I am taking out a mortgage on a property and my partner (not on mortgage as didn't have enough permanent work years) is going to be paying towards the mortgage each month, and paying a lump sum (approx 13k) to me for the house to reduce amount of mortgage needed. Questions are: The bank will want to know where the extra funds are coming from so it will either be a gift from my partner as it's under the 19k, or could it be treated as a loan with 0% interest? Also, will my partners payments towards the mortgage be taxed or what is the best way to deal with this. We are young first time buyers and trying to get the lowest interest possible on mortgage, but yet don't want to find we owe tax instead. sorry not worded too well.
Gift from partner to top up mortgage on sole mortgage and taxation
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Brendan Burgess
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If she gives you a gift, it will be subject to CAT.
If she lends you the money it will be a loan and not subject to CAT. I would suggest that it be classified as a loan so that it would be repayable if you break up.
If the amount she give you towards the mortgage is under €14k a year, it can be considered rent under the Rent a Room scheme and so not subject to taxation.
It's very important that you document what you are agreeing and what you are not agreeing in the event of a dispute.
For example, if you break up, she could claim that she owns half the house as she paid half the mortgage. If you are putting up a deposit of €13k and she is matching it, then she might have a case.
Brendan
If she lends you the money it will be a loan and not subject to CAT. I would suggest that it be classified as a loan so that it would be repayable if you break up.
If the amount she give you towards the mortgage is under €14k a year, it can be considered rent under the Rent a Room scheme and so not subject to taxation.
It's very important that you document what you are agreeing and what you are not agreeing in the event of a dispute.
For example, if you break up, she could claim that she owns half the house as she paid half the mortgage. If you are putting up a deposit of €13k and she is matching it, then she might have a case.
Brendan
Dr Strangelove
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I think this part is far more consequential than the tax part.
There are surly 3 issues here:
the bank, the tax man, house ownership
It's clear she is also buying the house, and ideally should be on the deeds. She is paying part of the purchase price and will be paying down the mortgage with you.
The bank
You firstly satisfy the bank that you are getting whatever it is they want you to say, ask the friendly bank manager or your broker what is the best wording, if it were me I'd just say it was my own money.
Tax man
You tell him she is co owner in reality but you can't do it on the deeds because of the bank.
Ownership
The minute you have the mortgage drawn down you tell the bank you want her on the mortgage, that she's paying towards the mortgage and you are a couple who want the house in joint names.
This is ridiculous carry on by the banks. Best of luck.
the bank, the tax man, house ownership
It's clear she is also buying the house, and ideally should be on the deeds. She is paying part of the purchase price and will be paying down the mortgage with you.
The bank
You firstly satisfy the bank that you are getting whatever it is they want you to say, ask the friendly bank manager or your broker what is the best wording, if it were me I'd just say it was my own money.
Tax man
You tell him she is co owner in reality but you can't do it on the deeds because of the bank.
Ownership
The minute you have the mortgage drawn down you tell the bank you want her on the mortgage, that she's paying towards the mortgage and you are a couple who want the house in joint names.
This is ridiculous carry on by the banks. Best of luck.
I wouldn't fancy my chances with a judge arguing that she didn't contribute initially and didn't pay down mortgage. There is much legal precedence on cohabiting couples who were able argue ownership based on contributions made.
If the OP presents himself as married after drawdown the bank won't be able to object to the deeds being put in both names. Which solves a whole heap of problems and no need for drawing up agreements that even the mere suggestion of one would raise the heckles of a contributing partner in a young couple purchasing 'their' house and not 'his' house.