Advice on Buying house with son

B

Broadcaster

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Our son is currently living and working in London and renting a house there at 2k sterling per month. He got married recently and has a young baby. His plan is to return to live in Dublin with his family within the next two years to set up an Irish arm of the company he works for. He earns approx 90k per year however his wife was made redundant just after the birth of their now 9 month baby,so there is only one income (apart from unemployment benefit currently).

We are in the fortunate position to be able to help with some funding towards a house for them here. He's looking at a house costing €450k and has savings of 30k. My question is if we provide 100k as a deposit and go guarantor on a mortgage would a bank entertain that scenario. The alternative is for us to sell a rental property and provide a higher sum. I do understand that this would take up,most of his inheritance allowance but it may be better than inheriting later in life when he has less need for it.

Any advice would be much appreciated.
 
Could he not move into the rental property or is that not in an appropriate location?

Sorry, can't really comment on the other alternatives but I suppose you should mention what the rental property provides in way of income and outgoings.
 
Is the €100k a gift?
At present he can apply for a mortgage at the ECB level of 3.5* €90k = €315k
+ savings €30 = €445k total

Without and exemption he is nearly at the desired €450 level presuming the €100k is a gift. If this is the case I would not overly complicate the issue and leave them, off to buy their own house. The banks do not put too much weight behind guarantors anymore as many of them defaulted in the downturn.

The jobs market in Dublin is very strong at the moment so his wife should not have too much trouble getting employment should she wish.

The current inheritance band is €330k from parent to child so there is still a chunk unused.
 
Broadcaster said:
Any advice would be much appreciated.
Click to expand...

Well with that in mind here goes:

- Don't see why you'd sell a property for him
- Who is driving this idea
- What if he can't leave London
- Is his wife Irish
- I've seen guys be relocated with a top company, no expense spared and families moved, top schools paid for, and then told 6 months later, on your bike.
- Why is your son looking at a house in Dublin if he's not moving for 2 years
- He doesn't even have a 10% deposit !
- Your son has no inheriteance allowance, who introduced that idea into the equasion
- How many other children do you have.
- Who will pay the mortgage on the property and with what money
- Has your son ever owned a property


When you answer those points I might reconsider you giving away your hard earned life savings and assets as a good idea.
 
Thanks Dereko and Easel for your response. Appreciate those.

Bronte, I've set out my replies below your questions.

Don't see why you'd sell a property for him.....
We can't take it with us so not much good to us when we are 6 ft under! Maybe put it down to generosity!
- Who is driving this idea
It's a discussion his parents are having!
- What if he can't leave London
Don't understand what you mean "can't leave".
- Is his wife Irish
No, but is keen to live in Ireland rather than London
- I've seen guys be relocated with a top company, no expense spared and families moved, top schools paid for, and then told 6 months later, on your bike.
He's not in that league at all.
- Why is your son looking at a house in Dublin if he's not moving for 2 years
"Within 2 years"...That's an estimate....he'd plan on buying just before leaving London
- He doesn't even have a 10% deposit !
Not yet but saving like the rest of his peers
- Your son has no inheriteance allowance, who introduced that idea into the equasion
I am referring to the inheritance band that children are entitled to.... I think you know that!
- How many other children do you have.
One other who will receive equal amount when needed
- Who will pay the mortgage on the property and with what money
Son will, in the normal way - own salary. Will need to dovetail leaving London with purchase in Dublin
- Has your son ever owned a property
No
 
Broadcaster,

It will be difficult for your son to purchase a property without actually living here. I recently moved back to Ireland and the lending systems are very much bound by the borders of Ireland. In my case I was transferring back with the same company I had worked for for 10 years and I tried to secure a mortgage prior to moving back and it was not possible. It seems like a simple idea but the reality is banks are not set up to do it, in fact I would advise not to deal with any banks directly as they seem to just refer to a computer with fixed inputs before saying no. I would go the broker route who seem to have a connection to be able to talk to the bank. That is the route I went and was able to secure a mortgage within 3 months of moving back.
 
Hi Broadcaster

If you will not need the money, giving a gift to him now would make a lot more sense than leaving it to him later when he no longer needs it.

Especially as he may find it hard to get a mortgage in Ireland.

The advantages of doing it now, rather than later
  1. The CAT threshold might be reduced at some stage in the future.
  2. He will be paying high mortgage interest
  3. It's tax efficient
    1. You are paying income tax on the rent received and CGT on any increase in value
    2. He will be paying no income tax on the imputed rent and no CGT on the increase in value
  4. He may be able to buy a bigger house than he could otherwise afford - in other words, he gets to save himself from trading up after a few years
The downsides of gifting now
  1. You will presumably have a CGT liability which you would not have if you die owning the house
  2. If he splits up with his wife - she will probably get half of it
  3. Your circumstances might change and you might need the money
I have seen another case where this was done but the parents were still alive 20 years later. They did their wills and felt that the gift 20 years ago was in the past and split their estate equally among their three children. That was not appreciated by the other two.

Ideally give both sons the same amount at around the same time.

Brendan
 
Andrew365 said:
Broadcaster,

It will be difficult for your son to purchase a property without actually living here. I recently moved back to Ireland and the lending systems are very much bound by the borders of Ireland. In my case I was transferring back with the same company I had worked for for 10 years and I tried to secure a mortgage prior to moving back and it was not possible. It seems like a simple idea but the reality is banks are not set up to do it, in fact I would advise not to deal with any banks directly as they seem to just refer to a computer with fixed inputs before saying no. I would go the broker route who seem to have a connection to be able to talk to the bank. That is the route I went and was able to secure a mortgage within 3 months of moving back.
Click to expand...
Thanks for that advice Andrew. Didn't realise not living here had such consequences. Will certainly remember to go through a broker.
 
Brendan Burgess said:
Hi Broadcaster

If you will not need the money, giving a gift to him now would make a lot more sense than leaving it to him later when he no longer needs it.

Especially as he may find it hard to get a mortgage in Ireland.

The advantages of doing it now, rather than later
  1. The CAT threshold might be reduced at some stage in the future.
  2. He will be paying high mortgage interest
  3. It's tax efficient
    1. You are paying income tax on the rent received and CGT on any increase in value
    2. He will be paying no income tax on the imputed rent and no CGT on the increase in value
  4. He may be able to buy a bigger house than he could otherwise afford - in other words, he gets to save himself from trading up after a few years
The downsides of gifting now
  1. You will presumably have a CGT liability which you would not have if you die owning the house
  2. If he splits up with his wife - she will probably get half of it
  3. Your circumstances might change and you might need the money
I have seen another case where this was done but the parents were still alive 20 years later. They did their wills and felt that the gift 20 years ago was in the past and split their estate equally among their three children. That was not appreciated by the other two.

Ideally give both sons the same amount at around the same time.

Brendan
Click to expand...
That's terrific Brendan. Lots to digest there and great to have before we make any moves on our money. We have always treated both children exactly the same over the years i e if one gets money no matter how small the other is given an equal amount. Very conscious of being fair to both. Thanks again.
 
Not sure why you thanked everyone except me. But never mind.

My questions are designed to figure out your thinking. I don’t see anything wrong with you gifting to your children. Just always wary where kids might beggar their parents. Not the case here. And no I did not understand you meant the inheritance limit. My question was more about children assuming they had a right to any inheritance.

The reason for asking the wife’s nationality was if she was Irish she has more of a clue about living in Ireland. She might loath Dublin. BB has pointed out the dangers as regards her ownership if they split up. I’d advise your son to rent for a year in Dublin first to se if they both like it.

As regards leaving London, his company might change its mind. There are no guarantees with companies. Especially with Brexit.
 
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Thanks Bronte. I do understand that some parents may feel pressurised into providing finance for their children but we've experienced the complete opposite. Ours are reluctant to accept money and are constantly telling us to spend on ourselves. We do that anyway but we are also conscious that we've enough to provide a good standard of living for ourselves at this stage of our lives and we'd be happy to share what we can. Hopefully that gives you a better idea where we are come from in all of this. Thanks for the advice. I appreciate you taking the time.
 
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