Joint mortgage with my brother to pay inheritance tax?

Hallo.

This is a complicated one... so settle down.

When my mother's uncle died (bachelor with no kids), he left my mother a lovely big house in a very desirable part of Dublin. This house is now the PPR of my mother, my younger sibling, myself and my long-term partner (we moved in late last year after living abroad to save for a deposit).

Though they knew it would come one day, my parents never sought-out any financial advice on the inheritance tax in the 12 years that followed the death (I know). Cue 2020. Everyone's favourite year. The Revenue sends us a bill for the costly sum of €290K - inc interest. My parents don't have the means to pay this, plus my father now lives abroad.

So our options are...

1. Sell the property to pay the tax - the house at peak boom was worth €1.2M, now at pre-major-recession, we would need a new valuation done. The house also needs some big renovations.

2. My mother signs the house over to us three siblings (aged 28-33) and we take out a joint equity mortgage on the debt.

The 'buts':

1. We really don't want to sell as the house is amazing, and an incredible investment for the future.
2. Together, myself and my older sibling earn good money. My youngest sibling is now unemployed thanks to damn Covid-19. They will be refused a mortgage, though will be on the deeds. A case of bad timing.
3. I am still planning to get a mortgage with my partner next year.
4. Renting out even one room in the home could cover a large chunk of the mortgage, but will mean my mother will be living with a stranger.
5. Getting a mortgage with siblings comes with all sorts of trouble.

I do know the easiest solution would be to sell, but would love to hear any thoughts, advice or solutions anyone could throw my way to avoid that.

Cheers
B

Was your Mum living in the house when your uncle died?

BridBird said:

My parents don't have the means to pay this, plus my father now lives abroad.

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What is your mother's age? Income?

Is a mortgage for her completely out of the question?

Has she seen if Revenue are open to an agreed repayment schedule?

She's 63, on a part-time income and no assets (beyond the house, of course). No chance of a mortgage herself unfortunately.

We've spoken to Revenue with our accountant and yes, they do repayment schemes - but with the interest rates and the repayment period they offer, it's rather unaffordable.

Are your mother and father separated?

Did they jointly own a house before they separated?

Did she get a share in that house or does she have a claim on it?

Brendan

What interest rate does Revenue charge?

It might be worth paying that for the moment until you see where you are going.

There used to be life loans, where the bank would roll up the interest. But they are not available any more. They might become available at some stage in the future.

I don't think that the three children should compromise their borrowing capacity by borrowing to buy this house.

It seems that your mother is living in a house which she cannot afford. She has had 12 good years in it.

Time to sell and buy a property she can afford.

Brendan

They charge around 8% a year.

Gordon Gekko said:

Was your Mum living in the house when your uncle died?

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No, she only moved in after he'd passed.

The two most obvious options are to sell it or for you guys to buy it from your Mum. Both should be achievable. But you guys buying it could be very messy, could join you all at the hip, and could jeopardise your own plans to buy. I’d sell it and organise a nice modern and comfortable place for your Mum; who needs the hassle and this is all “house money” in a way.

Personally I would not take on this problem. She knew she would owe tax, yet left it for 12 years. Time to sell up, pay the debt and find another house. It would be insane to tie yourself to a mortgage to cover her debt, when you are saving for a property with your partner. I'd be livid with my partner if he did this and jeopardised our chances of getting our own mortgage later on. Surely she can see the most sensible option is to sell and not have her children paying off such a large debt. Is she open to selling at all?

Rent out the room and start repaying the tax ASAP and see how that goes? If you and your siblings have not paid rent to your mam time to change that. If you did that now how would she be fixed?

Do you and your partner want to live with your sibling and your mum for decades? Because that is what you are signing up for if you get a mortgage on this property. Have you spoken to your partner about this? I know if my wife told me she wanted to live with her mum and sibling forever (that's what we're talking about), there would be serious issues.

And where does the third sibling live? Do they have their own place? Will they have two mortgages? If so, are they going to be paid rent if they're not living in the property?

Renting out a room to a stranger with 4 other people living in the house? Not a good idea.

If you mum sells for €900k, pays the tax bill, she can still get a very good house with enough room for the rest of you to live in until you're sorted.

The other options are messy and will lead to complications down the road.

The tax bill might always have been unaffordable, so look at the interest and penalties as being the rent for the last 12 years.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)