Tax relief on allowable mortgage interest is provided to the borrower as

• A. Reduction in loan repayments
• B. Direct monthly payment from Revenue
• C. Increased tax credit
• D. Increased standard rate tax band

Answer: (A)

The key idea being tested is how mortgage interest relief is delivered to the borrower. When mortgage interest qualifies for relief, the benefit is felt as a lower monthly cost of borrowing. In practice, that relief is provided by reducing the monthly repayments the borrower needs to make, effectively easing cash flow each month. It isn’t typically delivered as a direct monthly payment from Revenue, nor is it an ongoing tax credit or an adjustment to the standard tax band. The monthly relief makes the loan cheaper to service on an ongoing basis, which is why the option describing a reduction in loan repayments is the best fit.