Adding name to mortgage

Hi, I have a funny situation.

I am 'renting' a property from my dad.
This was a rental property for a few years but when I moved back from the UK I moved into the property.

The mortgage is in his name but I make the repayments - money transferred to his acc every month.

My bank said I could add my name to his mortgage cause at the moment I have no claim to it but I have been living there for 7 yrs and put over €35k into the house (the property will be mine when mortgage is paid off in 12.5yrs time).

The bank sent me a Home Loan Amendment Form to fill in and they need both my dads and my income and expenditure details. My dad showed this to his accountant and he thinks that they only want our info and if they do add me to the mortgage (which he highly doubts!?) they will take out a new mortgage for us and we will loose our current mortgage - a tracker mortgage.

Anyone know if this is the case..??

How very cute of them to want to add you to the mortgage!. This actually still gives you no claim over the house but all the liability of the mortgage. To have any entitlement to the house you need to also be on the house deeds.

How very cute of them to want to add you to the mortgage!.

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I imagine that Calin initated the discussion.



Hi Calin

I presume you are confusing "mortgage" with "title deeds"?

The title deeds specify the ownership of the property.
The mortgage is a loan from a bank to a borrower - secured on the property.

You would like to get your name on the title deeds so your ownership of the property is confirmed. The bank will allow this if your name is added to the mortgage as well. They might specify that you lose the tracker, but you should be able to negotiate this out of the deal.

How did this peculiar ownership structure come about?
Does your father have his own home?
If so, he will be subject to CGT on any capital gain on this investment.
Are you actually paying rent? If so, he will be liable to income tax on the rental income.

Wbbs, I initiated this by asking the bank if I can be added to the mortgage not being aware that I have still no entitlement to the house.

Brendan,

I am indeed confusing a mortgage with title deeds!!

My dad has a few properties he bought years ago as investments and on my return from the UK he said I can 'have' one of the houses and take over paying the mortgage. I wasn't and am not in the position to take out a mortgage myself. A few years back he regigged his mortgages and has a 15 yr tracker mortgage which has about 12yrs left on it on the property I live in with my family.
My father has his own house as well as the investment properties. I am paying 'rent; to my dad but everything is above board when it comes to income tax etc.

My dad mentioned to me about getting my own mortgage in case of CGT increases as I presume that will effect him (sorry but I haven't a clue about all these taxes) but I did a quick look on a mortgage calculator and the repayments would obviously be much higher than what we are making at the moment which I wont be able to meet. Not that I have any savings to qualify for a mortgage.

But also on the mortgage side the property is no where near what he paid for it 9 yrs ago so I presume I will only get a mortgage on it current value and he will have a short fall of the difference?

I think what he maybe worried about if something goes wrong with his own business and he is unable to make repayments on the other properties, which are soon to be coming off interest only repayments, that he may loose all the properties and 'mine' included. He doesn't think this will happen but you never know.

I just don't know how to protect the property as I have no claim on it. ( I don't mean to come across as greedy but it was an agreement, he has done this for my brother as well but he gave him down payment for his mortgage so his house is his)

Is there a cost involved in adding my name to the deeds and if I do this how can the bank specify I lose the tracker?

Thanks for your response so far.

Hi Calin

There is no point in us guessing.

Provide the actual figures
Purchase price of house
Current value
Amount of mortgage outstanding
Interest rate
Your gross salary, etc.

Brendan,

Mortgage was for €242k - value of the house was €250k

Current value roughly around €165k

€205k amount outstanding

Interest rate is 1.7%

Years left on mortgage is 19yrs! - this is a shock to me as I am 99% sure he told me it was a 15yr mortgage!

Combined salary for myself and partner would be roughly €70k

No savings!

If he paid €250k for the house and it has fallen to €165k, he won't have to worry about CGT for some time. CGT is paid on the difference between the sales price and the purchase price, so unless there is an increase of 50% in prices over the current level, he doesn't need to worry about it.

As you are living in the house, you will be exempt from Capital Acquisitions Tax i.e. gift tax. So, again, you don't need to worry about this, unless the rules are changed.

Your main concern is ownership of the property. Your father may change his mind and not give it to you. Others may dispute his will.

he said I can 'have' one of the houses and take over paying the mortgage.

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At the moment, the house and mortgage are in negative equity, so there is no advantage in having both transferred into your name. You would be acquiring a liability and not an asset.

You might revisit the situation when you have the mortgage reduced to the value of the property.

But, as of now, there is no need to do anything.

Keep the tracker and keep up the payments. When the house is worth more than the mortgage, you might want to do something about it then. At that stage, the mortgage will be smaller and there will be fewer years to maturity, so losing the tracker may not be as much a problem. Right now the tracker is very valuable.


If he has a lot of other properties without mortgages, he may want to take tax advice to plan how best to pass it on.

Brendan,

Thank you VERY much for your responses and clearing up a lot for me.

I think I will wait and see what happens for now and maybe look at things again when we are in a better situation or if value of property goes up as you suggested.

I am very confident that he wont take the house away from us......but then again families and money - can be a nasty combination!!

Thanks again for your valuable responses.

Calin

Looks to me you are in a very messy situation. Also seems you are a tenant and are not acquiring any equity as you've mentioned your dad is paying income tax on rent.

If he were to die, his house insurance, if he had any would pay off the mortgage, and the house would be an asset of his estate, to be distributed according to his will. If he has no life insurance, which is more likely, then the mortgage still has to be repaid. If there were any equity, say in a few years time, that equity would most likely go to pay off his other debts - seems to me he's in a lot of negative equity.

I see a BIG warning to you from your father, hope you're listening, his comments about his potentially precarious finances.

So based on the above, you have not put 35K into the house. As it's 19 years left to run, even if you were paying a mortgage, all you'd have been paying is interest.

But lucky you, here's the solution, and a nice neat one at that. Walk away, with an income of 70K you should have no problem getting a mortgage of about 200K which is way above your current house value, and it solves all issues and problems.

If you do not go with my last suggestion, then there is no excuse for you not going to your own solicitor, not your dads, to find out exactly what is possible for you.

And no wonder the bank is willing to put you on the mortgage, what bank wouldn't want someone else to be equally responsible for a mortgage where there is negative equity and the principal borrowers seems to be cross secured all over the place.

Bronte,

thanks for your response and I have taken your comments on board. My parents are away at the moment but on their return we are sitting down and getting the will amended to state that the house is mine. I will enquire then about life insurance and house insurance.

Regarding the €35k, when I said I have put that money into the house I meant as in physically into the house. New kitchen, wardrobes in all bedroom, new flooring, attic conversion, new boiler.... I can go on.... and actually I think at this stage probably a lot more than €35k.

I haven't a hope of getting a mortgage at the moment, I have no savings and like most people these days live month to month so the suggestion of 'walk away' isn't one for us.

calin said:

Combined salary for myself and partner would be roughly €70k

No savings!

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calin said:

I haven't a hope of getting a mortgage at the moment, I have no savings and like most people these days live month to month

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A combined income of €70k would be above the average, I imagine.

You should be able to save or make mortgage repayments from that income.

This is an issue you need to address.

Brendan

I am making the mortgage payments there is no issue with that but my issue would be if we went for our own mortgage we would lose the tracker and the rate of 1.7% and the repayments will increase.

I have 2 young kids so also pay a lot in childcare, with health insurance etc I am probably like everyone else finding it hard to have substantial savings!

You need to figure out if you would be better off renting a house.

At the moment, you seem to be paying off your dad's negative equity, for no obvious benefit.

Brendan

calin said:

I am making the mortgage payments there is no issue with that but my issue would be if we went for our own mortgage we would lose the tracker and the rate of 1.7% and the repayments will increase.

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How much are you paying in rent/mortgage?

How much would it cost to rent an equivalent house. How much would it cost to pay a mortgage at current interest rates on a mortgage of 165K?

We are paying €1050 pm at the moment

TO rent a hse would be €850pm

Repayments on a mortgage for say €170k would be roughly €995 pm

How much of a deposit do you need to get a mortgage?

Roughly €20k that's going on it being 12%

When you are having a discussion with your parents you're going to have to be cool and level headed. It's not about what they want, but what is best for you and your family.

So you need to decide now what exactly it is you want.

My advice is that you walk away from your current property if you cannot get it legally sorted out. But this may cause friction. For example if your father is unable to sort this out for you, and if it will cause his house of cards to tumble, you'll have to think about that.

You should know at the end of the meeting what is possible and what is not, and also whether you have been paying rent or mortgage and acquiring an asset.

Please be very clear that having the will amended means nothing. For example, there may be no assets left after all debts are taken into account, the will can be changed etc. It is not a guarantee.

Re the 20K, it is worrying that you don't seem to have any savings, it's not a question you posed, but I think you need to do something about this.

Bronte thanks for your comments and I am meeting with my parents next week so we can discuss things.
Re the savings - its worrying that I have no savings?!!? I think you will find that a majority of people these days have no savings. But as you mentioned, its not something I asked about.