Purchasing from parents

theShire

Last year my father inherited his father's house. The house is old and my parents were not in a position to do anything with it.
I agreed to purchase the house based on the valuation at the time and have since got approval in principle, granted planning for extension, done work on emptying contents and prepared for my builder to start.
My bank have now come back asking for a 'gift' letter from my parents as they have valued it higher.
The previous valuation was provided to the bank and we were expecting our letter of offer.
I have replied to the bank about the fact that there was/is no 'gift' element in the purchase.

Do I have any recourse to have the original agreed price used? The bank are only providing the original agreed purchase price.

This is just adding more stress to my parents when the hope was that this would ease their burdens as they are elderly pensioners while giving me the chance to have a moderately bigger house for my wife and kids.

Any advice?

Bold Abdu

What's the difference between the valuations?

theShire

Bold Abdu wrote: »

What's the difference between the valuations?

12k increase based on valuation in March 2019 vs Dec 2019 after I emptied the contents and was granted planning permission for the extension.

Edit: timeframe - previous mortgage application with another provider fell through so had to apply with new bank in October

Bold Abdu

To make things run smoothly you could just get the gift letter.

The letter would be from both your parents so the first €6K is covered by the small gift exemption. The other €6K would eat in to your threshold but no tax should be payable.

The above is dependent on if you've received any prior gifts from parents, are likely to receive future inheritance from them, are buying house on your own or with wife/GF etc.,

theShire

Bold Abdu wrote: »

To make things run smoothly you could just get the gift letter.

The letter would be from both your parents so the first €6K is covered by the small gift exemption. The other €6K would eat in to your threshold but no tax should be payable.

The above is dependent on if you've received any prior gifts from parents, are likely to receive future inheritance from them, are buying house on your own or with wife/GF etc.,

Buying with my wife so does that mean she would have tax implications?
Also, would their be tax implications for my parents?

Edit: appreciate your advice, thanks

Bold Abdu

theShire wrote: »

Buying with my wife so does that mean she would have tax implications?
Also, would their be tax implications for my parents?

Edit: appreciate your advice, thanks

There is a small gift exemption of €3K per annum. So your dad and mum can each give you €3K. They can do likewise for your wife.

So if your parents give you a gift letter saying that they are gifting you and your wife €12K, the full €12K is received tax free.

There are no tax implications for any party.....assuming neither you or your wife have received any gifts from your parents in 2020.

theShire

Bold Abdu wrote: »

There are no tax implications for any party.....assuming neither you or your wife have received any gifts from your parents in 2020.

Thanks, that's the main thing I wanted to clarify, it should make it easier to explain to my parents about the need for the letter

Kangaroolala

According to Irish capital gain tax, You have a lifelong exemption of €320,000 for group A if your parents are willing to give the house to you, and the small gift exemption you can have from both of your parents are €3,000/y from each of your parents.

Claw Hammer

What the bank is concerned with, is whether or not, your parents would have any claim to the property on the basis that they owned some of the equity. What they want from your parents is a letter saying that they make no claim on the property, that any access over the market value of the property is in the nature of a non-recourse gift and the do not expect to acquire any interest in the property or retain any interest in the property.
The bank is not worried about the tax implications other than if it was to affect your ability to pay repayments.

Ronin247

I am sure that you have thought about this, why not take the mortgage with your parents?

You will probably pay 3% and your parents will get less than 0.5% for putting the money in the bank. Essentially the bank takes your parents cash and lends it to you and creams 2.5% off for the privilege