Joint mortgage

salmonorcod

Hi
I have the opportunity to be gifted a site. It would be in my name only. I would intend to apply for a joint mortgage with my partner unmarried. Are there implications to this? Is it a sticking point in getting approved?

Thanks

Lenar3556

salmonorcod wrote: »

Hi
I have the opportunity to be gifted a site. It would be in my name only. I would intend to apply for a joint mortgage with my partner unmarried. Are there implications to this? Is it a sticking point in getting approved?

Thanks

Is this site for the building of a house, and it is on this building which you anticipate the joint mortgage arising?

If so, yes, the bank are likely to have an issue with that.

The bank will want clear and merchantable title. Granting a mortgage to someone who is not registered as the owner of lands on which the house is to be built would be non runner.

salmonorcod

I would be the sole owner of the site. But I would be looking to raise a joint mortgage with my partner in order to reach the funds required. I wouldnt raise enough on my own

ELM327

This would likely not work.

Lenar3556

salmonorcod wrote: »

I would be the sole owner of the site. But I would be looking to raise a joint mortgage with my partner in order to reach the funds required. I wouldnt raise enough on my own

She would need to be registered as an owner of the land on which the house is to be built.

Why is that an issue? Even if the bank agreed to what you are proposing it wouldn’t offer you much by way of protection in the event of a future breakup if that is the aim.

Trish56

The information below is totally incorrect.

OP I am a mortgage broker and you can of course have the site in your own name and mortgage in joint names which is referred by the lender as one on title and two on mortgage. This happens regularly where one is gifted the site.

Lenar3556 wrote: »

Is this site for the building of a house, and it is on this building which you anticipate the joint mortgage arising?

If so, yes, the bank are likely to have an issue with that.

The bank will want clear and merchantable title. Granting a mortgage to someone who is not registered as the owner of lands on which the house is to be built would be non runner.

Lenar3556

Trish56 wrote: »

The information below is totally incorrect.

OP I am a mortgage broker and you can of course have the site in your own name and mortgage in joint names which is referred by the lender as one on title and two on mortgage. This happens regularly where one is gifted the site.

It's not quite as simple as that Tricia.
While there may be cases where a lender will enter into such an arrangement, its not a typical application and a number of issues arise.

I stand by my statement that as a general rule, mortgage holders and title holders should be the same individuals when it comes to the construction (or purchase) of a family home. If this is not the case, there should be a good reason, and the example you have provided is not one - why not add the second person to the title?

In the situation described, you have someone who has no registered title to a dwelling committing to the responsibilities of a mortgage and making repayments on same. Whatever this individuals reasoning, it leaves them potentially very exposed and the bank have a duty to investigate this - usually by insisting that at the very least such a person receive independent legal advice as to what they are getting into.

From a tax perspective there are potentially serious CAT implications, both on the transfer of the lands in the first instance and potentially on the construction costs of the dwelling itself. Revenue have in the past taken quite an interest in such arrangements and the underlying rational. Is has been identified in certain circumstances as a mechanism for evasion of CAT on the transfer of lands. In other cases Revenue have assessed at a future date that the title holder gifted an element of the dwelling to the unmarried cohabitant and a tax bill followed.

None of the above is lost on the lending financial institution, who see it as additional risk.

salmonorcod

As a potential workaround could we purchase the land into both names as agricultural land at full value and subsequently apply for planning? Thanks

dory

This is happening in my family at the moment. The person who doesn't own the land is signing a document saying that she will be liable for the payment of the mortgage , but has no owndership of the land. So if they break up she has to keep paying the mortgage even if he stops paying, and she can't force a sale as it's not her land to sell. Very dodgy situation to get into but it is possible. The bank had no issue as long as she could show that she had it all explained to her by her own solicitor and was happy to go into that agreement. That got around any tax issues with inheritance.

Getting married would be much easier and safer.

Lenar3556

dory wrote: »

This is happening in my family at the moment. The person who doesn't own the land is signing a document saying that she will be liable for the payment of the mortgage , but has no owndership of the land. So if they break up she has to keep paying the mortgage even if he stops paying, and she can't force a sale as it's not her land to sell. Very dodgy situation to get into but it is possible. The bank had no issue as long as she could show that she had it all explained to her by her own solicitor and was happy to go into that agreement. That got around any tax issues with inheritance.

Getting married would be much easier and safer.

You should have given her a shake!
Revenue did a blitz of these type arrangements in 2011. While most were significantly more complex cases, there was quite a bit of CAT recovered, some of it dating back many years.

Lenar3556

salmonorcod wrote: »

As a potential workaround could we purchase the land into both names as agricultural land at full value and subsequently apply for planning? Thanks

That might be reasonable. You should get professional advice.

Any hope of marrying the girl?

salmonorcod

Yes we are definitely getting married most likely after the house is built as thats what we both want to put our money into. If we get the half acre valued and complete the transfer with solicitors we could then proceed with planning permission? The site would be worth much more with planning but I dont think that's an issue as planning would be obtained after transfer?

Trish56

Lenar3556 - you mention 'it's not as simple as that' however having been in the Mortgage Business now over 40 years I deal with this on a daily basis. As an example I've just checked my self build files and can state that 80% of self builds that I am processing currently are where the site is gifted and are 'One on Title and two on the Mortgage' and the 20% are where the couple purchased the site.

I'd be very surprised if Solicitors who are doing the transfer of site and the conveyancing for the mortgage would be giving illegal advice to their clients and encourage them to evade tax. I would also be surprised that the lenders agree to one on title and two on the mortgage if it was not allowed and within Revenue guidelines. Yes the Loan Offer always includes a 'Condition that the applicant receive independent advice'.

As a broker I am only involved in the transaction after or during site transfer and am informed this is how the mortgage will be processed so I am not familiar with the legalities and indeed I do not get involved.

If the site is put into the joint names of both applicant's before planning permission well then because it is agricultural land the value of the gift would be circa 12k per acre so the non blood relative can receive a gift of 6k without any tax liability. I presume when planning permission is eventually granted and a house constructed that Revenue could also view that the intention was to avoid tax.
[/B]

Lenar3556 wrote: »

It's not quite as simple as that Tricia.
While there may be cases where a lender will enter into such an arrangement, its not a typical application and a number of issues arise.

I stand by my statement that as a general rule, mortgage holders and title holders should be the same individuals when it comes to the construction (or purchase) of a family home. If this is not the case, there should be a good reason, and the example you have provided is not one - why not add the second person to the title?

In the situation described, you have someone who has no registered title to a dwelling committing to the responsibilities of a mortgage and making repayments on same. Whatever this individuals reasoning, it leaves them potentially very exposed and the bank have a duty to investigate this - usually by insisting that at the very least such a person receive independent legal advice as to what they are getting into.

From a tax perspective there are potentially serious CAT implications, both on the transfer of the lands in the first instance and potentially on the construction costs of the dwelling itself. Revenue have in the past taken quite an interest in such arrangements and the underlying rational. Is has been identified in certain circumstances as a mechanism for evasion of CAT on the transfer of lands. In other cases Revenue have assessed at a future date that the title holder gifted an element of the dwelling to the unmarried cohabitant and a tax bill followed.

None of the above is lost on the lending financial institution, who see it as addit[/B][/B]ional risk.

Lenar3556

Trish56 wrote: »

As an example I've just checked my self build files and can state that 80% of self builds that I am processing currently are where the site is gifted and are 'One on Title and two on the Mortgage' and the 20% are where the couple purchased the site.

That does seem like alot Trish, are some of these married couples? Does it not strike you as odd that someone is joining a mortgage for the purchase of a house and then having no registered ownership? Why would this be happening?

Trish56 wrote: »

I'd be very surprised if Solicitors who are doing the transfer of site and the conveyancing for the mortgage would be giving illegal advice to their clients and encourage them to evade tax.

In fairness there is no evidence of that.

Trish56 wrote: »

I would also be surprised that the lenders agree to one on title and two on the mortgage if it was not allowed and within Revenue guidelines. Yes the Loan Offer always includes a 'Condition that the applicant receive independent advice'.

It's not illegal. Nor in itself in contravention of any Revenue guidelines. Purely from the banks perspective, it does present additional risk plus additional due diligence requirements in accordance with central bank rules. Both applicants are required to receive separate independent advice.

Trish56 wrote: »

As a broker I am only involved in the transaction after or during site transfer and am informed this is how the mortgage will be processed so I am not familiar with the legalities and indeed I do not get involved.

Understand, but by extension I think we need to be careful about suggesting that this arrangement is normal and perfectly ok.

Trish56 wrote: »

If the site is put into the joint names of both applicant's before planning permission well then because it is agricultural land the value of the gift would be circa 12k per acre so the non blood relative can receive a gift of 6k without any tax liability. I presume when planning permission is eventually granted and a house constructed that Revenue could also view that the intention was to avoid tax.

Not really. If the land was transferred at its current market value at a given time, there should be no cause for concern. There is no guarantee that planning will be granted and additionally that process involves considerable expense and risk. Its a much better course of action for the protection of all involved.

Trish56

I understand your concerns however I think we have to presume that both the clients receive appropriate legal advice and that their Solicitor draws up an agreement to protect their investment in the property should they split up.

Usually when a couple plan on building a property they are engaged and plan to marry and when they do they are covered under the family home protection Act.

I think without we known all the legalities (unless of course you are a Solicitor) regarding this and that the Law Society must be aware I've no intention of getting into an argument over it however I would suggest that you should be careful regarding stating that Banks are not applying due diligence according to Central Bank rules. In your 1st reply you stated that it was evasion of tax and Revenue have followed up with bills - that is a serious statement to make and do you have any evidence of this as it could be concerning for anybody on here that have received a gift of a site.

I answered the OP's question honestly to say yes this can be done and is done on a regular basis when a site is gifted to a blood relative so I won't be making any further comments only that we should stick to the facts.

I would recommend that the OP discuss this with his Solicitor before transferring the site.

Lenar3556 wrote: »

That does seem like alot Trish, are some of these married couples? Does it not strike you as odd that someone is joining a mortgage for the purchase of a house and then having no registered ownership? Why would this be happening?


In fairness there is no evidence of that.



It's not illegal. Nor in itself in contravention of any Revenue guidelines. Purely from the banks perspective, it does present additional risk plus additional due diligence requirements in accordance with central bank rules. Both applicants are required to receive separate independent advice.


Understand, but by extension I think we need to be careful about suggesting that this arrangement is normal and perfectly ok.



Not really. If the land was transferred at its current market value at a given time, there should be no cause for concern. There is no guarantee that planning will be granted and additionally that process involves considerable expense and risk. Its a much better course of action for the protection of all involved.

salmonorcod

Thanks the comments are very good. I did speak with a solicitor and purchasing the land at today's market value is fine to do. We haven't started planning permission process yet so its agricultural land. Like any transaction i think it should be up to the purchaser to do as they please with the land they purchase including apply for planning.

I also agree that the statement regarding revenue following up with a tax bill is concerning. Surely if both parties are contributing equally to the mortgage the house couldnt be treated like a gift.

Lenar3556

salmonorcod wrote: »

Thanks the comments are very good. I did speak with a solicitor and purchasing the land at today's market value is fine to do. We haven't started planning permission process yet so its agricultural land. Like any transaction i think it should be up to the purchaser to do as they please with the land they purchase including apply for planning.

I also agree that the statement regarding revenue following up with a tax bill is concerning. Surely if both parties are contributing equally to the mortgage the house couldnt be treated like a gift.

There is no issue if they both own the land and any subsequent dwelling.
There can be various issues where ownership is purported to be by one person, yet is being part financed by another who allegedly has no title to it whatsoever.

gogo

A bank treats this as joint borrowings, sole title and it’s absolutely normal now. It’s not considered tax evasion as a someone said above, you are entitled to do what you can to limit your tax exposure.
Have done dozens of these types of applications, normally for applicants from a farming background.
Used to be a case that bank didn’t like them, but not anymore, very common

salmonorcod

Cheers I suppose in this case the main question I had from the outset was for 2 unmarried people does it throw up obstacles etc

I will check all with solicitor again before doing anything anyways