Borrowing mortgage amount from parents.

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mickoneill30

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Myself and my wife have been saving for a few years and have a fair bit saved for our house.
My folks have a few quid and have offered to loan us the rest rather than taking out a mortgage. There would be advantages to us doing this and I'm considering it but I'd want it to be above board.
Has anybody ever done this officially. Are there any implications tax wise to us or to my parents.
If we did it, it'd be over 10 years. I was thinking of approaching a solicitor and getting some kind of agreement to say that we'd owe x amount starting on a certain date and to be paid back at a certain rate per month over 10 years.
This way if something happened to my folks I'd still owe their estate. Also if something happened to me and my wife whatever is left owing would have to come from our estate.

Are there any major issues that I might be missing?
 
I'm not sure from legal perspective but it can get messy if there are siblings that may have problems with it. If a legal agreement is drawn up, it will be less hassle.
 
Some other posters may be able to point in the right direction, but as far as I know you might be liable for gift tax if it's large enough.

We have plans to overpay our mortgage and hope to be mortgage free within 10 years, the sum of interest to the bank will be about 20-30k on a 185k mortgage depending on how things go.

You need to see if the gift tax is more than the interest with a bank just overpaying the mortgage within 10 years.

Search for 'Karls mortgage calculator' in google, you can calculate what the total interest will be if you were to overpay your mortgage with a bank.

And search for 'Gift Tax' and you'll get the Revenue's webpage on Gift Tax.

PS. Having looked at the gift tax thresholds, you will probably be OK if you are buying/building a modest size home.
 
Your parents can give you a present up to €332k and it will not be subject to CAT.

So if they give you an interest free loan, for example, then there would be no CAT either.

If you pay them interest, they will pay tax on it at their marginal rate. You will get TRS on it, I think, although I am not sure how it works.

It's a good idea to do it interest free. Your parents would be paying tax on the interest anyway, so it's not much of a sacrifice to them.

Giving you the money, might be safer than putting in the bank. Or put it another way, if you don't give it back, at least you will be benefiting from it. If a bank goes bust, your parents won't get any satisfaction of knowing that their deposit went to a good cause.

As stairs says, make sure that all siblings are involved in the process.

A solicitor should be able to draw up a legally binding mortgage agreement.

I know it's a horrible thing to raise, but you must work out what happens if you split up from your wife before the mortgage is paid off. There are many rows reported on askaboutmoney where the spouse claimed that the money provided by the other's parents was a gift.

Brendan
 
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