Advice for a Friend (Mortgage)

SusanC10

Hi All

My Friend and her partner have been living in Dublin for years. 3 kids. Renting. She is from the same place as I am - rural 4 hours from Dublin. Only Child.

Her Dad (widower) owns 2 houses at home. 1 he lives in alone and 1 next door which previously his parents (now deceased) lived in. That house is still standing with a Roof but not much else. He is now become ill (not life-threatening but debilitating) and my friend and her partner have made the decision to move home.

My friend and the kids have already moved and are renting nearby quite cheaply. Her Dad does not want them to move in with him. She is a Stay-at-Home Mum. Her partner has moved in with his own parents in Dublin and is trying to get a job so that he can move too.

The father is in the process of gifting the house to my friend only. Their plan then was to get a Mortgage to renovate the house. They have now been told by the Bank that because they are not married that her partner cannot get a Mortgage on a house he does not own and my friend cannot get a Mortgage on the house she will own as she is a stay-at-home Mum. They have also been told that her father cannot gift the house to the Partner without Tax issues.

Is there any way around this from a Mortgage point of view ? Money is very tight all round in this scenario.

This situation is very similar to our own Plan (down the road) where I own a small cottage (in need of renovation) on a large site at home beside my Mum's house and am a Stay-at-Home Mum but I am married and have been told that I can transfer the site and house into Joint Names without tax issues and then we can get a Joint Mortgage.

Is my Friend's only option to get married ?

Thanks in advance.

Cuddlesworth

SusanC10 wrote: »

Is my Friend's only option to get married

Yes. Without either having a job, its unlikely they will receive money for renovations, which can be very expensive if the house is as bad as you say though.

SusanC10

Thanks. Her Partner does have a job but it is in Dublin as is he at the moment. He is travelling to our home place at weekends and looking for a job more locally as it is 4 hours by car to Dublin. They do have some Savings but the Partner is not a First Time Buyer and they will not have enough for 20% plus any Tax on a gift of the Property into Joint Names plus legal fees and other Costs associated with the renovation / furnishing of the house.

SusanC10

Has anyone got any advice on this situation ? Is my friend's only option to get married ? Her Partner is still in Dublin and still living with his parents. My friend and kids are still renting. Partner has a Permanent job in Dublin but is looking for jobs in our home location but not much happening down there.

riclad

The simple option is to get married ,then apply for a loan as a married couple .

If you receive a gift, you may have to pay gift tax on it. If you receive an inheritance following a death, it may be liable to inheritance tax. Both these taxes are types of Capital Acquisitions Tax.

The benefit (the gift or inheritance) is taxed if its value is over a certain limit or threshold. Different tax-free thresholds apply depending on the relationship between the disponer (the person giving the benefit) and the beneficiary (the person receiving the benefit). There are also a number of exemptions and reliefs that depend on the type of the gift or inheritance.

If you receive a gift or inheritance from your spouse or civil partner, you are exempt from Capital Acquisitions Tax.

The tax applies to all property that is located in Ireland. It also applies where the property is not located in Ireland but either the person giving the benefit or the person receiving it are resident or ordinarily resident in Ireland for tax purposes.

Budget 2016
The Group A tax-free threshold, which applies primarily to gifts and inheritances from parents to their children, is being increased from €225,000 to €280,000. This increase applies in respect of gifts or inheritances received on or after 14 October 2015.


There should be no taxs if the house is valued at less than 280k.

And the father gives the house to his daughter .
The father should make a will ,since his health is bad.
I don,t think theres a lot of legal fees involved in recording a gift ,
go to flac free legal advice centre .

SusanC10

The House in question is well under the €280k Threshold. If the Father gifts to the Daughter she will still need a Mortgage for Renovation as House not really habitable right now.

She is not working. Her Partner is but would not own the House.

Is there a way that she could get the Mortgage and Partner guarantee it ?

I still think that they should just get married - would simplify things hugely.

riclad

MY advice is get married,
Under the family home act, you,ll own half the house anyway,
You can buy materials on adverts.ie ,and here at 50-30 per cent cost
from builders providers .
http://www.macswarehouse.ie/alu-clad-windows-and-doors/

i built an extension 400 sq ft cost of materials around 10k.
On site i own .
You can buy floorboards,bricks, blocks on adverts ie very cheap.
i bought door on adverts.ie 5ft x10 ft pvc new never used ,140euro.

Pro Hoc Vice

riclad wrote: »

MY advice is get married,
Under the family home act, you,ll own half the house anyway,
You can buy materials on adverts.ie ,and here at 50-30 per cent cost
from builders providers .
http://www.macswarehouse.ie/alu-clad-windows-and-doors/

i built an extension 400 sq ft cost of materials around 10k.
On site i own .
You can buy floorboards,bricks, blocks on adverts ie very cheap.
i bought door on adverts.ie 5ft x10 ft pvc new never used ,140euro.

The Family Home protection Act does not mean a spouse owns half a house that they are not on the deeds.

OP married or not if the husband not an owner of the property no bank is going to lend him money based on the security of the property.

The father, daughter and partner will all need to be advised on this issue I for one would not take out a loan based on a property I have no legal interest in.

whatnext

Even from an income taxation point of view seeing that she is a stay at home mum getting married is a no brainer I'd say?

Senna

Is there an issue with them getting married, they don't believe in it, religious grounds?
You can give 3 months notice and get married in a registry office with only two witnesses, doesnt need to be a big deal.
They have 3 kids together, so marriage isn't the nuclear option.

Pro Hoc Vice

Senna wrote: »

Is there an issue with them getting married, they don't believe in it, religious grounds?
You can give 3 months notice and get married in a registry office with only two witnesses, doesnt need to be a big deal.
They have 3 kids together, so marriage isn't the nuclear option.

They also have the option of civil partnership and legally they are for many issues married under the http://www.irishstatutebook.ie/eli/2010/act/24/enacted/en/html

Do they know that they are paying more tax than they have to for years also as the man can't claim his partners tax credits when they aren't married. Not sure why a couple with 3 kids wouldn't be married to be honest.

SusanC10

They don't really believe in marriage afaik. They may have to reconsider it now though !

Sleepy

Tell them it'll be worth about 3,500 a year in tax breaks to them... Might change their mind about it! You don't need to have a big wedding to get married. A registry office job can be done for under 2/300.

"Against marriage"? You would have to wonder what goes on in some peoples heads.

Elliott S

Sleepy wrote: »

Tell them it'll be worth about 3,500 a year in tax breaks to them... Might change their mind about it! You don't need to have a big wedding to get married. A registry office job can be done for under 2/300.

Maybe it's just me, but IMO "For the tax breaks" is a dreadful reason to legally tether oneself to someone. It's a nice bonus but should never be a deciding factor. If the marriage doesn't out, it's an absolute pain to dissolve in Ireland. Ain't no tax breaks worth that!

SarahMollie

Elliott S wrote: »

Maybe it's just me, but IMO "For the tax breaks" is a dreadful reason to legally tether oneself to someone. It's a nice bonus but should never be a deciding factor. If the marriage doesn't out, it's an absolute pain to dissolve in Ireland. Ain't no tax breaks worth that!

True, but they already have 3 kids together, and are planning to relocate to the OPs friends home town and renovate this house, so it sounds like they're in it for the longhaul regardless.

If they want to stick to their guns and be treated legally as indivuduals, then they have to live with the reality that the Banks and the Revenue are going to treat them as such.

Senna

Elliott S wrote: »

Maybe it's just me, but IMO "For the tax breaks" is a dreadful reason to legally tether oneself to someone. It's a nice bonus but should never be a deciding factor. If the marriage doesn't out, it's an absolute pain to dissolve in Ireland. Ain't no tax breaks worth that!

As sad as this statement is; its probably easier to get out of a marriage than it is a mortgage.

Elliott S

Elliott S wrote: »

Maybe it's just me, but IMO "For the tax breaks" is a dreadful reason to legally tether oneself to someone. It's a nice bonus but should never be a deciding factor. If the marriage doesn't out, it's an absolute pain to dissolve in Ireland. Ain't no tax breaks worth that!

Its not just tax breaks, its also things like becoming the next of kin etc.

If you are committed to someone and plan to be with them long term them getting married makes sense never mind if you have kids. You get financial and legal advantages which you wont get otherwise (and rightly so you don't get them without getting married). People shouldn't be thinking about "getting out of it" they should be planning on being in it for life. The fact they are going for a mortgage together even further ties them together, as others have said they are more tied to the mortgage than each other through marriage.

Sleepy

Elliott S wrote: »

Maybe it's just me, but IMO "For the tax breaks" is a dreadful reason to legally tether oneself to someone. It's a nice bonus but should never be a deciding factor. If the marriage doesn't out, it's an absolute pain to dissolve in Ireland. Ain't no tax breaks worth that!

Maybe it's just me but I'd consider 3 kids a much stronger tether than a legal document...

Elliott S

Sleepy wrote: »

Maybe it's just me but I'd consider 3 kids a much stronger tether than a legal document...

What relevance has that to the dissolution of a marriage? Divorced parents are still parents.

Going into a marriage if unsure could prove costly and tax breaks won't have been much of a benefit if the marriage ends. Tax credits and benefits are a nice bonus but never a reason for marrying someone if you are otherwise unsure. Of course, people can use it as a reason but if it is the only reason, that's foolish, IMO.

SarahMollie

Elliott S wrote: »

What relevance has that to the dissolution of a marriage? Divorced parents are still parents.

Going into a marriage if unsure could prove costly and tax breaks won't have been much of a benefit if the marriage ends. Tax credits and benefits are a nice bonus but never a reason for marrying someone if you are otherwise unsure. Of course, people can use it as a reason but if it is the only reason, that's foolish, IMO.

But no one has said anything to indicate that the relationship is in trouble. The OP said her friends are simply not into the idea of marriage and thats why they're not married at this point. The OP didnt hint at any trouble in their relationship. And given that they've 3 kids and want to take out joint finance together, it seems to me like they see a future together.

Its fine to say you're against the institution of marriage, but if you're faced wiht the reality of not being able to access credit jointly, as well as the tax implications, well, they might reconsider. Who knows, maybe its all the fuss that comes with weddings thats put them off up until now, we don't really know their thinking.

The fact is that getting married would make their lives a lot easier in this instance, so they should at least consider it. If not, well then they'll have trouble being treated as a couple rather than individuals by the banks for lending purposes.

Elliott S

SarahMollie wrote: »

But no one has said anything to indicate that the relationship is in trouble.

Indeed but if they don't want to marry, for whatever reason, that's the end of it really. A relationship doesn't have to be trouble for people to not want to marry. I even think it's kind of weird for the OP to start this thread about another couple.

athtrasna

Elliott S wrote: »

Indeed but if they don't want to marry, for whatever reason, that's the end of it really. A relationship doesn't have to be trouble for people to not want to marry. I even think it's kind of weird for the OP to start this thread about another couple.

And weirder that people have felt the need to take it to relationship analysis rather than accommodation and property

SarahMollie

Elliott S wrote: »

Indeed but if they don't want to marry, for whatever reason, that's the end of it really. A relationship doesn't have to be trouble for people to not want to marry. I even think it's kind of weird for the OP to start this thread about another couple.

Of course - but if they remain unmarried, then they will have to pay a lot of tax on the gift of the house and any mortgage will be in his name as she has no income. Simples. This is absolutely their choice. My point is that you can't have the benefits of marriage without actually getting married, so you look at the facts as they are and make a choice. It seems they are hoping for a "have cake and eat it too scenario" which I don't think exists.

As to the part in bold - agreed. But there are often a lot of "friends" problems on this forum so who knows.

SusanC10

Thanks to all who replied.

Maybe I should have said but my Friend asked me to post the question here. She is not on Boards. We had a coffee the last time I was home and talked a lot about her situation. I said that there was good advice on this site and she asked me to post on her behalf. I emailed her the link. She does not have Broadband so checks infrequently.

Neither she nor I expected it to turn into a discussion on marriage / relationships. She just wanted to see if there were any other options apart from getting married to achieve what they want to do.

Thanks again.

Dardania

Could the daughter take a mortgage on her father's place (to fund the renovation) on the understanding that it will be sold when he passes?

Pro Hoc Vice

Dardania wrote: »

Could the daughter take a mortgage on her father's place (to fund the renovation) on the understanding that it will be sold when he passes?

I don't think the daughter has any income. Also currently the daughter does not have any interest in her fathers property.

Elliott S

athtrasna wrote: »

And weirder that people have felt the need to take it to relationship analysis rather than accommodation and property

It's a valid point. "Hi, my friend doesn't want to get married, what should I do, something something property?" Um... nothing? Oh and btw, I'm not the only poster here to comment on the relationship side of it. Others had before I ever did.

@ Sarah Mollie - point taken, but it does seem like the OP isn't talking about herself in reality. But, who knows?

I see that the OP has said her friend asked her to post, that wasn't clear before. So that's different obviously.

henryd65

On the basis that they do not want to get married and also if your friend trusts her partner then a possible solution:

Father gifts house to your friend. Friend's partner gets a mortgage and buys house from friend. Funds used to modernise house.

Purchase price should not be above transfer value of house so no CGT. Transfer value of house I assume is below relevant CAT threshold.

SarahMollie

henryd65 wrote: »

On the basis that they do not want to get married and also if your friend trusts her partner then a possible solution:

Father gifts house to your friend. Friend's partner gets a mortgage and buys house from friend. Funds used to modernise house.

Purchase price should not be above transfer value of house so no CGT. Transfer value of house I assume is below relevant CAT threshold.

Surely then there would be Stamp Duty payable if they did this though? It might be a price worth paying but outside marriage, I don't think theres a tax free way of doing this.

Cuddlesworth

Sleepy wrote: »

Maybe it's just me but I'd consider 3 kids a much stronger tether than a legal document...

Until 2015 it meant nothing to the father in the eyes of the courts. Its still limited today but much better.

In 2010 couples who had cohabited for 5 years or 2 years with children could claim for maintenance, property adjustments or pension adjustments from the other half income/estate. On top of maintenance for the children for the primary caregiver.

There would be no reason to not marry or get a civil partnership today unless the women in this circumstance was claiming social welfare(illegally). Otherwise they are simply complicating their lives financially for no real gain, as this is not the only situation in their adult lives where not being married is going to complicate things or put them at a financial loss.

henryd65

SarahMollie wrote: »

Surely then there would be Stamp Duty payable if they did this though? It might be a price worth paying but outside marriage, I don't think theres a tax free way of doing this.

Get a mortgage from a bank like EBS or BOI. The 2% rebate would cover the 1% stamp duty with balance available for legals.

bigroad

I would go to a Credit union and see how much a renovation loan would be.They are much more flexible than a bank.
Also look at renovation grants from the government that might be available.
It all depends on how much work the house might need .
A mobile is also option to live in while working on the house.

Ayuntamiento

It's so sad that a couple with 3 children would view marriage as such a horrific imposition on them. I can't imagine how you can reproduce 3 times over with another person and not be sure that you want to be with them forever, unless she's in receipt of single parent allowances and that's her motivation for not marrying.
As regards this situation, if he has to live 4hrs away from the property in order to make money then no bank will entertain this idea.

riclad

When giving a loan ,banks look at x times your salary ,
and is the house worth say 80k.
Also have you got 10-20 per cent of the house value saved up.
Also do you save money every month.
what are your basic expenses, rent etc
The banks would want to see a survey before giving a loan .
To check is the house worth the value of the loan.

SarahMollie

henryd65 wrote: »

Get a mortgage from a bank like EBS or BOI. The 2% rebate would cover the 1% stamp duty with balance available for legals.

Firstly you don't get any of that money until about 9 weeks after draw down (BOI anyway) so you have to have the ready cash to pay for stamp duty at the point of sale.

Also, no such thing as free money, the banks are only giving out these offers so they don't have to be more competitive on interest rates, you do end up paying for it anyway.