 2 bed Apartment in Lucan for €284,00 back in 2007. By todays figures if we were able to sell the apartment the value would have dropped to around €170,000. Therefore we are looking at negative equity of around €115-120 K. It was our intention like everyone else to buy the apartment and move onto a house in maybe ten years. We are luckily both still working and able to pay our mortgage but feel we will never be able to move on the way things are going. I have heard a lot of talk of Negative equity mortgages and wanted to get some advice as to how we could look at moving on in the future. Any advice would be great.

    Thanks,

    Karl.

    • http://www.mortgageline.ie/blog Stephen Hamilton

      Hi Karl,
      Its a difficult situation you, and many others life you (me included), find yourself in and no matter what way you look at it you are in negative equity of over 100k.

      That said you do have choices, two of which would be as follows,

      - You could rent the appartment out and then move and rent somewhere else yourself
      - you could rent the appartment and then try to buy somewhere else with a 90% mortgage

      Give us a call or drop me and email if you would like to discuss your situation in more detail.

  • James Sweeney

    I’m trying  to understand this at present I struggle to pay €1074 a month and I was a first time buyer in 2005…..how much can I expect to see my mortgage change? we are a single wage family any change would help

    • http://www.mortgageline.ie/blog Stephen Hamilton

      Hi James,
      your mortgage interest relief will be increasing from its current rate to a new rate of 30%. This is restricted to the first 10,000 interest per person. For a first time buyer mortgage of 200,000 on an interest rate of 4% taken out in 2005 this will mean a new increased monthly relief of €200. This is an increase of approx €100 per month.
      If you want to give me your approx current mortgage balance and interest rate I can let you know what your approx new relief will be?

  • Jakiprendergast

    I am in arrears for a few years now as my husband lost his job. My mortgage when i bought in 2005 was 1000 euro per month, this went up to 1464 at peak and we fell into arrears. Eventually bank agreed to let us pay 600 per month, reviewed regularly. Havent received mortgage interest in years even though we pay 600 per month. Is this right, are we not still entitled to it ??

    • http://www.mortgageline.ie/blog Stephen Hamilton

      You should be entitled to the relief regardless of your arrears situation. Give the revenue a call and explain your situation. They are very helpfull. Dont want to get your hopes up but if you are entitled to the relief and have not been getting it then you could be in for a small windfall in backdated relief. Call the revenue asap to find out.

  • Moll

    Hi im trying to figure out if im am a first time buyer and enititled to 30% interest relief? my huband previously had a morgage on his family home due to family difficulties when he was 18 we bought a house together in 2007 it was my first morgage we have two morgage accounts /1 +/2 we ar recieving interest relief on /2 which is our home im getting conflicting information on our status as 1st time buyers morgage company and revenue say yes any research ive done says no because my husband had previously owned a home?

  • Lorraine

    Hi I would appreciate some advice on the following.  I bought an apartment in 2004, I then met my current partner sold the apartment and we bought a house in 2006.  We paid 35000 stamp duty on it and got no allowances for my partner as, when questioned, i was classed as the main earner.  Do you think we would be entitled to the new 30% mortgage interest relief?? we are in negative equity. would love some advice on this, thanking youin advance

    • http://www.mortgageline.ie/blog Stephen Hamilton

      your partner should be entitled to the new mortgage interest relief if he was a first time buyer in 2006.