NE & Want to buy Parents Home without Banks

Hi

I hope someone can offer some help

In 2006 my now wife and I bought an apartment. Current mortgage €280k value on a good day €180k - NE €100k

In 2012 we had twins and the place was unsuitable. My father lived alone in a large 4 bed house so we moved in with him and rented the apartment out. We have excellent tenants though make a large loss on the rent

My Dad is now 66, he's a carpenter with arthritis in his hands. He has no pension so no means of officially retiring bar whatever state pension would be which he's not expecting to be much

We would like to buy the house from him but are not optimistic of getting a mortgage of anywhere near what we'd need (we have good salaries and no other debts but at the moment our childcare costs are €2k a month)

So my Dad wants to retire and we want to buy his house - is it possible to come to an arrangement where we pay him, say, €2k a month like a mortgage and he signs us over the house now?

The house is worth €600k, we were thinking if he gifted us the value of €120k and we agreed to pay him €24k a year for 20 years = €480k

My dad has a whole of life policy worth €120k also whuch he could leave to my brother. So we would both get €120k from our father in the end

In the event my father didn't survive 20 years I would pay the balance of the agreed amount between myself and my broher though i presume there would be a tax liability. Obviously my Dad would have a home with us for life

Can this be done officially? What would the tax implications be?

I'll post our salary details now if it helps

Thanks

LC

Details:
Me: €80k (recently promoted, was on €60k before)
Wife: €55k
Mortgage: €280k on tracker, payment €1100 per month
Rent recieved: after tax €800 PM
Rent to Dad: €500 PM
Childcare: €2k PM which will drop to circa €1400PM when they start school next year
Running 2 cars: circa €500 PM
Life, home, other insurances; €200pm

Savings: €20k which we have struggled to add anything to every month. Hoping recent promotion will help with this

Think those are the big ticket items

We have groceries then as well, kids do some classes. We don't have a lavish life but there's not a ton left over every month

I think that a very reasonable plan.

Couple of points:
Why won't your dad qualify for a contributory state pension.
How are you making a huge loss on the rental income.

The transfer of the property from your dad is subject to tax at the market value. Assuming it's always been his PPR then there is no CGT.
You are proposing that he transfer the property to you at €480k so the exposure to CAT is only €120k (a right of residence may be involved) if you have not received any gifts previously then no CAT for you, your spouse is different so there may be some exposure for them. House could be put in your name.
Stamp duty is payable on the market value.
Your dad is then giving you a loan of €480k interest free repayable over 20 years. The interest free loan is subject to CAT but as interest rates are so low the annual exemption should cover that.

You should draw up a formal agreement to give comfort to your dad, yourselves and sibling. If the unthinkable happened in 3 years and you were left with a liability of €203k to your sibling could you deal with it? Could you get life assurance to deal with that.

On your fathers death you would receive a write of of your 1/2 of the debt of €203k again you depending on previous gifts would he ok, your spouse would have some exposure.

Best of luck.

I would also be looking at the whole of life policy your Dad has, are the premiums on that going to stay affordable or is it eventually going to get so expensive that he ends up cancelling it and therefore that 120k won't be there for your brother. These policies are normally reviewable and tend to go up quite a lot or cover gets reduced, these have been the subject of many discussions on radio and online.

Hi Joe

Thanks for the replies - my father was/is self employed. We've no idea what he would be entitled to. My mother only got €100 p/w though my dad worked then. He's concerned he won't get much/anything because we live with him (would th ey assume we support him? Would money we pay him be taken into account?) and I don't know anything about what he/pensioners/self employed are entitled to.

By 'large loss' on the apartment I meant the mortgage repayment is €1100 per month plus we get hit for a few grand a year in expenses (central heating went this year for example). We are spending much more on an apartment we don't live in than we are making - though I suppose strictly from the taxmans point of view we are making a tiny profit. I'd give anything to offload it, we never wanted to be landlords and I'd rather have the €1100 a month for my kids. But we are where we are

Has he claimed http://www.citizensinformation.ie/e..._related_benefits/widows_contrib_pension.html

Montbretia, yes that's an excellent point on the premiums on the WOL policy. Currently It's manageable but it is due to be reviewed in 5 years. I have wondered what we will do if it becomes astronomical. I guess I would try to help my dad keep up the payments. I would do my best to make sure my brother gets a fair share anyway. I'm not looking to screw him out of an inheritence I just want to buy my family home and also allow my dad retire.

Can I just also ask - does the taxation change at all given its unlikely we will be able to sell the apartment for another few years? So if we went ahead would my Dad's house count as a 'second home'?

I know there are tax exemptions on inheriting second homes provided you don't own another property at the time. What if any would be tge case where you buy the family home?

Yes there is a dwelling house exemption of you inherit/are gifted a house you have lived in for 3 years and own no other property.

As you are paying for the majority the gift is minimal. Is your father in good health?

Your Dad should take a trip into Citizens Info and ask about pension, first he should request his prsi contribution record from Social Welfare https://www.welfare.ie/en/pages/secure/RequestSIContributionRecord.aspx then bring that into to Cit Info and they will tell him what if any his entitlements will be.

The ideal would be that he would be entitled to a contributory pension and this would not be means tested, otherwise if a non contributory then maybe there might be an issue with rent you are paying or who knows what! Lot simpler if he qualified for a contributory one and he may do based on prsi contributions from previous employments or contributions made while self employed.

Thanks very much for those links Montbretia and Joe I'll show him them.

I don't think he currently claims anything. He worked abroad for a long time as a young man then moved home to have a family where to the best of my knowledge he has always been self employed so not sure how much prsi he would ever have paid

Obviously there are no certainties but other than physical issues with his hands that make it unlikely he can continue to work he's otherwise in good health. His own father lived into his 90s

I very much appreciate the detailed replies, I've learned a lot and it looks very positive

Thanks