Joint Mortgage One person living there.

finty

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Hi,

I have a joint mortgage with a friend on a house from a few years back. We both lived there. I'm moving out and we have agreed that he will pay the mortgage and management fees and we'll retain at 50:50 share of the place

Just wondering how this works tax wise.

Will it mean that half of what he pays will become "rental income" for me?
 
I will leave the tax to others but I doubt if this 50/50 idea will work based on what you said.

For example:
suppose the gaff is worth 10k net of the mortgage now, at the point he takes over the mortgage payments.
Suppose in 10 years time you both decide to sell it and it makes 90k net of mortgage.
Do you expect to get 40k?
Any good lawyer will prove otherwise
 
This is an interesting point.....

I presume there is some way that one person can remain in the property and pay what amounts to rent to stay there without causing this problem?
 
In my experience as a previous tenant in common - I was only liable for 50% of the tax as that was my share of the property. Neither of us were living in the property however. If it's only a room being rented out then you're fine not to pay tax up until €10k (I think that's the figure).

Don't forget to let the Revenue TRS section know too as if you're receiving this then you're not entitled to it once you move out. Not sure what it means for your friend still living there.
 
First of all, whatever you decide, you need to put it in writing and both of you should sign it. You need to account for so many things. How long is this arrangement for? How can you end it and insist on the sale of the house? What if rents rise? What if interest rates rise? What happens if he falls behind in the mortgage? This is a very complex issue and you need to tease it out to avoid any rows in the future.

I think it would be much, much simpler if he agrees to pay you rent equal to half the value of the market rent i.e. he rents your half from you. If he gets a tenant, this should be structured as the tenant renting from you.

Then you both continue paying the mortgage equally as you have been doing.

Your tax situation will be simple enough
Rental income: €10,000
Less 75% of interest paid € 6,000 (Note this is interest paid and not the full repayment which includes capital)
Taxable income: €4,000

You probably need to register it with the PRTB or you won't get the tax relief on the interest.

You will be liable for CGT on your half if there are Capital Gains when you sell it.

Simplest of all though, may be for him to buy it from you and get a new mortgage. But not if you have a cheap tracker.

Brendan
 
This is an interesting point.....

I presume there is some way that one person can remain in the property and pay what amounts to rent to stay there without causing this problem?

It is not rent and cannot be construed as such and does not bestow on your pal any of the rights and obligations that come with paying rent.

You cant expect him to pay 100% of the mortgage and be only in for 50% of the net gain from now on.

I think you need to man up here to the situation and draw up some agreement with him that shares the benefits in an equitable way, recognising that he is in a position to share in capital growth that he cannot do it he were renting.

This should also consider maintenance costs of property and appliance replacement etc etc

Just for interest, whats the current market value and whats the current mortgage?

You should get a value now anyway
 
Thanks for the helpful replies.

We are trying to come to an arrangement that suits us both. I'm moving in with my partner and he is getting married and wants to stay in the house with his wife. Otherwise I would have rented my half of the place to a tenant.

It just happens that the market rent for the place is just about the same as the mortgage and other costs. In fact the "rent" he would pay is below what would be the market rent for the property.

The way we were going to look at it was that we agree on a rent for the place. He pays this as a normal rental agreement for a set period (probably a year) into the joint account we have for the place.

Any costs not covered by this such as in increases in interest rates, maintenance etc are split 50:50 between us and conversely any excess is split between us.


We have gotten the place valued recently.

Market rent is about 2100e/month

Mortgage is 1800e/month
Other costs such as mgmt fees, property tax etc come to about 150e/month
So every month the place costs about 1950.

Plan was to let him pay the 2000e/month.


"It is not rent and cannot be construed as such and does not bestow on your pal any of the rights and obligations that come with paying rent."
Surely the fact that he gets to live there bestows some of the rights and obligations that come with paying rent?
 
I think it would be much, much simpler if he agrees to pay you rent equal to half the value of the market rent i.e. he rents your half from you. If he gets a tenant, this should be structured as the tenant renting from you.

Then you both continue paying the mortgage equally as you have been doing.

This is sort of how we have it worked out in our discussion. Maybe my original post wasnt very clear.

Simplest of all though, may be for him to buy it from you and get a new mortgage. But not if you have a cheap tracker.

Brendan

Unfortunately we have about 50k negative equity at the moment and neither of us would be in a position to pay to exit the arrangement.
 
The point is that any good lawyer will be very quick to point out that mortgage payments are not rent.

Introducing the extra dimension of a spouse makes it even more important that you get some paperwork.
I was interested in capital values of house and debt, ie is there much Neg equity as the profit sharing is moot otherwise as you are both liable for the lot of the debt
 
Another approach might be to do a side agreement with him, where he takes over the house and the mortgage.

The downside for him is that he is getting €50k negative equity.

The downside for you is that the side agreement does not affect your relationship with the lender. You still owe them the money if your fellow joint owner doesn't pay it.

You may also find it difficult to borrow as you will already have a mortgage.

Brendan
 
Another approach might be to do a side agreement with him, where he takes over the house and the mortgage.

The downside for him is that he is getting €50k negative equity.

The downside for you is that the side agreement does not affect your relationship with the lender. You still owe them the money if your fellow joint owner doesn't pay it.

You may also find it difficult to borrow as you will already have a mortgage.

Brendan

We are going to look into this too. Might make life less complicated....
 
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