Mortgage help from parents

Diziet

Registered User
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May I ask for some information from the knowledgeable experts here, please?

My daughter and her husband are planning to buy a house and we are in the fortunate position to help them do that. We can either give them a straight gift, or a much larger interest free loan. We can not lend them enough to avoid getting a mortgage at all (we have a younger daughter and would like to do the same for her).

What do we have to consider in out planning? Are there tax implications for the gift to our daughter? She hasn't received any sizeable gifts from us before. What is the best way to use the money?

I don't mind paying for advice, but what kind of advisor do I need? I would be very grateful of any pointers on the question, and on how to find an advisor.
 
I don't think you need an advisor, other than, perhaps, a mortgage advisor.

You can gift your daughter up to €310,000 free of CAT.

If you lend her €300,000 interest-free, it would be regarded as a gift of around €3,000 a year, so again, no problem there.

The advantage of a gift is that it will be easier for them to get a mortgage. The problem with a gift, is that she can't gift it back to you when you need it or you will be subject to CAT on any gift over €30k.

You have to look down the line at what happens if they separate. I have seen a lot of issues arising when there is no clarity. He claims that the gift was to them both. So he owns half the equity in the house.

If it's a loan, at least you can insist that they repay it.

Brendan
 
Thank you Brendan, appreciate the reply. So tax is not an issue, which is good.

The problem with a loan is that with the current mortgage offer, they insist that any money that comes from other sources is wither their own money or a gift. I am not sure if there is any way round that. I would rather we loan the money interest free and they reduce their mortgage, but there is not enough money there to cover all the cost of a house.
 
I guess you tell the bank it's a gift but do a contract with your child and partner that it is a loan and that for the purpose of getting a mortgage you have agreed to let the bank consider it a gift.
 
That would be very simple - I just don't want to make trouble down the line :). Appreciate the responses, thanks again.
 
The bank's major concern is whether or not you have a claim on the property. They want you to have no claim hence the reason they want it to be a gift.
 
I would not be looking for a claim to the property - it would be an unsecured loan, interest free with a repayment level that would be within the means of the couple.
 
The bank will ask for you to sign a declaration saying that the money is a gift and you won't be looking for it back. You should get legal advice on whether you can then supersede this with a loan agreement between you and your daughter.

It's better to have these things clear at the outset. When it comes to large amounts of money, people can fall out pretty easily. You wouldn't want to sign a declaration just to keep the bank happy thrown back at you in the future.


Steven
www.bluewaterfp.ie
 
In my experience, people sign the bank declaration and then separately sign a document stating that the bank declaration dated X is utterly meaningless and was signed purely to square off the bank with the agreement of all parties. I have also seen Revenue accept this.

Paper doesn't refuse ink - Agreements, written or not, that are demonstrably a ready-up have no basis.
 
I have another question (I am full of questions today).

Say we want to do a straight gift of 50K. But if we do that, won't they have to pay gift tax? The exception is only 3K a year, so 6K for husband and I.
 
Say we want to do a straight gift of 50K. But if we do that, won't they have to pay gift tax? The exception is only 3K a year, so 6K for husband and I.

No, they won't, assuming their Group A and Group C thresholds are still intact.

The Group A "parent/child" threshold is €310k and the Group C "stranger" theshold is €16,250.

You guys can give €6k per year to both (i.e. €12k in total without impacting on their thresholds.

So €50k given 50/50 would result in:

- €19k of your daughter's Group A threshold being used up (i.e. €25k less €6k).

- €2,750 being taxable for your son-in-law (€25k less €6k less €16,250) and a tax bill of €908.

Therefore just tweak the split or structure the deal as a loan. A lot depends on your overall wealth, the level of any previous gifts or inheritances, and the probability of them inheriting significant assets down the line.
 
The recipient submits the return and pays any tax. Once you hit 80% of the threshold, it triggers an obligation to submit a return, even though no tax arises.
 
In my experience, people sign the bank declaration and then separately sign a document stating that the bank declaration dated X is utterly meaningless and was signed purely to square off the bank with the agreement of all parties. I have also seen Revenue accept this.

Paper doesn't refuse ink - Agreements, written or not, that are demonstrably a ready-up have no basis.


Hello, I am back again with a question on the mechanics of this. We are providing a loan of 70K to our daughter and husband, who are now actually buying an actual house :). We plan to vary the agreement once they have moved in to say it is a loan payable at x per month, and will back this up with standing orders and bank statements etc. We do expect the money to be repaid and the couple plan to repay it.
The question is, how does the couple inform the revenue? Presumably the bank will tell revenue that they received a gift of 70K, how does the couple then go back and provide evidence to revenue that the agreement is actually for a loan?
 
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