At present Pension Mortgages represent a small but growing part of the mortgage market due to the huge popularity of property investments among private investors. Mostly they are used by private investors to purchase investment properties tax-efficiently.

With a typical pension mortgage, interest only is paid on the loan during the term of the mortgage and the arrangement used to repay the capital sum borrowed is the lump sum on maturity of the borrower's pension plan.

This method provides tax relief not only on interest repayments but also on pension contributions (therefore, tax relief is also received on the capital repayments). In addition, the pension fund grows free of tax.

Tax relief

Like other mortgages, mortgage interest payments can be offset against rental income in any tax year and any excess can be carried forward, to offset against future rental income.

For a sole or main residence, tax relief is granted at the marginal rate of income tax at 20 or 41 per cent. This relief is deducted by your lender at source.

If you are buying an investment property, whether it's rented or commercial, you're entitled to full interest relief on the borrowings for that property and you must include it in your annual tax return.

If self-employed or in non-pensionable employment, you can put up to 30 per cent of your earnings into a pension and get full tax relief, depending on your age. Income tax relief is granted at your marginal rate (20 or 41 per cent) and your fund grows tax-free until you retire.

There is a single earnings cap of €254,000 on the amount of relief you can get on annual pension contributions.

For more information please contact our sales team at 014097090 or info@orca.ie