Deposit for mortgage advice

[Cashweasel]

Hi I am looking to help my partner to buy a property by providing them with a lump sum towards the purchase price.

They mentioned it to the mortgage advisor in bank who said that we would need to show the source of the lump sum. This raised a couple of other questions which I would appreciate some advice on.

1. What method should I use to help them out. Is a loan better than a gift which I assume there would be a tax issue with?

2. If I was to give them a loan could redeemed by me buying a future share in the property either part or full?

Thanks

 

[skrooge]

1. What method should I use to help them out. Is a loan better than a gift which I assume there would be a tax issue with?

Assuming you're not married then correct on the tax front. In the eyes of the State there is no relationship between you too. So CAT at 33% may be payable, but your partner, if the gift of over the threshold.

CAT groups and group thresholds

This page explains thresholds, rates and aggregation rules for calculating Capital Acquisitions Tax

www.revenue.ie

CAT could be avoided/reduced if you loaned them the money but this approach is likely to be counterproductive. A mortgage provider will factor in your loan when calculating what they will be willing to lend to your partner.

2. If I was to give them a loan could redeemed by me buying a future share in the property either part or full?

Depends on:
1) wording of the contract - employ a solicitor to draw this up. Make sure they are independent of your partner.
2) the capacity of your partner to repay it in a reasonable time frame.
3) willingness of your partner to do this.

Imagine your relationship deteriorates and your partner refuses to pay you back and or they lose their job. You could spend a considerable amount of money on legal fees trying to get your loan back. Many a professional lender has run into issues on some or all of these points.

Overall, you appear to be taking on a lot of risk for very little/no return. Why not - If you're in a long term, stable, happy relationship - pool your resources and purchase together. But that's a lot less about taxes and finance and much more about the strength of your relationship.