Gift or short term loan from brother to clear mortgage and trade up

T

Themindboggles

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Hi all,
A sibling has given my husband and I some money to clear our mortgage to enable us to move to a bigger home. Balance on mortgage is €127,000. We would have kept the house and rent would cover the mortgage only we were not in the running to do this when the bank stress tested two mortgages. Basically the existing house is preventing us from moving. The idea is that once we move (we have already gone sale agreed on a new home) we would sell our existing house and pay him back - this should happen within a few months. Market value of the house would cover the amount he loaned us. We're not sure how to manage this for the mortgage application. I was asked in the bank when clearing the mortgage the other day about the source of the money for money laundering purposes. I explained and when the lady said 'I'll note it as a gift' I asked her not to, mindful of Capital Gains Tax implications which I felt the bank would be nervous about for the next mortgage. Now I'm not sure which was worse... after all a short-term loan from a family member is still a debt in the eyes of the bank, correct? Can anyone give any advise on how we should manage this?
 
If there was any query by revenue, actual facts are used and not words written by a bank official. In any case, the bank only reports if they are supicious of where the money came from, so for ease of paperwork, "gift" is probably right.

The only "gift" is the value of the interest and this would be well under limits.

Your bank statement and your brother's bank statement will show the tansaction. Similarly when the hosue sells, the reverse transaction will be shown.

Nothing whatsoever to worry about especially as the giving and return will take place in the same tax year
 
Thanks for the replies, that's a relief! Just waiting on the closing statement for the mortgage to arrive so we can submit the full application for the new mortgage. We just got the contracts for sale through on the new house so hopefully we get approval quickly!!!
 
What happens if your existing house doesn't sell for what you think it should sell for?
Is there enough equality in your existing house to pay him back, if you need to sell it for 10K less, or 20K less, or 30K less ?
 
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