investment property

Purchasing An Investment Property – FAQ’s

In this blog our resident mortgage expert Robert O’Neill QFA answers 10 questions we regularly get asked about buying an Investment property .

1. How much of a mortgage can I get when purchasing an Investment Property?

In general you can borrow between 65% - 80% depending on your financial circumstances. Some banks will limit the amount you can borrow depending on the area where you are buying, or the type of property.


2. How long can I take a mortgage out for on an Investment Property?

The term on investment mortgages is up to 25 years depending on the age of the oldest borrower.


3. Can I release equity on my own property to purchase an Investment Property?

You can release equity on your own property to purchase an Investment property; however we would advise that the majority of the debt is secured against the new property you are actually purchasing, as this is the property that will be at risk should you be unable to make repayments.


4. Do I pay tax on the rental income from my Investment Property?

The short answer on this is like any other earned income in the state. You will pay between 20- 40% tax on your rental income depending on the tax rate applicable to yourself.


5. What are the current interest rates for an Investment Property mortgage?

As of 16/1/2021 the mortgage rates on Investment properties range from 3.75% to 5.75%. It is well worth shopping around as the difference between the lowest and highest rate over the term of the mortgage can be nearly €50,000. At Citywide Financial we will do the shopping around for you.


6. Can I purchase an Investment Property through my pension fund?

Yes you can purchase a property through your pension fund. The fund will need to be self directed and all rents and capital growth on the property will be held with the pension structure. The fund can borrow up to 50% against the purchase price of the property. There are various strict revenue rules which needed to be adhered to. Citywide financial will help manage the process from start to finish. If this is something you wish to discuss further, feel free to email rob@citywidefinancial.ie or call 086 229 3032.


7. Is it harder to get a mortgage on an Investment Property?

In general it can be slightly harder to get a mortgage on an investment property, as the banks will stress test mortgage repayments and also only allow 80% of rents when calculating the affordability. They will also look at overall income to debt ratio. More recently there have been two lenders who have come into the market who will assess the overall debt based on rental yield which is a positive. As each banks criteria is different we would strongly recommend talking to a broker before seeking an investment mortgage. Just because one bank says it will not work for the client, it doesn’t mean the bank down the road will be the same!!


8. Can I switch my Investment mortgage to another provider?

Yes you can switch your mortgage from one provider to another. As rates vary from 3.75 to 5.75%, there can be significant savings by switching providers. Generally you will need about 30% in equity in the property for a bank to consider the switch.


9. Who currently has the best mortgage rate for Investment Properties?

As of 16/01/2021 Dilosk Ireland and Pepper have the joint lowest rates of 3.75% for properties with a Loan to Value (LTV) of less than 60%.


10. Can I get an Interest only mortgage on an Investment Property?

Most of the lenders are still offering Interest only options. Interest only will allow you a lower repayment as none of the capital is being repaid. It will also maximise the amount of interest you can write off annually against your rent received when calculating your tax bill. The big disadvantage is that you will owe the same amount as the day you took the mortgage out as none of the capital will be repaid.


For additional information on buy to let mortgages please visit our buy to let Mortgage Broker page. 


Should you have any queries regarding any type of mortgage feel free to contact Rob on 086 2293032 or rob@citywidefinancial.ie.
Citywide Financial Solutions
January 2021

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