# Mortgage from the in Laws - What should be in the Agreement



## Airtight (19 Sep 2009)

My wife and I had found a property we liked, we had planned to buy it the tradtional way, via cash savings + a repayment mortgage from a bank for 20 years.

Her parents have offered financial assistance, however, this is what they have proposed: 

- They buy the property in full from savings and take ownership.
- We pay 25k towards the initial cost of buying the property.
- They gift us 40k off the initial cost of buying the property.
- A fixed price lump sum to be agreed including interest, this would then become the principle sum to be repaid..
- The agreed principle is repaid via monthly installments over 10 years, we can also reduce this term by over paying.
- Once we have repaid the balance in full they will transfer ownership of the property to my wife and I.

An agreement is to be drawn up between us with no third party envolved, what advice can you offer in terms of the provisions that should be made in the agreement.

We need to ensure both parties are protected, if things go wrong for some unknown reason.


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## niceoneted (19 Sep 2009)

I would stay clear of an agreement like this. If I was going ahead with it I would insist on a solicitor being involved.
What would be the case if any party was to die or if your wife decided the marriage was over etc,
If anything I would insist on all parties being joint owners for a start. 
Be very careful.


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## sse (20 Sep 2009)

Whilst it is very kind of them to offer assistance, I'd expect a conversation with a decent solicitor would very strongly advise steering clear of such an arrangement, for example:

- what happens if you split up?
- what happens if one of the in-laws dies?
- what happens if both in-laws die before transfer (remember they own it, not you, it's part of their estate)?
- what happens if you don't make the repayments?
- what do other siblings think of the arrangement (if any)?

These kind of arrangements can go very wrong, tread carefully.

SSE


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## Kate10 (20 Sep 2009)

I disagree.  I think it would be a mistake to walk away from what could be a very good solution out of fear of something going wrong.  A good solicitor will tie as much down as possible in a robust contract.  He/she will also ensure that all parties get independent legal advice, and you will all be advised about potential risks.  Then you will be in a position to make an informed decision.

Good luck!

Kate.


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## Kev (20 Sep 2009)

Make sure both of you get independent legal advice including the parents....
if not things can go seriously wrong...


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## Airtight (20 Sep 2009)

We will be going ahead with the agreement, if me and the wife split, she can have the house.

The biggest question on my mind is what if one of them die or both? We will be taking out life assurance to cover the debt if one of us die.

Does any body know of a standard form of agreement for such situations?


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## Complainer (20 Sep 2009)

What's in it for you? I'm guessing that it is intended that the interest rate they will charge will be less than the bank, but how can you know what interest rates are going to be in the future?

What's in it for them? Is this really a good time to be investing in residential property in Ireland?

This sounds potentially very, very messy. TBH, it sounds like a bit of an attempt to  grab control. Your plan to let her have the house in case of a split is short-sighted. If kids come along, how would you expect to have any hope of getting a place where the kids can stay with you?

If they want to help their daughter, let them give her cash, with no strings attached. If they want to invest in property, why not let them by an investment property and you can help them out by managing the property for them. 

Don't let your family home get tied up in these complications.


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## j26 (20 Sep 2009)

...What should be in the Agreement...




... a clause as to who pays the legal fees *WHEN* it goes pear shaped (as there's a very good chance it will.




Seriously that arrangement is a bag of problems - are the parents licenced to lend money and charge interest in the first place?  Beyond a contract, you'd need a trust of some sort set up, and most likely it would end up as Counsels dream ticket for long expensive opinions.  Here are some potential issues


You split up - you've dealt with that one
One or both of your parents in law dies - unless it's willed to you specifically it could be passed to anyone.  You have no control over what happens.  Even if you see a will where it's bequeathed to you, what's to stop them from changing it after?  People are prone to changing their wills on their deathbeds.
One or both of your parents in law lose their marbles - then a committee would have to be appointed, and again you have no say over what happens
Your partner does something to annoy her parents
The property market grows significantly - your parents in law see a huge sum of cash for their retirement fund, and they decide to get you out
You and/or your partner lose your job - how do you pay the contracted amount?  If the parents in law are borrowing the money, or will depend on it for part of their income, how will they react if their credit rating is threatened by you not paying?
If you're insistent on this arrangement, get legal advice, you, and the parents in law.  Seriously!


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## woodbine (20 Sep 2009)

I can't help at all with the legal questions, but i'm wondering what would happen with insurance. If you don't own the property, would you have an insurable interest in it? What would you be? I don't think you'd be tenants so who could insure the property?


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## huskerdu (20 Sep 2009)

A few other issues to consider which will cost money and need to be covered. 
Who pays the stamp duty and legal fees for both property transactions ?
This form of finance costs a lot more, because of the two transactions, 

When the parents signthe property over to you in the future, they will be disposing of a non-PPR, so CGT will apply, if the house price has gone up.  Who will pay this ?


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## murphaph (20 Sep 2009)

I really can't see the advantage here. If the parents are just wanting to help their daughter out it would be so much easier to give her money towards the purchase price.

Doing this without good legal advice is idiotic IMO. Looking for an online template etc. is naive in the extreme. OP, go talk to a decent solicitor for half an hour and see what they say. It'll be the best money you ever spent.

I fail to see the financial advantage with this complicated solution and the extra taxes involved could be significant; CGT/Gift Tax/Stamp Duty

Is the first time buyer exemption from stamp duty going to be lost also?


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## Complainer (20 Sep 2009)

j26 said:


> .Your partner does something to annoy her parents


Or perhaps more likely, you do something that annoys your missus and her parents?

What happens in the market continues to fall and stays in the doldrums (as happened in Japan), so you faced with over-paying for the asset at the end of the period?

What happens when you want to build an extension, and the in-laws want you to convert the attic instead?


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## Airtight (20 Sep 2009)

Thanks for all the food for though, it has put many questions and doubts in my head. 

My wife and I have children and it is her parents that offer the help, we didn't ask.

One thing is for sure there needs to be a lot of trust between both parties, to be perfectly honest I am not sure it is there, they are the one that insisted on drawing up an agreement, and now in hindsight it does seem like a controlling move on their part.

I'm not sure about this at all.


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## Scotsgirl (20 Sep 2009)

I too think it sounds very complicated. If you have the means to buy yourselves my thoughts would be to do that.  It would save a lot of hassle in the long run. Too much can go wrong. I can't see what the benefit is to either party with the proposed arrangement.

The parents should just gift you €40k towards the cost.


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## Bronte (21 Sep 2009)

Even with the best solicitor working on this there is too much that can go wrong.  Marriage and buying a house is difficult enough without having your inlaws financially involved in your lives for a long time.

As previous poster said it would be much better if they just gifted their daughter the money.  That's a nice clean arrangement.


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## sse (21 Sep 2009)

Airtight said:


> Thanks for all the food for though, it has put many questions and doubts in my head.
> 
> My wife and I have children and it is her parents that offer the help, we didn't ask.
> 
> ...



Just buy the house yourselves. If your in-laws want to help you out then that's very kind, just get them to gift the money to your wife and she can decide what to do with it.

We can't possibly know the details of your particular situation, but the arrangement proposed is a disaster waiting to happen.

Good luck

SSE


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## Airtight (23 Sep 2009)

How about they pay for the house we take ownership, we also sign an agreement to repay the loan, does that sound simpler / cleaner?


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## terrysgirl33 (24 Sep 2009)

Why do they need to help you?  Are you incapable of supporting your own family?  Do they hate you that much?

Do they have a licence to lend money?


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## Complainer (24 Sep 2009)

Airtight said:


> How about they pay for the house we take ownership, we also sign an agreement to repay the loan, does that sound simpler / cleaner?


What is the benefit in this approach for you?


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## murphaph (24 Sep 2009)

Airtight said:


> How about they pay for the house we take ownership, we also sign an agreement to repay the loan, does that sound simpler / cleaner?


The simplest solution has already been stated. You just take out a regular repayment mortgage and if your wife's folks really want to help they can just gift the 40k to her and let her pay it off the mortgage. Risk to everyone is low.

The sbove solution leaves your wife's parents completely at the mercy of a court should you stop paying them back and seeing as it'll be a family home and the loan cannot be secured on it like a bank secures their mortgages against the property, there's not much (no) chance of your wife's folks getting possession back if you decide not to repay them.


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## Airtight (24 Sep 2009)

murphaph said:


> The simplest solution has already been stated. You just take out a regular repayment mortgage and if your wife's folks really want to help they can just gift the 40k to her and let her pay it off the mortgage. Risk to everyone is low.
> 
> The sbove solution leaves your wife's parents completely at the mercy of a court should you stop paying them back and seeing as it'll be a family home and the loan cannot be secured on it like a bank secures their mortgages against the property, there's not much (no) chance of your wife's folks getting possession back if you decide not to repay them.



The main benefit of have my wifes parent involved isn't only for the 40k thats coming regardless, its for the interest, its a fraction of what the bank would charge.


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## j26 (24 Sep 2009)

I'll ask again - are they licenced to charge interest?  If not the interest provisions might have to be 'informal' for your alternate suggestion to work.

The loan can be secured on the property by way of a charge, but a deed of charge would have to be drawn up and executed.


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## Bronte (25 Sep 2009)

Airtight said:


> The main benefit of have my wifes parent involved isn't only for the 40k thats coming regardless, its for the interest, its a fraction of what the bank would charge.


 
Can you give us the percentage? I imagine if it's way below normal rates the revenue will want to claw back some of that in the same way they do for bank staff who receive preferential loans rates.

Do you yourself see anything bad about getting a loan from your inlaws?


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## Airtight (25 Sep 2009)

j26 said:


> .



*"I'll ask again - are they licenced to charge interest?"* 

Its purely a domestic arrangement, so the answer is no.

*"If not the interest provisions might have to be 'informal' for your alternate suggestion to work."*

Why so?

*"The loan can be secured on the property by way of a charge, but a deed of charge would have to be drawn up and executed"*

How would we go about doing this? It that a similar system to the way banks secure mortgages?


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## Airtight (25 Sep 2009)

Bronte said:


> Can you give us the percentage? I imagine if it's way below normal rates the revenue will want to claw back some of that in the same way they do for bank staff who receive preferential loans rates.
> 
> Do you yourself see anything bad about getting a loan from your inlaws?



Its not actually interest, its a 10k lump sum (peanuts in terms of what it might cost), its more like a fee for the loan.


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## j26 (25 Sep 2009)

Airtight said:


> Why so?
> 
> 
> How would we go about doing this? It that a similar system to the way banks secure mortgages?



1. Because I believe it is illegal to lend money and charge interest unless you are licenced as a money lender.  At best the in-laws could have serious trouble enforcing their security (if it came to that), because the agreement may not be legal.

2. Pretty much the same.  It's a deed of charge, which is similar to a mortgage deed.


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