Mortgage no deposit - buying house at below market value

H

hello@1234

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My partner and I currently live in her fathers house. He lives in one end of the house in a granny flat and we have our own side. We plan to buy the entire property from him for the remainder of the mortgage and to also draw down money to remodel the house. We have savings but not the 10% of the cost of the mortgage we would be drawing down.

I was wondering because the house would be worth significantly more than the mortgage, is it possible to get 100% of the mortgage?
 
You will give a better answer if you give numbers
Market value of the house
Selling price
Cost of refurbishing the house

Before you do anything, make sure that your partner and you do up a detailed agreement on what happens if you split up.

If you do split up, you will own half a house with the father having a right to live in it.

Brendan
 
Hi thanks for the reply,

Market value would be roughly 350k
Selling Price: 50k (remainder of mortgage)
Remodel price: 200k

So we would be looking to borrow 250k.

Yeah we will be meeting with our solicitor to discuss terms to ensure everyone is covered.
 
There are tax implications if you are purchasing the house for €50k when its worth €350k.
You are getting a gift of €150k
 
The Horseman said:
There are tax implications if you are purchasing the house for €50k when its worth €350k.
You are getting a gift of €150k
Click to expand...
yeah as far as I know we would have to have only my partners name on the deeds to avoid paying gift tax. Not an issue as we are getting married next year so would be able to add me to the deeds then.
 
This is complicated by the fact that a bank will be involved and because you’re not married.
 
Is your partner likely to breach the €330k Parent/Child inheritance tax threshold at any stage?

The simplest option from a banking perspective might be to purchase the property from him for €350k, €250k of which is a mortgage and €100k of which is a gift from him. He can then gift your partner €200k of the €250k.

Then you have to think about a reduction for allowing him to reside in the granny flat and how to reflect that.

If it was me, I’d keep the banking and the tax separate, i.e. simple purchase as far as the bank is concerned.
 
It's a bit complicated, but not impossible.
In addition to what @Gordon Gekko has pointed out above, banks are about cautious about lending where a parent has a right of residence. It's important that your partner's father is comfortable with what's being proposed and their security. Again, a right of residence can be put in place after the mortgage has been drawn down.
 
No she would not breach the inheritance tax threshold. I think what you mentioned is how we would go about it thanks for that.

I suppose one of my original questions would be whether we would need to get a deposit together? Since we would be essentially getting a gift of 100k, once we could show we can pay the monthly mortgage repayments would the 10% be waived.
No she would not breach the inheritance tax threshold. I think what you mentioned is how we would go about it thanks for that.

I suppose one of my original questions would be whether we would need to get a deposit together? Since we would be essentially getting a gift of 100k, once we could show we can pay the monthly mortgage repayments would the 10% be waived.
 
No, you don’t need a deposit. Obviously, this is all subject to your ‘father-in-law’ being okay with all of this and other siblings not thinking that it’s a ready-up.

The bank will still expect to see you meeting the usual criteria (e.g. evidence that you’re paying rent or saving the monthly stress-tested mortgage amount).

If the deal is done at €350k, the €100k ‘gift’ can be the deposit, absolutely.
 
Some good news then.

Yeah and the fathers side is very important to us. We actually considered splitting the house into two dwellings but that’s another conversation I guess!
 
There's a very unlikely option too if im not mistaken. If you live in the house for 3 years with her dad, then her dad leaves the property (possibly through death, not sure on the specifics there) and ye live in the house for a further 6 years as your primary dwelling, there's no inheritance tax. Unfortunately, it does require a death, but not knowing your circumstances I said i'd just throw it out there. It's a slow burner though - Only inherited 6 years after death. If the place didn't need 200k in renovations it could of worked out nicely. That all said, unless you're expecting to break the inheritance tax threshold upon his death, it might not make a difference.

Gordon seems to have outlined a nice clear path.
 
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