Taking out mortgage for parents in my name - Mad idea?

MmmmmCheese · 08-06-2019 12:40AM #1

Hi all, hoping to get some opinions and advice on the following situation.

My Grandmother passed away two years ago and left her house to my Mother in her will. Since then the house has largely remained untouched, meaning that it has fallen into disrepair and is in pretty bad shape. Quite a lot of money would have to go into making it habitable again.

The plan was for my parents to take out a mortgage, do the house up and let it. (I'm aware of all the pitfalls of being a landlord from reading this forum, it's something we'd approach cautiously.) Unfortunately they weren't approved the full amount that would be needed.

My Mam suggested taking the mortgage out in my name and my parents would make the repayments. What I want to know is what are the potential pitfalls for me in such an arrangement? Would I lose my first time buyers grant? Is it a terrible idea for a mortgage to be in mine name even if I trust that my parents will make the repayments? Anything else that would be a red flag. The property will eventually be left to me.

Also to add, we don't wish to sell it. It's terrible to see it falling into disrepair but we're not sure where to go with it now. Any advice would be appreciated as I'm fairly clueless as to what could go wrong.

JJJackal · 08-06-2019 12:51AM

MmmmmCheese wrote: »

Hi all, hoping to get some opinions and advice on the following situation.

My Grandmother passed away two years ago and left her house to my Mother in her will. Since then the house has largely remained untouched, meaning that it has fallen into disrepair and is in pretty bad shape. Quite a lot of money would have to go into making it habitable again.

The plan was for my parents to take out a mortgage, do the house up and let it. (I'm aware of all the pitfalls of being a landlord from reading this forum, it's something we'd approach cautiously.) Unfortunately they weren't approved the full amount that would be needed.

My Mam suggested taking the mortgage out in my name and my parents would make the repayments. What I want to know is what are the potential pitfalls for me in such an arrangement? Would I lose my first time buyers grant? Is it a terrible idea for a mortgage to be in mine name even if I trust that my parents will make the repayments? Anything else that would be a red flag. The property will eventually be left to me.

Also to add, we don't wish to sell it. It's terrible to see it falling into disrepair but we're not sure where to go with it now. Any advice would be appreciated as I'm fairly clueless as to what could go wrong.

You will d need to own the property to get the mortgage? Otherwise the bank has no collateral. You would lose first time buyers grant once you take ownership of the house which you must do to get a mortgage.

08-06-2019 06:41AM

It's an insane idea imo. Yes you will lose your first time buyer status and if renting doesn't work out then you're on the hook. You will not be able to buy your own house while this mortgage is active unless you're earning huge money. Don't do it, there's nothing in it for you at all.

wildwillow · 08-06-2019 07:50AM

Don’t do it. It’s not essential for them to have this house. You are putting your own financial future in doubt by taking on this risk.
Family are great until something goes wrong. Let your parents do basic repairs or just sell. Renting it is only going to add to your woes.
Your life is more important than sentimentality.

pwurple · 08-06-2019 07:53AM

This is complicated, there are a few things to look at.

Tax. Assuming all inheritance tax been cleared, this house belongs to your mum. For a mortgage, you would need to own that property... which means gifting it to you. There is a 320k gift CAT threshold at the moment if you are Group A.
https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-thresholds-post-november-2011.aspx

This may be the simplest way to do it. Gift the house to you now, while it has low value, you get the mortgage and then your parents are the agents for letting it, ie, you pay them a fee from the rent. However, while you will get the rental income, you will also be liable for all the tax on that also, and will have to pay preliminary tax. (Ie, pay the tax before you earn the income).

Depending on the amount needed, a personal loan may make more sense. From the credit union for example. They often do home renovation loans. The interest rate would be higher, but you would not have the limitation of the mortgage rules.

What is the end goal here?
Is the rent to cover upkeep of this property long term, because you have emotional attachment to the building and don’t want to see it fall into disrepair?
Is it to get an income or job for your parents?
If it is to create something for you to inherit, are there any other beneficiaries?

How best to handle it depends on what you want the outcome to be...

Have you calculated the return on investment? If you want to pop up the numbers we can calculate it here.

Value of the property now
Cost of renovation
Value of property post renovation
Projected rental income
Loan repayment duration

Lumen · 08-06-2019 09:24AM

Sell it.

The downside of the further feelings of loss are nothing compared to the thing becoming a massive inconvenience and black hole of money and effort that you end up hating.

Jet Black · 08-06-2019 09:48AM

Get someone in to give you quotes and it might open your eyes a bit. That's if you can get someone in, tradesmen are out the door now with work now. The house I bought needed work that I estimated to cost 5-10k ended up costing nearly double. You won't see the thousands fly out of your account. Mines not finished and I'm still putting money into it. Being a Landlord is a mugs game now too and they're making it worse by the year. Think about everything that could go wrong, think about it again, then think about selling.

wildwillow · 08-06-2019 09:49AM

Would you see yourself living in the house as your future residence? If so, buy it from your Mother at it's current value. Then get a mortgage to repair.

Are you your Mother's sole heir? Can she gift it to you now and use your inheritance allowance to avoid tax?

Are your parents elderly. Could the whole lot be lost in nursing home fees in the near future?

As a parent of an adult child I would never, ever put him in your dilemma.

As pwurple says, do the sums and be very realistic about renting. Remember it will be very difficult to remove tenants under the new legislation and I don't think your parents realise the difficulties.

The fact that it hasn't been maintained in any way for the last two years is very telling about how competent they would be. Even basic weather proofing and repairs should have been done.

Live your own life and make your own mistakes. Give a clear negative answer to your mother and disregard her arguments.

Nikki Sixx · 08-06-2019 09:52AM

Could your parents do it up and you pay them an agreed rent until they eventually sign it over to you?

Claw Hammer · 08-06-2019 01:41PM

Nikki Sixx wrote: »

Could your parents do it up and you pay them an agreed rent until they eventually sign it over to you?

The whole point is, the parents haven't got the money to do it up! How does this suggestion help?

JJJackal · 08-06-2019 02:42PM

The core issue here is the OP cant get a mortgage until he owns the house.

If he has a mortgage (lets call it mortgage A) on this house he wont be able to get the same size mortgage (lets call it mortgage

to purchase his own house to live in while mortgage A on the inherited house is active - granted when mortgage A is paid off he may be able to get a bigger mortgage B.

Mortgage A will not be a PPR mortgage (interest rates from 2.3% to 3.5% typically) but a Buy to let mortgage (interest rates typically >4.5%).

Re renting - the OP will now have to pay tax on all rental income from the house - so lets say the OP earns $40,000 per year and gets a rental income of 12,000, its highly likely his tax bill for the 12000 will be close to 4000 (depending on expenses, interest on loan and so on).

Very complex situation - its worth going to a financial adviser if you really are considering it

shane b · 08-06-2019 03:28PM

Could you get a home improvement loan out between you and your parents rather than a mortgage?
We had a rented semi d house that was vacant for 3 years due to lack of funds to upgrade it. It needed rewiring, replumbing, kitchen bathroom etc. We took out 30k over 5 years and got the house renovated and rented within 12 months. Covered the first years payments ourselves and since then the rent has covered the payments. Parents were able to write off some of the loan against tax too I believe.
Maybe get a quote from a builder to see how much money it requires?

The_Honeybadger · 08-06-2019 03:54PM

Impossible to advise properly here unless you know how much the refurbishment will cost, what the yield might be and what the OP’s personal circumstances are.

If it was me and I knew that I was guaranteed to inherit the house I would try to help out If I could.

Plumbthedepths · 08-06-2019 05:12PM

All I can say is don't do it. Family and loans are not a good idea.

The_Conductor · 08-06-2019 05:50PM

Plus- if the mother signs the property over to her daughter- her mother is no longer eligible to take out the mortgage loan they have currently been offered- as they'll not own the property.

OP- there are too many downsides to this proposal.
Do you want to live in the property and are you happy to exhaust your First Time Buyers status taking ownership of it?

Is the amount of money that you'd need to take out within the realms of a term loan (aka 10-20k)?

As it stands- from the little information you've presented thus far- it would be hard to suggest its anything other than a complete crackpot idea.

Mrs OBumble · 08-06-2019 06:36PM

OP, imagine it's done up and rented - and the tenant stops paying rent and won't leave.

Can you afford to make the mortgage payments, and pay your own rent at the same time for a couple of years while the eviction process winds it way along. And then pay to have the place repaired so it's tenantable again?

the_syco · 08-06-2019 08:55PM

MmmmmCheese wrote: »

The plan was for my parents to take out a mortgage, do the house up and let it. (I'm aware of all the pitfalls of being a landlord from reading this forum, it's something we'd approach cautiously.) Unfortunately they weren't approved the full amount that would be needed.

If the parents do not have much money, is it because they're bad with money? If they are, then giving them a fcuk load of money to do anything is a bad idea.

MmmmmCheese wrote: »

My Grandmother passed away two years ago and left her house to my Mother in her will. Since then the house has largely remained untouched, meaning that it has fallen into disrepair and is in pretty bad shape. Quite a lot of money would have to go into making it habitable again.

It sounds like the house was in bad shape when your mother got it. If you intend to put a shed load of money into a house that you don't live in, to rent it out, keep in mind you'll need to put another shed load of money into the house should a tenant wreck it, and walk away. Bringing them to court may only get you €1 a week, and not the amount that you'd need to fix the house.

=-=

As said, it's a bad idea. Sell the house, and buy a new house which doesn't need money put into it, and rent that. But I'm guessing that doesn't sound like a good idea, so why would putting money into a house that you won't own or live in be a better idea?

kravmaga · 08-06-2019 09:46PM

MmmmmCheese wrote: »

Hi all, hoping to get some opinions and advice on the following situation.

My Grandmother passed away two years ago and left her house to my Mother in her will. Since then the house has largely remained untouched, meaning that it has fallen into disrepair and is in pretty bad shape. Quite a lot of money would have to go into making it habitable again.

The plan was for my parents to take out a mortgage, do the house up and let it. (I'm aware of all the pitfalls of being a landlord from reading this forum, it's something we'd approach cautiously.) Unfortunately they weren't approved the full amount that would be needed.

My Mam suggested taking the mortgage out in my name and my parents would make the repayments. What I want to know is what are the potential pitfalls for me in such an arrangement? Would I lose my first time buyers grant? Is it a terrible idea for a mortgage to be in mine name even if I trust that my parents will make the repayments? Anything else that would be a red flag. The property will eventually be left to me.

Also to add, we don't wish to sell it. It's terrible to see it falling into disrepair but we're not sure where to go with it now. Any advice would be appreciated as I'm fairly clueless as to what could go wrong.

Had a read at your post, just sell it, it does not make sense , get proper legal advice or from a financial consultant

Taking out mortgage for parents in my name - Mad idea?

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