Borrowing €100k to buy a partner out - mortgage-free house

R

rogeroleary

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Three of us own a house that is let out and is in a great rental location - there is currently no mortgage on the house and it has rented very well for 7-8 years.

One partner is interested in getting out so we need to pay him €100k for his share.

Just looking for advice on where best to secure €100k mortgage (probably over 10 years) without giving a lien on PPR?

Any advice / suggestions would be much appreciated

Roger
 
Without placing a damper on your plans, I think it may be difficult to obtain your €100 k mortgage without all parties concerned giving a PG. Is there any commonality in each of your individual Bankers ??
 
Thanks Mercman,

To be honest I'm not quite sure - we probably do have some commonality in banking but I was thinking that with an LTV of just 33% and a proven track record in terms of rental income / management we could avoid a lien?

Roger
 
The way and manner Banks are at present, it really is extremely difficult. They'll want a full first charge without doubt, maybe more, but if you all Bank with the same Bank and have clean records you might be lucky, especially with 33% LTV. You might even be able to forgo PGs if the valuation is near correct and the numbers stack up.
 
There are three things here

1) A mortgage on the investment property - which is what you want
2) A cross security on your homes - which is what you don't want
3) A personal guarantee which Mercman has introduced

3) You will be borrowing money in your own names so personal guarantees are meaningless. You give a personal guarantee of someone else's borrowing or of a company's borrowing.

2) I don't think that they will want cross-security on your homes when there is so much equity in the investment

1) A mortgage on the investment property - I just don't know. If your rental income is good and your other income is good, you may get such a loan.

4) You could consider remortgaging your homes and borrowing €50k each for this project. It will be difficult to get, but would have some advantages

  • The rate might be lower
  • your mortgages would be separate so you would not be jointly and severally liable.
  • They would be protected by the Mortgage arrears code
Against that, you might lose your home if you default.
 
and also Brendan if borrowing against our own homes we could not offset the interest (75%) against the income which is another downside?

Roger
 
rogeroleary said:
and also Brendan if borrowing against our own homes we could not offset the interest (75%) against the income which is another downside?

Roger
Click to expand...

Hi Roger

This is a common misunderstanding.

You can offset 75% of the interest on money borrowed to buy an investment property against the rental income.

It does not matter if

  • the loan is secured on the rental property
  • the loan is secured on some other property
  • the loan is not secured at all.


Likewise, if someone remortgages and investment property to build an extension to their home, they are not entitled to claim 75% of the interest on it against their rental income.



it is the purpose of the loan, and not the security, which determines the tax treatment.
 
Can you claim the interest relief on borrowings to refinance a rental property.

I thought it was just TO BUY a rental property. Not if you refinance it.
 
I am not sure what you mean by "refinance a rental property"? And that is not what the OP is doing, or it's not what I understand by that expression.

If you take out a Bank of Ireland loan for €100,000 to buy an investment property you get tax relief on the interest.
If you take out an AIB loan to pay off the €100,000 loan to BoI, you get tax relief on the AIB loan.

If you have no loan , and you borrow €100,000 secured on your investment property e.g. to buy your home, you get no tax relief on it.
 
Perhaps you own a rental property with no mortgage (wherever secured)

You might then go to the bank and get a mortgage secured against the rental property. This is what I meant by refinance a rental property.

I wonder in that case would you be able to claim tax relief on the interest.

This may not be exactly what the Op is doing but I think it is close.
 
If the purpose of the "refinancing" is to pay off another loan used to purchase the property then that's fine, if it's for some other purpose then it won't qualify.
 

The difference is what you intend using the money for.

The OP wants a mortgage to buy a share in the rental property.
In your example, you want a mortgage to spend the money on something else.
 
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