Hi Everyone,
This is a somewhat niche scenario that we are currently navigating through and I am hoping to get some advice to maximise the benefit for all parties and minimise the costs in terms of any relevant taxes whilst securing the best funding source. Apologies for the length but I am trying to provide as much context as possible.
To summarise our scenario:
What we are trying to figure out is how best to approach the funding for this initial interim solution whilst ensuring we are in a position to refinance for the total house cost. Our current thoughts are:
Appreciate there is lots of information in the above, we will be speaking to an advisor as well to help with this but just wanted to get people's initial thoughts and feedback, particularly if anyone has gone a similar route.
This is a somewhat niche scenario that we are currently navigating through and I am hoping to get some advice to maximise the benefit for all parties and minimise the costs in terms of any relevant taxes whilst securing the best funding source. Apologies for the length but I am trying to provide as much context as possible.
To summarise our scenario:
- We want to apply for a joint mortgage, unfortunately my wife is on a maternity cover contract for Teaching and therefore the max mortgage we can get is ~€190k - €200k as it is only my income counted. We currently have savings of ~€70k available to us
- Long term, we are looking to purchase my parent's home from them, the property is currently valued at ~€550k, my parents are willing to gift me 1/3rd of the price as that would be my inheritance. There is still a ~€70k mortgage outstanding on the property in my parents name.
- As an interim solution, we are looking to extend and renovate a section of the house into a "2-bed modern apartment" for me and my wife before we then buy the whole house and link the apartment with the rest of the house. My parents will then renovate the other end of the house to create a Granny Flat for themselves.
- The cost for the extension and renovation is estimated at ~€250k (all in). As we have savings of €70k, we have a shortfall of €180k for this interim solution.
What we are trying to figure out is how best to approach the funding for this initial interim solution whilst ensuring we are in a position to refinance for the total house cost. Our current thoughts are:
- My parents split the property portfolio with the area that we will extend and renovate as a separate folio.
- We then get a mortgage to purchase this area from my parents and they pay for the renovations/extension as a gift using those funds (effectively providing my inheritance).
- We will then pay off the mortgage (~€850 a month at current rates) and pay my parents ~€1,000 a month as a "loan" to them.
- In 5-10 years time we will then look to take out a new mortgage to buy the other folio so that we have sole ownership of the full property. The total cost we will pay at that point will have the total of our €1,000 a month payments deducted.
- Is this the best approach or would it be simpler to add me and my wife to the title deeds and we then take a mortgage out against the whole property (lower LTV and potentially easier to remortgage at a later date)?
- There is still a ~€70k mortgage outstanding on the property - would this have an impact on splitting the property folio?
Appreciate there is lots of information in the above, we will be speaking to an advisor as well to help with this but just wanted to get people's initial thoughts and feedback, particularly if anyone has gone a similar route.