Gift and a loan to buy a house

[Leslie91]

Apologies if this is not the right forum to be in...

We are fortunate to be in the situation whereby a parent can help us buy a house costing €400K with a gift and a loan. We will be taking the full €225K gift allowable and the balance as a loan if possible, that we will be repaying.

Can someone explain how this €175K is treated by Revenue, in terms of it being 'free use of money' from parent to child. Is there a set commercial interest rate applied when working out if the allowance of €3K per person covers it etc?, does it need to be documented/registered anywhere etc?

Many thanks in advance.

PS. Dwelling house relief is not an option.

 

[Joe_90]

A gift to a child of €225,000 would use €222,000 of their threshold assuming no prior gifts. Your husband may have a threshold together with the €3,000 per annum per person small gift exemption.

The deemed gift on the €175,000 is the amount of interest foregone by the parent so say 1%. You should have a written agreement confirming the terms of the interest free loan so that there is no dispute at a later date. The agreement should be witnessed by a third party in case your parents were to die and a query arise about the loan.

 

[Leslie91]

A gift to a child of €225,000 would use €222,000 of their threshold assuming no prior gifts. Your husband may have a threshold together with the €3,000 per annum per person small gift exemption.

The deemed gift on the €175,000 is the amount of interest foregone by the parent so say 1%. You should have a written agreement confirming the terms of the interest free loan so that there is no dispute at a later date. The agreement should be witnessed by a third party in case your parents were to die and a query arise about the loan.

Tks so much for replying. So the gift to us (from the loan) is actually the cost to the donor of giving the money away as a loan (i.e. current deposit rates for example). If we are repaying the loan with interest (eg. 3.5%) then is that deemed income on part of the donor? we're thinking something like 175K at 3.5% over 15 yrs or €1250 a mth approx.