Buying a portion of parents home to relieve Seniors Money debt?

G

giddyup

Registered User
Messages
51
My mother was listening to the Joe Duffy show and is all in a tizzy. Folks took out one of these loans ~15 years ago. We had been planning to do something about it. I advised her not to get caught up in the JD stuff. The family went in eyes wide open at the time and knew that piper would need to be paid at some point.

So to my question. I would like to pay off the loan by buying a portion of their home. Loan is X. House is valued at Y. X = Z% of current home value. I would own that Z% of home going forward. Has anyone done anything like this?

It's been a long time since I've been on AAM so delighted to rediscover it in this context.

Thanks!
 
What is JD? It would be better if you put figures. Do you have siblings.
 
Last edited:
Yes - Joe Duffy - thx.
House 500k. 0 Mortgage. Loan 150k. Yes there are siblings. The whole family is ok with the general plan. Just trying to figure out best way to execute on it. I would buy 30% of value now and at some future point I get 30% of future value and 70% is split among siblings including me. Haven't thought through options too much - just starting to do that hence the ask. I'm thinking I formally buy a share, not even sure how that gets done (does name go on deed?) or I maybe gift them money to do the payoff (but a non-trivial amount of CAT kicks in) and we write up an agreement (record it in will?) that I will get 30% before the rest is split.

Any pointers or advice welcome. Just starting to think it through but I would like to help them out but in a way where my outlay is protected.
 
How are you planning on financing the purchase? If you have cash just loan it to your parents and have an agreement drawn up that you will be repaid by their estate when they pass. It may prove difficult to get a mortgage for this kind of transaction.

Do you really want to have €150k tied up for an unknown period of time?
 
Last edited:
Hi giddyup

The programme was a disgrace. It was full of misinformation and I am not surprised that you mother is in a tizzy. Any older person who heard it and had one of these loans would have thought that they were about to lose their home to "criminals" , "vultures" and "loan sharks".

The programme was about Bank of Ireland Life Loans and I was surprised that none mentioned Seniors Money from whom your mother has borrowed the money.

If I remember correctly, Seniors Money mortgages were variable rate loans and not fixed rate loans.

Therefore your mother can repay part or all of her loan at any time, without an early repayment penalty.

So the first thing to do is to check with Seniors Money what the current rate of interest is and confirm that it is variable.

Let's say it is 5%. After ten years, the €150k loan will increase to €244k.

So there is no need for a tizzy. There is no need for anyone else to get involved in a complex scheme.

If you are sitting there with €244k in a current account in AIB earning 0% and you have no plans for it, then you might as well lend it to your mother to clear the loan. She will save €7,500 a year.

If you have only €50k with no home for it, you can pay that off as well and reduce the loan to €100k.
 
Last edited:
For Bank of Ireland Life Loan Customers

Giddyup, as the principles are the same, I hope you don't mind me dealing with the issue in the same thread.

The mortgage rate was fixed at 6.9% for 15 years.

But when the 15 years fixed rate period is up, it changed to a 3% variable rate loan.

So your mother now has a mortgage of 3% on her family home. That is not a bad rate.

It is a variable rate. It can be paid off in part or in full without any early repayment fee.

If the loan balance today is €150k and you do nothing, after ten years, the balance will increase to €201k.

If you are sitting there with €200k in a current account in AIB earning 0% and you have no plans for it, then you might as well lend it to your mother to clear the loan. She will save €4,500 a year.

If you have only €50k with no home for it, you can pay that off as well and reduce the loan to €100k.

If you have a mortgage on your home at 4.5% interest, then you should not be clearing your mother's loan at 3%.

If you can make contributions to your pension scheme, you might be better off doing that, than paying off a loan at 3%.

If you have a Bank of Ireland Life Loan which is less than 15 years old

The rate was fixed at 6.9% for 15 years. If the loan was taken out 12 years ago, then there is still 3 years left at 6.9%.

But you can still pay it off early. There will be an early repayment fee but this reduces as the remaining term shortens. So ask BoI for a quote on paying it off early.
 
Last edited:
Buying the house is a bad idea.

If you do so, it will be an investment for you and any increase in value will be subject to Capital Gains Tax.

If your mother retains ownership, it will be exempt from CGT as her principal private residence.

It is also much simpler for your mother to have a loan on the house owing to you.

Brendan
 
It should be a loan and not a gift.

A gift would have CAT implications. A loan would not. (There is a theoretical usage of the annual gift exemption on the interest, the Revenue is not interested in this sort of stuff.)

A gift might also create a dispute when the will is settled.

So do a formal loan. By "formal" I mean, draw up a document yourself.

"I giddyup give this loan to my Mrs giddyup. This is a loan and not a gift. It is to be repaid when the house is sold or from her estate."

You and your mum sign it and get your siblings to witness it.

It's amazing how verbal agreements get forgotten after ten years.

Brendan
 
I would seriously advise Giddyup to get a legal document drawn up. Agree that it should be a loan and not a gift. What happens if the mother having paid of Seniors Money goes back to get another loan. And that loan increased to equal the value of the home, but they have their security on it.

How would Giddyup’s loan affect Fair Deal.

If you ask me this is all pretty stupid when we are talking about a 500k house, sell it, buy an apartment suitable for elder needs and pay back the loan. I suppose the mother is in a large four bed unsuitable to her needs, costly to repair, astronomical to heat and a constant worry. A brand new one bed, brings down worries, and costs, so she can live better.
 
Brendan - thanks so much for all your responses. Documented/witnessed loan seems like a simple route to take so will discuss this with the family.
 
Bronte said:
If you ask me this is all pretty stupid when we are talking about a 500k house, sell it, buy an apartment suitable for elder needs and pay back the loan. I suppose the mother is in a large four bed unsuitable to her needs, costly to repair, astronomical to heat and a constant worry. A brand new one bed, brings down worries, and costs, so she can live better.
Click to expand...

Disparaging and assumptive. Thanks for your input.
 
You must log in or register to reply here.
Back
Top