Son wants house, will mortgage new one for me.

Just wondering if anyone has come across anything like this or has any thoughts.

My wife and I live in Dublin, house paid, planning to sell up in the next year or two. Our plan is to move to Spain where we have family, and also get a small place down the country, to spend half the time.

My son is married, both working and have mortgage. During a conversation about us planning to sell/move, he suggested don't sell. He'd take out a mortgage to get us a house here and in Spain, take over our existing house for rental. House in Dublin being worth more, it would be his pension. Quoted Rich Dad, Poor Dad . He already has an apartment rented in Dublin, so it wasn't without some thought.

Cleanest way would obviously be if he owned my house, and I could buy on my own. Is there an efficient way to do something so that we don't end up giving everything away in one tax or another?

Any thoughts appreciated so that I would have some idea before going to a solicitor.

Amby123 said:

Quoted Rich Dad, Poor Dad .

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Forget that. It is an American book which has very little application in Ireland because of the very different legal systems and tax systems.

Is this what your son is proposing?

Son will buy a house in country and in Spain and will rent them to you?

He will let out your house in Dublin and take the rent?

He presumably continues to live in his current family home?

This is how this would be taxed:

You would pay rent to your son which would be subject to tax. He would get some tax relief for the mortgage interest paid in Ireland. I have no idea what the tax consequences in Spain would be.

You would be getting rental income in Ireland. This would be taxed in full as you have no mortgage interest to set against it. (It would be completely irrelevant that your son is letting it for you. As the owner, you would be taxed.)

Your house would become an investment and when you eventually sell it, part of the gains would be subject to Capital Gains Tax. If you sell it now, there would be no CGT if it's been the family home since you bought it.

The commercial aspects of the proposal are equally terrible

Amby123 said:

House in Dublin being worth more, it would be his pension.

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People should not be buying property "as their pension" unless they do it within a pension fund. If he already owns his family home and if he has a rental apartment, he has enough exposure to property. He should probably start a normal pension to avail of the very generous tax benefits. Direct ownership of property is heavily taxed and is not a good idea.

If your son wants to invest in property, let him do so. It's unlikely that a family home in Dublin would be the best property investment. My understanding is that the best yields are in the apartment sector and lower priced houses generally.

If your son thinks that your house is a good investment in its own right, then he should simply buy it from you at market price with an investment mortgage.

That is much cleaner for all of you and has no complicated tax consequences.

Thanks Brendan. The Rich Dad reference wasn't meant literal, but just that it was better to have something.
We wouldn't pay rent on any new property, it's just a swap. It was only a passing comment, but I wanted to see if there was any merit in it.
The exposure to property is very valid and if he had the disposable cash as against taking out a mortgage, it would probably get him to retirement with a sustainable pension quicker. Good advice and plenty to think about..

Amby123 said:

We wouldn't pay rent on any new property, it's just a swap.

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It wouldn't be a swap. If you don't pay him any rent, he would have a hefty mortgage to pay and no rental income to cover it.

You can't just allocate him the rent from your home while you continue to own it.

You have not given a lot of information about what age you are, what your income is or how much pension income you have.

If we assume ( which I hope is the case), that you and your wife are healthy and need to have money for your next 20+ years, your priority is your own financial long term situation, not your sons investmest plans.

If your sons plans are based on his belief that house prices will rise and you'd be a fool to sell, have a think about where that thinking got people 10-15 years ago.
If your house is one of your major assets, be very careful about gambling it.