Second Mortgage Question

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SCND2022

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Hi there, my husband and I own our home. Both names on deeds. House valued recently at €500k. We want to move my mother closer to us. House for sale close by for €350k. Her house is valued at €200k which she will sell and gift me the money. When I asked BOI about getting a mortgage for the balance €150k they advised the rate would be 5% or more as it is not our primary residence. House would be in our name with right of residence for
My mother.

Can anyone please advise if there is another bank we could approach? Is there a way around this insane rate? Would a quickie divorce help? (Drastic but 25
Years at 5% or more seems as crazy)

Any and all advice welcome. TIA
 
Non-PPR mortgage rates are always going to be higher than PPR rates. At a glance 5% isn't unusual. Try other lenders. Try a broker. I presume you're joking, but I don't see how divorce would help?

Or maybe do an equity release on your own (mortgage free?) home and use that to subsidise the purchase of the other property for your mother? That would also have the possible advantage of a much lower Loan To Value ratio (30% versus 43%) which may reduce the interest rate charged.
 
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SCND2022 said:
When I asked BOI about getting a mortgage for the balance €150k they advised the rate would be 5% or more as it is not our primary residence. House would be in our name with right of residence for
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Before you consider anything drastic, recall the difference between 3% and 5% over 25 years on €150k is €160 a month.


TBH if the plan stands or falls on a cost of this much then it's probably worth a rethink.
 
ClubMan said:
Non-PPR mortgage rates are always going to be higher than PPR rates. At a glance 5% isn't unusual. Try other lenders. Try a broker. I presume you're joking, but I don't see how divorce would help?

Or maybe do an equity release on your own (mortgage free?) home and use that to subsidise the purchase of the other property for your mother?
Click to expand...
I did ask about equity release and BOI wouldnt entertain it to buy another home. I thought this was odd given the amount of equity here. I will contact a broker thanks
 
Why not buy the second house to live in yourself (PPR) and let your mother live in your current house. If after a day or two it doesn't work out you can always swap. The lender(s) can be informed in "due course".
 
Strategic separation would allow the purchase of the second property by the departing spouse; otherwise skrooge's suggestion is worth following up.
So long as mortgage payments are made in full and on time, bank won't care who is living in which property
 
NoRegretsCoyote said:
Before you consider anything drastic, recall the difference between 3% and 5% over 25 years on €150k is €160 a month.


TBH if the plan stands or falls on a cost of this much then it's probably worth a rethink.
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ClubMan said:
BOI are only one lender. You need to try others.
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Indeed! Contacting broker tomorrow.

Repayments were about €200 more per month, would just like to save on that if we could and would like to check all avenues. Plan goes ahead regardless we of rate. But €200pm X 25 years is €60k and if I don’t have to waste that I’d prefer not to
 
You want to borrow €150k.

As Coyote points out the difference between 3% and 5% is 2% or €3k per year additional interest.

This is not a lot of money in the greater scheme of things. The house is likely to rise or fall in value by much more than €3k per year.

You will probably pay down the mortgage fairly quickly, so the additional interest will fall fairly fast.

It certainly is not a reason for getting a divorce, unless that is on the cards anyway, in which case your mother probably should not be giving you a gift of €200k.

Finance Ireland used to give remortgages, but they have become very expensive recently.

Brendan
 
SCND2022 said:
Her house is valued at €200k which she will sell and gift me the money.
Click to expand...

I have to say that I don't like this at all. It doesn't make much sense. What is your reasoning for structuring it like this?

You will own a second property. That will be treated as an investment and the rent not paid could be treated as a gift to your mother. Not an issue under current rules, but could become an issue later. Second properties tend to be subject to taxes at higher rates than family homes.

When your mother dies and you sell the property, you will pay Capital Gains Tax on any increase in value.

If your mother goes into a nursing home in the near future, the gift to you of €200k cash could cause problems for the Fair Deal Scheme. Unlikely to be a problem, but bear it in mind.

A much better solution, if you could finance it would be for you to lend your mother the €150k.

As it will be her home, any increase in value will not be subject to Capital Gains Tax. You will not be charging interest on the €150k but the implied gift will not trouble the Gift Tax thresholds.

Brendan
 
Brendan Burgess said:
A much better solution, if you could finance it would be for you to lend your mother the €150k.

As it will be her home, any increase in value will not be subject to Capital Gains Tax. You will not be charging interest on the €150k but the implied gift will not trouble the Gift Tax thresholds.
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This seems by far the most sensible, especially if it's possible to get equity release on your PPR which would be at a lower rate.

As well as no CGT you also don't have complicated issues with a right of residence on a mortgaged property which could also cause issues with a lender.

Your mother would have to will you the house of course but I assume you can trust her not to renege on this.
 
NoRegretsCoyote said:
This seems by far the most sensible, especially if it's possible to get equity release on your PPR which would be at a lower rate.

As well as no CGT you also don't have complicated issues with a right of residence on a mortgaged property which could also cause issues with a lender.

Your mother would have to will you the house of course but I assume you can trust her not to renege on this.
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Would she have to will the OP the house or could this be managed as a condition of the loan repayment on death.
 
time to plan said:
Would she have to will the OP the house or could this be managed as a condition of the loan repayment on death.
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I'm not an expert but I assume any outstanding loan is a claim on the estate.

I only suggest willing the house as OP has already suggested that the mother will sell the house and gift €200k today.

Assume on death the house is worth €400k and there's a loan to the child of €100k who is the sole beneficiary. Then there is just a net inheritance with a value of €300k.

It gets more complicated with siblings of course.
 
NoRegretsCoyote said:
Your mother would have to will you the house of course but I assume you can trust her not to renege on this.
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Not really.
A solicitor should draw up an official mortgage on the property specifying that it is repayable in full on death of the mother or if she vacates the house for more than 3 months.

The mother should also specify in her will that the house is to be sold.
And to make it even cleaner, the daughter should be appointed the sole executor.

Brendan
 
skrooge said:
Why not buy the second house to live in yourself (PPR) and let your mother live in your current house. If after a day or two it doesn't work out you can always swap. The lender(s) can be informed in "due course".
Click to expand...
Brendan Burgess said:
I have to say that I don't like this at all. It doesn't make much sense. What is your reasoning for structuring it like this?

You will own a second property. That will be treated as an investment and the rent not paid could be treated as a gift to your mother. Not an issue under current rules, but could become an issue later. Second properties tend to be subject to taxes at higher rates than family homes.

When your mother dies and you sell the property, you will pay Capital Gains Tax on any increase in value.

If your mother goes into a nursing home in the near future, the gift to you of €200k cash could cause problems for the Fair Deal Scheme. Unlikely to be a problem, but bear it in mind.

A much better solution, if you could finance it would be for you to lend your mother the €150k.

As it will be her home, any increase in value will not be subject to Capital Gains Tax. You will not be charging interest on the €150k but the implied gift will not trouble the Gift Tax thresholds.

Brendan
Click to expand...
Meeting with solicitor now so will put all of this to her, thanks for the info, not things I would have considered. We have no plan to sell the house upon my mothers death (which hopefully won’t be for many years) we would keep it either to rent or for our kids. I am an only child so no issues with others regarding inheritance.
When you mention gifting her €150k, I assume this would be through equity release. I will investigate this today with the broker.

Thanks again
 
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