Selling house to brother

kdevitt · 10-04-2017 4:01pm #1

I have a house which myself and my wife bought right at the height of Celtic tiger days - so needless to say its still a fair chunk into negative equity. Its been rented out for the last two years or so - the rent income more or less covers the mortgage (tracker).

The tenants handed in their notice today, so we're back into the situation of finding new ones. Its a good location, and there'll be no problem finding someone - but I just hate the stress of dealing with a rental.

Simultaneously, my brother just happens to be looking for a place to buy, and is even viewing places in the same estate. So ideally, he'd move into our place - pay enough to service the mortgage, and the house is his at the end of the process. Can't just sell it to him at market value or we have to cover the negative equity on the mortgage - but since the mortgage is on tracker, the cost of servicing it is more or less the same as a mortgage would be on the house if we sold it at MV.

I know in the UK they have installment contracts which seem to be more or less the same thing. Anyone know a legal way of achieving the same result?

endacl · 10-04-2017 4:03pm

Take him on as a tenant, and sell him the house for a Euro once the mortgage is paid?

punisher5112 · 10-04-2017 4:03pm

What will you do when he stops paying???

Its messy so either sell or rent again.

kdevitt · 10-04-2017 4:04pm

endacl wrote: »

Take him on as a tenant, and sell him the house for a Euro once the mortgage is paid?

He'll get whacked for CGT on the difference between the one euro, and the market value (I think)

kdevitt · 10-04-2017 4:07pm

punisher5112 wrote: »

What will you do when he stops paying???

punisher5112 wrote: »

or rent again.

He's no less likely to not pay his rent than any tenant I'd take on. Regardless - I'd imagine I could get a contract done up similar to a rent to buy scheme. Selling is just not an option.

Just curious as to whether or not someone has managed something similar.

The_Pretender · 10-04-2017 4:12pm

kdevitt wrote: »

He'll get whacked for CGT on the difference between the one euro, and the market value (I think)

He'll only pay CGT on any gain he makes, if he was to sell it now at a loss he wouldn't pay CGT. The issue will be on his brother's side - if he is sold the house at a discount then the difference between market value and sale value will be seen as a gift, and he will be taxed accordingly.

OP what's your aim here, to have your brother pay the mortgage until it's out of negative equity? Or have him pay it off until the mortgage is cleared? It looks like your brother is to pay the mortgage until it's cleared, but if that's the case why would he go for it when he could get a house in the same estate for market value instead of your more expensive house?

kdevitt · 10-04-2017 4:18pm

The_Pretender wrote: »

OP what's your aim here, to have your brother pay the mortgage until it's out of negative equity? Or have him pay it off until the mortgage is cleared? It looks like your brother is to pay the mortgage until it's cleared, but if that's the case why would he go for it when he could get a house in the same estate for market value instead of your more expensive house?

Aim is for him to clear the mortgage and own a house at the end of the process. You're right in saying the house is technically more expensive, but the cost of servicing the debt isn't - and its a bigger / better house than the others he's looking at in the same area.

He's keen on it, and we're keen on it - just trying to see if theres a way to make it work.

pilly · 10-04-2017 4:21pm

And where do you live in the meantime? Rental?

CIARAN_BOYLE · 10-04-2017 4:25pm

cat is the relevant tax head to worry about. not cgt. it sounds messy to me. not to mention if b your bank knew you were renting the property out you would lose your tracker. so being tied in long term could be a big problem here.

Dial Hard · 10-04-2017 4:49pm

punisher5112 wrote:

What will you do when he stops paying???

When? It's a given that he'll stop paying??? I've been renting my brother's house for three and a half years and have never pissed a payment.

pilly wrote:

And where do you live in the meantime? Rental?

Wherever he's currently living, presumably.

antoinolachtnai · 10-04-2017 7:31pm

You could do an instalment contract here in Ireland too. You would have to find a solicitor who was interested in doing this at a reasonable cost however and this would be the toughest part. There are legal problems to overcome and the various tax issues would also need to be sorted out. I would suggest that it be structured so he has an option to buy you out once the property goes into positive equity or even that you have a put option to require him to buy you out in those circumstances. You would essentially be acting as a 'bank' for your brother so you need to consider all the pitfalls with your advisors.

davindub · 10-04-2017 8:30pm

I'm sure you can't do any kind of property contract that involves a mortgaged title without the bank's permission.

OP I can see what you are thinking but I cannot see a way to avoid income tax on the rent your brother will be paying. A more cost effective option might be to sell for what is outstanding on the mortgage, even with the difference in the between tracker rates and mortgage rates it should a lot less than what your brother will have to pay to service your tracker mortgage.

antoinolachtnai · 10-04-2017 8:40pm

I think the OP would have to get legal advice on whether he can do a contract in relation to the property. I think he could do certain types of contract. He wouldn't be completing any sale, that's for sure. He couldn't complete anything until the bank was satisfied.

kdevitt · 10-04-2017 8:55pm

antoinolachtnai wrote: »

I think the OP would have to get legal advice on whether he can do a contract in relation to the property. I think he could do certain types of contract. He wouldn't be completing any sale, that's for sure. He couldn't complete anything until the bank was satisfied.

Yep that would have been my thinking on it, I obviously couldn't transfer title while the mortgage is outstanding. The rent to buy scheme covers something similar, but over a shorter period - whereby the 'rent' paid actually constitutes a deposit on the house once the sale proceeds.

Definitely won't be doing anything without legal advice anyway. If I get anywhere with it I'll update the thread.

Selling house to brother

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