Buying an apartment from a parent

Pages · 16-10-2015 2:43pm #1

Hi all ,

so essentially my father has an apartment which thankfully is nearly paid off with the bank. I was looking to enter the property market myself but my father after nearly breaking himself mentally in paying the interest on that apartment during the recession he's keen for me to try and avoid ever paying a cent of interest to a bank.

I'm just wondering what the options would be if I was to buy the apartment from him.
(I apologise for how stupid these suggestions might sound)

Could i draw up a contract offering to pay him 1000 a month for 350 months type of deal ?

Could I "buy" the apartment off him for a euro and pay stamp duty on the market value , then settle our debt outside of the deal ?

Like I'm sorry if I'm being silly but essentially what I need to know is what is the best way for the apartment to be legally mine in name , and hopefully avoid paying either interest in mortgage or tax. But at the same time I plan to be giving my father money so I don't want to get done for any tax laws I might not know about. I know there's a 280k between parent and child allowance but since the apartment is over that value I'd rather not pay the tax on the remaining 70k

sunnysoutheast · 16-10-2015 3:04pm

Pages wrote: »

Hi all ,

so essentially my father has an apartment which thankfully is nearly paid off with the bank. I was looking to enter the property market myself but my father after nearly breaking himself mentally in paying the interest on that apartment during the recession he's keen for me to try and avoid ever paying a cent of interest to a bank.

I'm just wondering what the options would be if I was to buy the apartment from him.
(I apologise for how stupid these suggestions might sound)
Could i draw up a contract offering to pay him 1000 a month for 350 months type of deal ?
Could I "buy" the apartment off him for a euro and pay stamp duty on the market value , then settle our debt outside of the deal ?

Like I'm sorry if I'm being silly but essentially what I need to know is what is the best way for the apartment to be legally mine in name , and hopefully avoid paying either interest in mortgage or tax. But at the same time I plan to be giving my father money so I don't want to get done for any tax laws I might not know about. I know there's a 280k between parent and child allowance but since the apartment is over that value I'd rather not pay the tax on the remaining 70k

First off, I don't think any of the unconventional options would fool Revenue for a second, I'd say they have seen it all before. There would still have to be conveyancing and change of ownership.

However, I believe there is a method by which property can be legitimately gifted if certain conditions are met, the main one being that you don't own any other property and live in it for a period, I know neighbours of ours plan to gift apartments to their sons after college. Might be worth talking to a specialist, sorry I don't know the details.

Ri_Nollaig · 16-10-2015 3:06pm

you would probably want to speak to an accountant and/or a solicitor to be honest.

Are you currently living there? If you have lived there for 3+ years you can be gifted it and not have to pay any capital acquisition tax.
More info here http://www.revenue.ie/en/tax/cat/leaflets/cat10.html
This would be outside of the gift allowance of parent to child. But you obviously have to wait 3 years if you haven't already lived there.

You would still have to have it valued by an auctioneer and pay stamp duty of 1% of that and would have to go through the standard conveyancing procedure. Your father might also be liable for capital gains tax but if its in negative equity that's not going to be an issue.

Not sure how it would work when its not 100% paid off yet, your father might not be able to gift it until that is cleared or you offer to pay the remainder. Maybe taking out a small mortgage or personal loan to do so? Obviously I have no idea what kinda money we are talking here but given you are looking at property you must atleast have a deposit going.

Either way, I'd say an hour sitting down with your father and an accountant would be money well spent.

Pages · 16-10-2015 3:17pm

sunnysoutheast wrote:

First off, I don't think any of the options suggested would fool Revenue for a second, I'd say they have seen it all before. There would still have to be conveyancing and change of ownership.

Hey thanks for the reply , sorry if it came across like this but just to be clear I'm not trying to fool revenue at all this isn't one of those "can i fool the state" type of questions. It's really just i hate the banks and don't want to have to take a mortgage for a place which I wouldn't need to pay the cash up front ... my main concern is that something like this would trigger an issue. Like I fully expect to pay any and all taxes such as stamp duty etc when the place becomes mine.

I suppose that's the crux of the matter , I'd like the best way to purchase a house from my father without having to front the value of the house at once since it's not required

Ri_Nollaig wrote: »

Are you currently living there? If you have lived there for 3+ years you can be gifted it and not have to pay any capital acquisition tax.
More info here http://www.revenue.ie/en/tax/cat/leaflets/cat10.html
This would be outside of the gift allowance of parent to child. But you obviously have to wait 3 years if you haven't already lived there.

You would still have to have it valued by an auctioneer and pay stamp duty of 1% of that and would have to go through the standard conveyancing procedure. Your father might also be liable for capital gains tax but if its in negative equity that's not going to be an issue..

Either way, I'd say an hour sitting down with your father and an accountant would be money well spent.

I didn't know about the 3 years deal so I'll be looking into that. I'm about to move in so it would require me to wait an extra 3 years which isn't exactly game breaking. But then my concern I suppose would be how would revenue look towards 1000 lets say a month going into my fathers bank account

Stheno · 16-10-2015 4:52pm

Pages wrote: »

But then my concern I suppose would be how would revenue look towards 1000 lets say a month going into my fathers bank account

I imagine they would expect him to pay any taxes due on it?

Pages · 16-10-2015 5:22pm

Stheno wrote: »

I imagine they would expect him to pay any taxes due on it?

Ha yeah sorry , I just thought it might look illegal or something. Sorry I'm a complete numpty when it comes to taxes

So it seems , although I'll be checking it out further is that the best option is to live there for 3 years route ?

ScottStorm · 16-10-2015 6:10pm

As good as boards is for advice I would definitely be sitting down with a solicitor and or accountant to find out which way to go on that.

The other consideration would be whether 350k of apartment is the way you want to go as your first property.

newacc2015 · 16-10-2015 11:11pm

Ri_Nollaig wrote: »

you would probably want to speak to an accountant and/or a solicitor to be honest.

Are you currently living there? If you have lived there for 3+ years you can be gifted it and not have to pay any capital acquisition tax.
More info here http://www.revenue.ie/en/tax/cat/leaflets/cat10.html
This would be outside of the gift allowance of parent to child. But you obviously have to wait 3 years if you haven't already lived there.

Either way, I'd say an hour sitting down with your father and an accountant would be money well spent.

If you have to live in the house 3 years prior to gift and 6 years after it. its not the easiest to avoid CGT.

OP just speak to a tax advisor. It will save you money

Wabbit Ears · 19-10-2015 7:49am

The other option is for him to sell that property, pay off any loans outstanding and gift you a large sum of money which you can use to buy your own, more reasonably priced for a FTB, place.

Honestly though, that's a really expensive apartment and really,anyway you look at it, your dad loses out in this deal and you will still have a fortune to pay in taxes etc. Speak to A lawyer and property accountant and find a better solution as what you are proposing is a bit of a lose lose IMHO.

edanto · 19-10-2015 1:48pm

I'd echo what the others have said about that apartment being expensive, but for your own reasons it might suit you.

It sounds like you are interested in a low-interest loan from your parents instead of a similar mortgage from the bank.

I don't know if transfer of property can be legally considered an interest free loan.

This page might help - http://www.revenue.ie/en/tax/cat/guide/free-property-loans.html

Get lets of professional advice on it, but I note that the value of the annual gift in the example of the €300k loan is only slightly over the value of the tax free annual gift that a parent can give to a child, so the tax due may be small.

Revenue Commissioners wrote:

Example 1

Market Value of Benefit in "free" use case involving a loan:

Joe gives an interest free loan of €300,000 to his nephew John on 1 January. The highest rate of return, Joe, the person making the loan, could obtain on investing the funds on deposit is 1.5%. John is deemed to take a gift of €4,500 on 31 December.

He is also deemed to take a gift each year, on 31 December, until the loan is repaid and each such gift is taken into account for aggregation purposes.

If the loan is repaid during the year, the date of the deemed gift for that year is the date of repayment. If the loan was repaid after 10 months the value of the gift for that year would be €3,750.

Butters1979 · 19-10-2015 2:12pm

It sounds like you are asking two different things here. The first is can you do this without paying interest to the banks and the second is would there be tax to pay.

As far as I know the only reason a bank needs to be involved is if you were to take a loan to finance the purchase of the property. You should be able to draw up a contract between yourself and your father for monthly payments for the purchase, and therefore should not need a bank.

When it comes to tax this is more complex and probably a bit more messy. As others have said you would need to discuss with a tax advisor and solicitor for this, but paying some tax would be unavoidable here.

But put it this way, the tax would probably be a lot less than the interest on a 30+ year mortgage.

Peregrinus · 20-10-2015 7:09am

Definitely talk to a solicitor. What you are proposing is perfectly legal, but:

- (a) you don't want to do it in a way that results in either you or your father paying more tax than you would if the apartment were bought and sold in the conventional fashion; and

- (b) you want to do it in a way that is fair to yourself, your father and any other family members who might have an interest or an expectation in your father's estate. Not to be morbid or anything, but if you're thinking of paying the purchase price over the 20 or 30 years that you would be paying a mortgage, there's a sporting chance that your father will die at some point during the period. You need to think through the implications of that. And, to be fair to your father, if he is allowing you time to pay the purchase price, you should be paying a higher price overall. You may want an accountant or a valuer to advise on what's a fair price for the property when the purchase money will be paid over 20 or 30 years, as opposed to in a straightforward sale.

If you do this deal on terms which are fair to your father, you won't save any money (apart from the bank's legal fees) doing this. The money you don't pay in interest to the bank will be more or less offset by the extra money you pay, over time, to your father.

Buying an apartment from a parent

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