'Giving away' my apartment - implications?

N

Noor77

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This may seem strange but I'm sure it is not the first time it has been done...essentially, I want to give my apartment to a family member for 'free'. I have a tracker mortgage, am not in negative equity (but not significantly 'in profit' either). I am moving abroad for work purposes and I don't want the hassle of trying to sell or renting it out. I want to sign it over to this family member (permanently) and will not take any payment for it - they will need to do quite a bit of work before they can rent it out and I am just glad to be getting rid of it so I have said I want nothing. However, I want to know what are the tax implications for both parties?

Thanks
 
Are you giving this family member the mortgage? If so you are hardly giving it away! In fact it may be that they are paying over the odds with the way the market is now and the refurb the apartment will require.
 
We are not sure how to deal with the mortgage.

Mortgage outstanding: €150k
Valuation in December 2011: €180k -€195k
(personally, I think €165k or €170k is closer to the truth, from a high of €405k at the peak of all the nonsense!)

Work required is only cosmetic...painting, carpets etc..maybe €5k max.
 
Hi Noor

You can't give away your apartment until you have paid off the mortgage. The bank won't allow you to transfer it to anyone else.

They won't allow your relative to take over a tracker mortgage either. They probably would allow them to take it over at a new standard variable rate mortgage.

Which bank do you have the mortgage from? BoS might give you a deal for paying off the mortgage early. The others are not doing deals.

Can you relative raise a mortgage themselves?

Brendan
 
Brendan Burgess said:
Hi Noor

You can't give away your apartment until you have paid off the mortgage. The bank won't allow you to transfer it to anyone else.

They won't allow your relative to take over a tracker mortgage either. They probably would allow them to take it over at a new standard variable rate mortgage.

Which bank do you have the mortgage from? BoS might give you a deal for paying off the mortgage early. The others are not doing deals.

Can you relative raise a mortgage themselves?

Brendan
Click to expand...

Hi Brendan,

Maybe 'giving away' is the wrong terminology for me to have used. My brother could raise a mortgage himself. My tracker is with AIB. If he raised the mortgage, could he buy the apartment off me and then could I give him the 'difference' back? I really just want to be rid of it and want to do it the most painless way possible.

Thanks
 
Your brother will not get the same interest rates as your tracker if he raises a new mortgage, it maybe easier to just sell the apartment.
 
Hi Noor

I don't really understand now what the question is.

Yes, you can sell your apartment to your brother or anyone else.

From the bank's point of view, they will want their mortgage repaid. So, as long as your brother pays €150k for it in total, you can sell your apartment to him at this price.

He will have to pay stamp duty on the full value of it. So he will have to pay stamp duty on €180k and not on €150k.

I would strongly advise though that you wait. I argue in this thread that AIB and PTSB should give steep discounts on early repayment of trackers.

I don't think you have anything to lose by waiting.

By the way, you could also give your brother an option to buy your apartment at €150k. Then you would get to keep the cheap tracker.

Brendan
 
It might be easier if you think about it like this. You're not giving away your apartment. You're selling it to your brother at a price that's a little bit below the market value.

He will have to get a new mortgage himself of €150,000 to pay you. In order for him to get a mortgage, he will need to qualify for a mortgage of €150,000 in his own right, have savings etc. Lenders are somewhat wary these days of offering a mortgage of €150,000 on a purchase price of €150,000. So he may find it easier if he buys it off you for €170,000, gets a mortgage of €150,000 using his own funds as deposit and then you later give him a gift of €20,000. As he's your brother, there wouldn't be any Gift Tax on this gift, although it would be aggregated with any other gifts or inheritances he receives from you in the future.

Liam D. Ferguson
 
Exactly. The optimum solution here is to formulate an agreement where your brother takes over the repayments on the mortgage & ultimately ownership of the property will be transferred to him. He is in effect buying the apartment from you in installments. A solicitor can draw up the agreement & it will enable you to retain the tracker & with no hassle on the loan repayments. The downside is that you will still have ultimate liability on the mortgage if your brother fails to meet the payments.
 
I wonder if there is any advantage now in adding your brother's name to the deeds and the mortgage? Or maybe just the mortgage?
 
Likely to be a high legal cost for this. Also this will be regarded by the Bank as an adjustment to the T&C's of the mortgage & tracker would be at risk!
 
Brendan Burgess said:
He will have to pay stamp duty on the full value of it. So he will have to pay stamp duty on €180k and not on €150k.
Click to expand...

really? I'm not disputing this, but who decides what the "full value" is in a market where little is moving and those properties that are selling are going for way below asking anyway? (and if the taxman decides that it is worth 30k more than he is selling it for, then shouldn't the brother technically declare gift-tax on the difference also?)
 
shweeney said:
really? I'm not disputing this, but who decides what the "full value" is in a market where little is moving and those properties that are selling are going for way below asking anyway? (and if the taxman decides that it is worth 30k more than he is selling it for, then shouldn't the brother technically declare gift-tax on the difference also?)
Click to expand...

It's self assessment, so the parties to the transaction determine the market value, and Revenue may agree or disagree.
 
shweeney said:
really?
Click to expand...
Yes. If Revenue decide that the payment for an asset is significantly below the fair market value of that asset then they will look to see if there is any tax evasion or illegal tax avoidance going on. I don't know how exactly they decide what the fair market value of an asset such as a specific property is though.
 
Thank you so much for all the advice and suggestions...we have decided to get some legal advice. My brother is a bit unsure as to whether he will get a mortgage as he is an artist and has a widly varying income. He lectures and gives private classes too but he might make €10,000 one month and €1000 the next. He does have about €30k in savings so maybe that will stand to him. I innocently thought I could more or less sign my mortgage over to him and that would be it. Just to add - neither of us are trying to evade any taxes (our Mum is an accountant so we are all kept squeaky clean financially!).

Thanks again...I will let you know how the legal advice goes.
 
The tracker's extremely valuable so giving it up would be nuts.

Ask your legal advisor about the possibility of drawing up some kind of side agreement whereby the tracker's retained but both you and your brother are covered.
 
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