Buying a property as a student, bypassing mortgage

wagil83134

Hi folks!

Had a quick question related to buying property here

I'm a fresh graduate on my stamp 1G and my folks are looking into purchasing property (perhaps a flat for around 120-150k)

I understand I cannot get a mortgage since I'm on 1G, spent barely over a year here and currently working a minimum wage job with no fixed timings. I don't own any other property at the moment, Ireland or anywhere else.

Parents are planning on taking out a loan from the bank back home, transferring the money to my account here, and having me buy the house in my name, skipping the mortgage process altogether. Would this be possible? How feasible is it?

From what I've seen, since it's my parents transferring the money, I won't have to pay tax since it'll be below 335k. Anything else I should look out for?

Thanks!

herbalplants

It is great your parents are so nice.

First do your homework where you can buy a property with 150k. Just make sure you can buy somewhere you want to live for a while. It won't be in Dublin.

wagil83134

Thanks for the heads up!

I should've specified I'm looking at a flat in Limerick at the moment,my apologies.

My parents are considering it as an investment since I'll work here for a bit and my siblings will come study here in a couple of years. It'll also be much more comfortable when they come visit. I'll be helping them pay back the loan later.

Kurooi

Yeah in theory you're an adult with money you can just go right ahead and buy.

3 things I think you should be aware of:

1. Your parents won't be able to get a mortgage for this purchase, if they need to borrow the money they will borrow it at an unsecured loan interest rate. The impact of this is pretty big, in Ireland mortgage interest rates hover around 3-4% while regular loan rates are 9-10%. Of course the rate depends on the country and bank your parents borrow with, but they will likely pay relatively high rates.

Further, banks are normally not keen on just throwing a lot of money at these loans, so your parents may get declined, but that really depends on the bank and how well they are off financially. I can tell you myself if I was to go out to AIB/BOI here ask for 50 grand to gift over to someone, they would laugh me out the door :) Others will come out with the money. I have no way of knowing how that will play out for you.

2. Estate agents will not take your bids without proof of funds. In your case this will be having the full sum on your account and getting a paper out of your bank to confirm that you have those funds. Not just a bank statement, an official form. This is quite risky for you as it seems your parents will need to borrow and transfer the money before you even find a place you like.

There may be some way around it, maybe a promisory note from your parents, but I have no experience in what estate agents will take, they can be quite fussy actually.

3. Watch out for properties that are difficult to mortgage. You as a cash buyer may be able to buy a studio or a 1 bed apartment, but when you try to sell it most people get a mortgage their bank won't let them buy it. Consider that in your decision making.

wagil83134

Super insightful, thank you very much!

I'm not sure how helpful mentioning the name of my parents bank would be, but it'll be a mix of savings and a loan.

I suppose I'll have a chat with the estate agents about the second point, and I'll talk to my bank about the same as well, get it cleared on both sides, so to speak.

The third point is definitely news to me, I've mentioned it to my folks and they'll have a think over the weekend about it.

Thanks again!

xper

Another thing to at least be aware of is the tax implication of the transfer of 150k from your parents to you. Under current rules for gift/inheritance tax, you may receive up to €3000 per year from anyone tax free and, over and above that, up to 325k from your parents over your lifetime without paying any tax but all amounts above that are subject to 33% tax.

Obviously the amount you are considering here is well below the tax free limit but it is significantly eating into it so just bear that in mind.

I don’t think the fact that your parents are outside the state has any bearing on the above but you might want to look into that aspect.

come to think of it, you might have to jump through a couple of hoops with your respective banks to transfer that sort of sum of money internationally. It can be done but there may be more forms to fill in than you might expect.

herbalplants

https://www.boards.ie/discussion/comment/120138036#Comment_120138036

Anecdotally, we had a lot of Chinese buyers buying properties in Dublin so I can't see how will the poster have problems with the bank receiving money here! Sure the Chinese buyers were moving cash from China.

Also Irish people work all over the world and some move their cash over to Ireland and buy property.

The poster may decide his time is in Ireland is not that great so sell the property so the inheritance tax could mean nothing to the poster.

Guido123

Do you plan to stay in Ireland?

It’s a great idea for your parents to buy a property for you here for cash. If you all can find a suitable property for €150K that would be great. My late mother would have greatly approved of this, she gifted me the proceeds of family semi-D Dublin home sale in height of Tiger, I paid due tax etc. her logic at tone was twofold, to divest of personal assets in case she needed nursing home care, and to save me a headache after she died.

wagil83134

https://www.boards.ie/discussion/comment/120139667#Comment_120139667

Yep! I shouldv'e mentioned this in my original post. I've got siblings planning on coming and studying here too.

tom_murphy112

Surely doesn't 1G visa not grant you permission to reside in Ireland for just 12 to 24 months ? Sounds like you like to stay here, but that all depends on being able to get employment that will allow you to stay here for longer period.

That being said, note that you would still have other yearly fees that you would need to take into consideration. Like House insurance, Property tax, Apartment management fees etc

herbalplants

I agree with above comment. You need to think about management fee cost which is expensive enough about 2.5k a year and it could go up, insurance, property tax. All these costs are every year.