Should recently retired parent clear her mortgage with her lump sum + best way to help her move

[Honestly]

The permutations are too complex given the following

• We don't know the cost of your ideal home
• We don't know if your mother wants your house
• If she doesn't, we don't know her budget for a new home
• We don't know when and how much your share options are

In summary, the overall strategy is
1) Your mother should not clear her mortgage as the cash will be useful.
2) You should wait until you see how the share options go

Just to answer all questions

• 500k for ideal home
• She would 90% take my house, I didnt want to ask without being sure if it was feasible.
• Budget for a new house is 1) sale of existing home, approx 220k 2) some % of her 90k savings, about 40-50k would be ok I think and 3) whatever I can contribute, I've 30k from my savings earmarked for her, so about 290-300k, which on the north city Dublin would get her about a 1-2 bed apartment
• Best case scenario 14 months 300k+, mid case 18 months 150k, worst case they're worth nothing lol.

Do you still think, knowing the above, she shouldnt clear her mortgage even though we would be waiting 18 months to be in a more confident financial position?

 

[Honestly]

Your aim should be to have a comfortable mortgage and not to have no mortgage.
For example, if the choice is between a €500k house and €100k mortgage left when you are 60 or a €400k house and mortgage-free by 60, go for the €500k house.

Brendan

Can you explain why? I'd really love to move to a 3/4 day week and take a less high-paying job to do so if needed so I'd been working towards paying it off early.

 

[Brendan Burgess]

Do you still think, knowing the above, she shouldnt clear her mortgage even though we would be waiting 18 months to be in a more confident financial position?

Yes, the interest saved is not huge in the overall scheme of things. Having access to the cash seems more important.

 

[NoRegretsCoyote]

Do you or anyone have a link that explains the whole interest-only loan and inheritance thing?

Details on the small gift exemption are http://inheritance (here). For interest-free loans details see here. Basically you have to calculate a notional interest rate of the best available on the open market.

If you dig around on AAM there are more threads on this.

 

[Brendan Burgess]

Can you explain why? I'd really love to move to a 3/4 day week and take a less high-paying job to do so if needed so I'd been working towards paying it off early.

OK, it is a matter of personal choice. You can choose to live in a €400k house or a €500k house with an additional €100k mortgage.

I can't really tell you which is better.

But many people have some artificial objective "I want to be mortgage-free". This usually makes no sense, but it could make sense in your circumstances.

But at age 36 with potential share proceeds , a probably inheritance at some stage in the distant future, I think I would buy the house which meets my needs if I can could comfortably afford it now - which you can - or which you will be able to if and when the share options come through.

The alternative is to buy a €400k house, and then come back here in 5 years saying that you want to trade up again, and face the huge costs, risks and disruption with trading up.

Brendan

 

[NoRegretsCoyote]

I just want to make sure in this hypothetical situation I understand it correctly.

• My mam sells her house for 220k and has 40k savings, and gives me all 260k (is this a loan? how does she give it to me?)

If a loan you can make it interest-only with write-off of the interest as above via small gift exemption. If it's a gift it will count toward lifetime inheritance thresholds but if her wealth is never going to breach €335k you don't really need to worry too much about this.

• Using my mam's 260k and my own shares potentially worth 150k and my own savings (currently) 70k I have 480k to buy something new
• My mam moves into my house and I continue to pay the mortgage there, but it's effectively her house

It's not "effectively" her house at all. It's legally and beneficially yours!

• I live in my new gaff, nearby but not too close, that was closer to 500k and better matched for what I need

In theory in the above scenario the new house was bought in cash, and the only mortgage is on my mam's house (my old house) at a great rate and affordable price. That seems too easy? I mean I know there'd be some overlap with my mam and me living here, and risk in selling/buying/markets, but assuming things went even vaguely to plan (and I wouldnt take action until the shares were liquid) is that right?

What would be happening here is your mother giving you an interest-only loan or gift and you letting her live in your house rent-free. I'm not sure if this would breach some Revenue rule, wiser heads may be able to advise.

Either way it is well worth both you and your mother taking separate legal advice if you do go down this road.

 

[bish123]

There is non-financial side of you (at 36) committing to staying with mother who is relatively young and can have independent life for many years to come.

1. What if you find a suitable match in few years and change plan to have a family of your own ?
2. What if you find a more lucrative job/ career away from existing house ?
3. What if either you or your mother looks for more privacy in near future ?
4. There is another sibling - what do they think about it ?

 

[Honestly]

There is non-financial side of you (at 36) committing to staying with mother who is relatively young and can have independent life for many years to come.

1. What if you find a suitable match in few years and change plan to have a family of your own ?
2. What if you find a more lucrative job/ career away from existing house ?
3. What if either you or your mother looks for more privacy in near future ?
4. There is another sibling - what do they think about it ?

Not sure if you misunderstood, but I dont want to live with my mam, I would temporarily in order to enact a house move/switch, but absolutely would not live with her permanently. I'd love to be at least a five mins drive from her, lol.

I have lived abroad, dont plan to do so again. I am happy in my location, tho as mentioned would prefer a home with some different features (side access, bigger garden, a room more suited to being an office, recently rennovated or new build).

My brother would facilitate all of this to support my mam too, and I would have no fears about complications with him.

I dont plan to have kids, and if that shifted I can accommodate one in this home or in a potential future home.

 

[Honestly]

What would be happening here is your mother giving you an interest-only loan or gift and you letting her live in your house rent-free. I'm not sure if this would breach some Revenue rule, wiser heads may be able to advise.

Anyone able to advise?

 

[Honestly]

OK, it is a matter of personal choice. You can choose to live in a €400k house or a €500k house with an additional €100k mortgage.

I can't really tell you which is better.

But many people have some artificial objective "I want to be mortgage-free". This usually makes no sense, but it could make sense in your circumstances.

But at age 36 with potential share proceeds , a probably inheritance at some stage in the distant future, I think I would buy the house which meets my needs if I can could comfortably afford it now - which you can - or which you will be able to if and when the share options come through.

The alternative is to buy a €400k house, and then come back here in 5 years saying that you want to trade up again, and face the huge costs, risks and disruption with trading up.

Brendan

Super helpful context, thank you.

I recently took a friend with a 500k home budget who wants to live in this area on a tour, and it was interesting to see what 500k could get now. Sad too, because homes that were 380k - 420k have gone up by 100k in the last two years. The main hesitation I have about waiting for the potential share-value in 1-2 year is the house prices will go up so much. I wish in 2019 when I bought, I'd've been braver and gone for 450k instead of 375k, I'd seen the value of that now. I think having lived through three recessions has made me really risk adverse, and I'm already high enough risk being a single person paying a mortgage.

 

[Brendan Burgess]

Anyone able to advise?

This got too complicated, so I am not sure that is being proposed anymore.

But, contrary to public belief, Revenue is just not interested in loans within families which are for a short term.

So if your mother lends you money to buy a house, there are no practical tax implications.

But it's probably best to wait until you have a clear proposal and you know the figures and for how long the loan will be before seeking a definite answer.

Brendan

 

[Brendan Burgess]

The main hesitation I have about waiting for the potential share-value in 1-2 year is the house prices will go up so much.

It's a risk. But then house prices can stabilise or fall as well. When prices are rising, it seems as if they will rise forever.

Don't forget that your house is rising in value as well. So let's say you could sell your home today for €450k and buy a house for €550k. But if you wait and house prices rise by 20%, then you will only "lose" 20% of the €100k or €20k which is not huge in the overall scheme of things.

I wish in 2019 when I bought, I'd've been braver and gone for 450k instead of 375k, I'd seen the value of that now.

Which is why I think you should wait until you see how much you get from the share sale and then buy your "forever" home.

 

[Honestly]

Thanks again for going through this with me, it's really valuable. Just looking at it again written out and wanting to check my logic is right.

• My mam sells her house for ~220k, and gives that to me as a loan.
• My mam moves in with me until I buy a new house, or some other housing solution.
• I buy my ideal home, funded by my mam's 220k, my shares ~150k, and saving ~50k - 420k in total, and supplement with a 100k mortgage (which will be harder to get because it's my second home, but not too hard because I have sufficient funding)
• I move into my ideal home worth ~500k with ~100k mortgage and pay that + the remaining mortgage on my home my mother is now in ~260k (1k pm), probably totalling ~1600 a month which I can comfortably afford

Then the only issue is how does my brother get inheritance when my mam passes, hopefully in 40+ years. Presumably I can sell the house and there's a way to equitably ensure I get back what I put in and I give him half of the remainder (or at least half of 220k?). We would never fall out over it, but we'd plan for it now and have an agreement.

 

[Brendan Burgess]

Have you confirmed that your mother wants to live in your house for the longer term?

If so, then the above works.

When your mother dies, her estate will be a loan owed by you of €220k. So you give your brother €110k. You can get that by selling the house.

Brendan

 

[Brendan Burgess]

As your mother is only 63, I don't think that she should be selling her home and finding herself living free of charge in a property owned by someone else. I know everything is fine now, but things can change. You can fall out. You get married and later split up and your spouse wants half your assets. You die and your spouse gets all your assets. All of these are unlikely, but one of them might happen. You will also own a second property which is just not a good idea these days with the public attitude to landlords.

So does the following work? I am so confused by the numbers, that I am not sure.

1) Your mother sells her house
2) You sell your house to your mother for €450k. She pays you €220k and owes you €230k.
3) You clear the mortgage on your home with the €220k
4) You will have no problem getting a mortgage based on your salary

The advantage of this would be:
1) Your mother would own a house which gives her great security and is not dependent on you
2) Any increase in the value of her home would be free of Capital Gains Tax as it's her home. If it's your investment, then there would be a CGT liability.

But all of this is speculation. You don't need to do anything now. Wait until you know how rich you are to see how much money you have and how it all works out.

Brendan

 

[Honestly]

I havent run the idea by my mam yet re her moving here, because I wanted to be sure it was viable, but I think she'd go for it. However, you're right she'd prefer to own and I would prefer not to have two mortgages (it boggles my mind to even think about that, my mam was a single mother and I grew up working class, so never imagined I'd have this 'problem').

I hear you loud and clear on it being speculation and waiting until the options become liquid, I will do that. It's still really helpful for me to talk through these options so I can understand my choices and their implications and talk to my family about them in advance.

Looking at your proposal here, can I ask some questions;

1) Your mother sells her house
2) You sell your house to your mother for €450k. She pays you €220k and owes you €230k.
3) You clear the mortgage on your home with the €220k
4) You will have no problem getting a mortgage based on your salary

• How does my mam owing me 230k help? Is it that I'd see that money again tax free when she passes through sale of the house?
• Assuming above is correct, I'd get a new mortgage of ~250k and that combined with potential shares and savings I could get a more ideal home for ~500k without adding in much risk and while helping my mam end up in a much more comfortable home than she can currently afford (which is my goal)

 

[Brendan Burgess]

How does my mam owing me 230k help? Is it that I'd see that money again tax free when she passes through sale of the house?

Yes. You could sell your home for €220k to your mother, but then she would pay gift tax on the difference between the price she pays and the market value.

And your brother would presumably get half the full house when your mother dies.

Brendan

 

[Honestly]

Hello,
Back again with a question on the same topic. What has happened since this post:

• I lost my job and was out of work for 9 months and spent half of my savings during that time, down to 35k ish
• My brother got his house in the west, but wont move for six months as it needs to be renovated
• I am three months into a new stable job, on 140k (was on 150k)

All shares/options are less secure and I cant count on them at all - there's some potential over the next year I may come into some liquidity but can not rely on it. My mam's house valuation is probably the same at around 220k.

I have moved away from the idea of giving her my house, which is good because she's settled into the idea of getting a two bed apartment in the area. The issue is she will only get 220k, owes probably 35k, might face a council claw back issue (waiting to hear, she's 18 years into the 20 year clause) and a two bed in this area of north Dublin is 300k minimum.

So now I am instead considering getting a top up mortgage of 80-100k, and lending that to my mam, and then she can pay me back some/all of it whenever her inheritance arrives. This is likely a much safer idea?

Reminder of my mortgage terms:

Mortgage of 375k, 260k remaining, current market value of 450k. On a 7 year fixed rate of 1.95% with Avant, just moved early 2022. 26 years remaining (I think, but aim is to clear it sooner).

I moved to Avant on these terms in June 2022. Just under 250k left now.

If avant wont give me a top up, do I have any other options, like getting a mortgage and co-signing with my mam?

 

[Dr Strangelove]

So now I am instead considering getting a top up mortgage of 80-100k, and lending that to my mam, and then she can pay me back some/all of it whenever her inheritance arrives.

AFAIK lenders are reluctant to give top ups now and will only do so for specific renovation plans and will need evidence of said works being carried out via engineers' reports.

 

[Clamball]

So the RSU of €10K and the shares of €150K are off the table, any redundancy to add to the pot? You will know for definitive this year sometime.

Currently your Mum
€220 equity in home
€35K debt
No pension lump sum if she has a debt?
€? Clawback to council if moving

You
€200K equity in home
€35K savings
€250K mortgage
€? Stock in previous employers company

AIB do top up mortgage one of their options being “support for family buying a home of their own” but Avant don’t offer this option. So the only way you could release €100K from your house would be to switch lenders and apply for a top-up but I don’t know how feasible that all is. Each step may prove to be impossible due to individual circumstances.

At the moment I think the only thing you can do for you Mam is to give her an interest free loan to pay off the debt of €35K, then you give it 12 months to see if you get anything on the old share option, build up your savings and wait to hear what the council says.