MORTGAGES: DIRT REFUND SCHEME
For First Time Buyers, a Government scheme announced last autumn allows them to reclaim Deposit Interest Retention Tax (DIRT) paid by them over the last four years.
Good news for First Time Buyers lucky enough
to have secured a mortgage. However, the small
print of the DIRT refund deal reduces it's value for some First Time Buyers.
Although the refund idea sounds good in principle,
the following points must be taken into
consideration before getting too excited about the deal:
1. For the last 4 years, interest rates paid on deposit accounts have been falling sharply, so your money on deposit has been receiving less and less interest since 2009.
2. The table below shows how the DIRT rate has been increasing over the same time period.
If you are a first time buyer, these increased taxes are good news, as they represent the amount that your possible tax refund is based on. To all other deposit savers, obviously they are bad news, with no sign as yet that they will be reduced in the next budget.
3. To qualify for the DIRT refund, neither you NOR the person you are intending to jointly purchase your new home with, can have owned a house in the past. The good side of this rule is that if neither of you has bought a house in the past, then BOTH of you can claim a DIRT refund on your individual deposit accounts.
4. You will only receive the refunds AFTER the property conveyancing has gone through the legal system, so you cannot use it to add to your mortgage deposit fund.
5. The refund system applies only to the last 4 years that you have paid DIRT, and will apply to those houses purchased between October 4th 2014 and 31st December 2017.
6. The maximum amount you will be able to claim back is 20% of the purchase price for a new home, or 20% of the completion value in the case of self build houses.
The table below gives you an indication of how DIRT increases would have affected a typical deposit savings account, allowing for reducing deposit interest rates over the last four years:
Please remember that the mortgage calculator should only be taken as an approximate guide, and may vary from the actual figures quoted by mortgage lenders.
This summary is based on a recent Irish Times newspaper article. It is subject to errors and omissions and you should always seek professional advice where necessary.