Advice on 'purchasing' parents house

ceannbui

Hi. Long time lurker here. I need to ask a question. First, some details.

I am thinking of buying my parents’ house. They are getting divorced. I live and work abroad. Therefore the bank requires 35% deposit on the value of the house. My parents would be willing to sell it to me for 200k, even though it is worth a bit more. That means about 70k cash deposit. The house is on a tracker mortgage, @ 700pm with c130k left on the mortgage.

My father thinks it is crazy for me to get a new mortgage as it definitely won’t be a tracker. Our plan is as follows: buy my mother out for 70k. She would then take her name off the mortgage and my father would leave his name on it. My father will then put the house deeds in my name (while his name remains on the mortgage).

There is a small 2 bed apartment on the property which my father would then collect the rent on (or live in). I would rent out the house and that money would be used to pay off the mortgage.

Does this seem feasible? Are there any obvious legal difficulties that may prevent this? Any advice?

Thanks a lot for taking the time to read and (hopefully) respond

godtabh

The bank isnt going to let any of that happen

4ensic15

O/P, the house is security for the mortgage. How could it be in your name?
Why not get your mother to renounce her interest in the house in return for periodic payments? These can come from the rent a room scheme.
You could also lend your father money secured as a second mortgage on the house which he could use to pay off your mother. He could repay you from the rents.

ceannbui

thanks for the quick responses. i honestly have no clue about mortgages as this is my first foray into house-buying territory.

What if I still pay my mother the money while the house remains in my father's name in both mortgage and deed and it (the house) is passed on to me on his death?

Would i be better off just getting a new mortgage for c.200k (-70k deposit) and letting my dad keep the income from the small apartment indefinitely?

4ensic15

ceannbui wrote: »

thanks for the quick responses. i honestly have no clue about mortgages as this is my first foray into house-buying territory.

What if I still pay my mother the money while the house remains in my father's name in both mortgage and deed and it (the house) is passed on to me on his death?

Would i be better off just getting a new mortgage for c.200k (-70k deposit) and letting my dad keep the income from the small apartment indefinitely?

If you give your mother the money, it would be a gift which would be taxable.
If you lend your father the money to give your mother it would not be taxable.

Marcusm

ceannbui wrote: »

Hi. Long time lurker here. I need to ask a question. First, some details.

I am thinking of buying my parents’ house. They are getting divorced. I live and work abroad. Therefore the bank requires 35% deposit on the value of the house. My parents would be willing to sell it to me for 200k, even though it is worth a bit more. That means about 70k cash deposit. The house is on a tracker mortgage, @ 700pm with c130k left on the mortgage.

My father thinks it is crazy for me to get a new mortgage as it definitely won’t be a tracker. Our plan is as follows: buy my mother out for 70k. She would then take her name off the mortgage and my father would leave his name on it. My father will then put the house deeds in my name (while his name remains on the mortgage).

There is a small 2 bed apartment on the property which my father would then collect the rent on (or live in). I would rent out the house and that money would be used to pay off the mortgage.

Does this seem feasible? Are there any obvious legal difficulties that may prevent this? Any advice?

Thanks a lot for taking the time to read and (hopefully) respond

You will find it very difficult to raise finance in these circumstances but it might be possible for you to buy your mother out. It's highly unlikely that you will be able to "perfect" this by removing her name at this stage. How many ch is the mortgage on the house? Do you have access to the 70k? Will your mother look to raise a new mortgage to buy another property? How is your relationship with your mother?

Basically, you can buy out her interest in the equity in the house and indemnify her in respect of her exposure to the underlying loan. If there is sufficient equity in the property and you have money, that would provide an effective economic solution to your problem. As part of this your mother would convey her interest in the property to you but it could not be finalised/reregistered while the mortgage is outstanding. Likewise, your mother would not legally be released from the mortgage. If there is sufficient equity in the house and she has no need/intention to raise further finance then it might be acceptable to her. If she is going to need to borrow then I suspect an outright sale of the property will be the only realistic option.

4ensic15

4ensic15 wrote: »

If you give your mother the money, it would be a gift which would be taxable.
If you lend your father the money to give your mother it would not be taxable.

If he lends the money to his father tax free the interest that would be paid to a bank on the loan (at a standard interest rate) will be considered a gift.

However the small gift threshold of 3k per year will most likely be enough to cover this. It needs to be calculated properly though.

The father can also use his life time threshold of 35k against the interest or the mother can use her 35k lifetime limit + 3k yearly exemption so he could give her 38k tax free but the rest would be taxable.

Graham

OP, go and talk to a solicitor that specialises in property.

It is very unlikely that the bank will entertain removing someone from the existing mortgage but they may consider adding an additional person. If this is an option, you may be able to buy your mother out with the €70k (all be it that your mother remains on the mortgage) and the solicitor could draw up a legal agreement between the three of you agreeing ongoing repayment responsibilities and ownership once the mortgage is cleared.

The downside to this approach is it would make getting a new mortgage on any other property difficult for all three of you until the existing mortgage is cleared.

ceannbui

Thanks for the responses.

I will have access to c.35k Euro this summer and roughly c.30k Euro next summer. I could pay the 35k this year and 3k a year after that.

I also like the idea of adding me to the existing mortgage.

My mother bought herself another house last year. She still owes money on this but it isn't a mortgage (i.e. personal loan, borrowed money from friends etc.).

My father is not interested in buying another property (short to medium term at least).

I have a good relationship with both parents, though their relationship is obviously not great

Mrs OBumble

You need independent legal and financial advice (separate from your parent) - both here and in the country where you are living and so most likely also have tax obligations.

Good luck with finding a solution which works for your family.