House swap with parents to pay off mortgage

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Vonga

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Hi All

We built our house 3 years ago on a site that was a gift from my father. We're now finding it increasingly difficult to pay mortgage. Planning permission condition says we can't sell for 10 years and in all honesty my father would probably be unimpressed with selling his "gift". My solution to the problem is for my father to sell his house (which is just next door) and pay off the mortgage on our house, and then he and my mother move into our house. We would like to move to the west, where house prices are cheaper. The outstanding balance on our mortage is €189,500 and my father's house would be worth about €350,000 - €400,000. So, the idea is he could sell his house, pay off our mortgage, keep say, €50K himself for his trouble and give us the remaining €100K to start again somewhere else. Can this be done, legally, and if so, would we and/or he get clobbered with inheritance/property/capital gains taxes?
 
Vonga said:
Hi All

We built our house 3 years ago on a site that was a gift from my father. We're now finding it increasingly difficult to pay mortgage. Planning permission condition says we can't sell for 10 years and in all honesty my father would probably be unimpressed with selling his "gift". My solution to the problem is for my father to sell his house (which is just next door) and pay off the mortgage on our house, and then he and my mother move into our house. We would like to move to the west, where house prices are cheaper. The outstanding balance on our mortage is €189,500 and my father's house would be worth about €350,000 - €400,000. So, the idea is he could sell his house, pay off our mortgage, keep say, €50K himself for his trouble and give us the remaining €100K to start again somewhere else. Can this be done, legally, and if so, would we and/or he get clobbered with inheritance/property/capital gains taxes?
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Has your Dad not already given you enough?

Seriously, you want your parents to sell their house, move into yours, pay off your mortgage for you and give you 100K? And for 50k for their "trouble"?

I'd love to hear what your Dad thinks of your "solution".
 
How long have your parents lived in their house for? If it's a long time consider that they have memories there - a home is about more than bricks and cement. I wouldn't ask my parents to do that.

As for the clause re not selling for 10 years - can you not be released from this given that we're in unprecedented circumstances. Have you formally asked for this to be changed? If not, can you rent it out rather than move your parents?
 
I dont get it.
You want your father, who already gifted you a site, to sell his home and then give you 189,000 + 100,000 (and pay solicitors fees).

Why should or would he?
 
I like the way you put it accross that it was"my solution". Do you work in the circus wearing a big red nose by any chance?
 
It would be treated tax wise as a purchase and a sale.

On your parents sale, assuming they sell before they move out or within a year of moving, there is no CGT as it is their PPR.

Then they buy your house, and you sell it to them. We need to know the valuation of your house before we can say if there is gift tax involved ( either way). Again for you if you sell before moving out or within a year there is no CGT. They will have stamp duty on the purchase, depending on the value of the house. Is the house in your sole name or in joint names with your partner-this affects whether you get consanguiniity relief on the stamp duty or not.
 
BTW on the planning aspect usually if you have to move to find work or for economic reasons you can get a letter of comfort from the council that will allow you to sell before the 10 years are up.
 
I'm not suggesting he sell his house for no gain. Our house would be worth a bit more than his (probably about €450,000 - €500,000), warmer and more comfortable, cheaper to run and maintain, bigger rooms, plus he gets the original site back in his ownership. It's not like I'm asking him to give me €300K out of his own pocket. He would still own a 3 bedroom house with a very large garden, as he does now, except the house in question is more modern and more comfortable. Same neighbourhood, same friends, same local pub, same everything, just 50 yards to the right.

In any event, the "moral" aspect of the proposition is another day's discussion. What I wanted to know was would it be legal and would it be costly in taxes on either him or us?
 
Could everyone get off their high horses, the OP is just asking about legal\tax issues. For all you know the father might love to move into a new house with 50k in his pocket.
 
Vonga said:
I'm not suggesting he sell his house for no gain. Our house would be worth a bit more than his (probably about €450,000 - €500,000), warmer and more comfortable, cheaper to run and maintain, bigger rooms, plus he gets the original site back in his ownership. It's not like I'm asking him to give me €300K out of his own pocket. He would still own a 3 bedroom house with a very large garden, as he does now, except the house in question is more modern and more comfortable. Same neighbourhood, same friends, same local pub, same everything, just 50 yards to the right.

In any event, the "moral" aspect of the proposition is another day's discussion. What I wanted to know was would it be legal and would it be costly in taxes on either him or us?
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I don't think you needed to explain that, it was fairly clear to me between the lines in the first post.

In any case is the house in your sole or joint names?

Based on the valuation you are looking at gift tax from you and your partner ( ?) to your parents. They are paying 289000 for a house worth 450000 to 500000.
 
Thanks for the explaination Vonga, I misunderstood your first post. Will your parents be upset if you move too far? How have you arrived at the valuations?
 
Thank you for your advice, Vanilla. Our house is in our joint names. Obviously, we would need to speak to a solicitor and/or tax expert to clarify all the implications before anything was set in motion. At the moment, this is a hypothetical proposition. Thank you all for your valuable input.
 
The two taxes I think will be an issue will be stamp duty and CAT. Based on your proposal you and your partner are giving a gift of a value of 161000 to 211000 to your parents. The valuation of your house will therefore be very important, as will what price you sell it at to your parents. They will also face stamp duty on the value of the house at the full rate.

For you, no tax on the as long as you sell while living there or within the first year of moving out and similarly for your parents sale as per previous.
 
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