Parents transferring mortgage/house to child who then makes it buy to let?

Hi All

I was wondering if you could give me some advice with a particular problem that i am having.

My parents own their own house they are both in their 50's at this stage, my dad runs his own small biz but for the last year the business isn't making much money and making ends meet is proving difficult, because of his age the bank PTSB is unwilling to negotiate on the term of the mortgage his monthly repayments are 1400 and the morgage has 19 years left to run.

So what my father has suggested to do is to transfer the mortgage and the house into my name, is this possible?

If the house was transfered into my name i would then change the mortgage to buy to let and let it to my family i.e. they would just have to make the interest repayments.

The house is valued at 300k and they have a mortgage of around 190k

any advice would be great.

Thanks

Brehon

Re: Help me out AAM

Hi Brehon - Please don't duplicate posts. I've closed the duplicate.

I don't fully understand. Who is living in the house you mention today? Do your parents own the house personally? Who will be living in it when you let it out? Who will be repaying the interest-only mortgage?

You'd certainly want to consider the tax impacts of renting it out at a minimum.

Re: Help me out AAM

My Parents

My parents own the house

I will be paying the interest morgage.

Any ideas?

Re: Help me out AAM

This seems fairly complex to me. Are you suggesting that you buy the house off them, or they simply transfer their interest in the house to you free of charge?

If the latter, any independent advisor should advise them that they would be crazy to write off their ownership of the house, regardless of your best intentions to help them out. There may also be gift tax/CAT implications for you in this transaction.

If you rent the house to them, your rental income will be taxable, though the interest you'll be paying can be written off against your tax. If you stick with the interest only mortgage, you'll be incurring interest costs of about €550 per month for the foreseeable future - Does this make sense? How long do you plan to continue with interest-only for? How will you ultimately repay the debt?

Is the problem with the business temporary or ongoing? Have they considered selling up the business?

There may also be a problem with the lending institution you would apply for the mortgage from. If your parents transferred the property into your name and continued to live in it, there may be rights of residence issues that the Lender would not be happy with.

Why not approach their bank about a remortgage on an interest only basis, and/or offer yourself as guarantor.

A good financial advisor should be able to help you. Maybe approach your bank or get a recommendation of a good mortgage broker.

Hi Guys

Thanks for your imput,

I would have the mortgage at interest only and when that runs out i will sell the house and buy another to put them into, the problem with remortgaging is there age 55.

"Why not approach their bank about a remortgage on an interest only basis, and/or offer yourself as guarantor."

Would this actually work do you think?

But wouldn't they be able to claim social welfare and then pay me this to cover my interest repayments?

I talked to a Broker and he said that the best way for me to do it was to buy get a mortgage for 190k and they sell the property to me for that amount its worth 300k. What do you think?

Also with an interest only mortgage when it runs out in 25years time i can take another mortgage out at interest only again right?

Thanks

Brehon

What do you do for a living and how much do you earn? How old are you and do you have any loans in your name? It is possible to take over the mortgage - subject to the lender's criteria being met - but your parents would have to waive their right of residence in the property and you'd need to check the tax and legal implications. By the way a €190,000 mortgage with 19 years to run should be costing €1147 gross - not €1400 per month.

Sarah

www.rea.ie

I have two other properties one in belfast and one nexty door to my parents.

My income from the house next door is 900 euro and i have an interest only mortgage which costs me 526 a month.

The property in belfast is also Buy to let and costs me 133 pound and i get rent of 260 pound a month from that.

I work full time and my salary is 42000 and i get a salary increase between 0-10% a year with a bonus of the same.

Thanks

Brehon

You should qualify on your income and the loan to value is good at 63%. The only lender who will do interest only for the term of the mortgage (on a home loan as opposed to an investment) is Bank of Scotland and I don't think they'd have an issue with your parents renting from you. Their tracker rates are 3.25% for loans over 60% and 3% for sub 60%.

Sarah

www.rea.ie

Is it the best why forward do you think?

Just on your professional opinion?

Thanks

Vernon

brehon6789 said:

I would have the mortgage at interest only and when that runs out i will sell the house and buy another to put them into, the problem with remortgaging is there age 55.

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What will you use to fund their new property? You'll still have the equivalent of just over €100k of equity in today's terms to put towards the new house. Even if house prices continue to rise and you have a lot more equity in cash terms, don't forget that the prices of the replacement houses will have risen correspondingly too.

Sarah W said:

It is possible to take over the mortgage - subject to the lender's criteria being met - but your parents would have to waive their right of residence in the property and you'd need to check the tax and legal implications.

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But Sarah, wouldn't any independent advisor who advises the parents tell them they would be crazy to give up rights of residence to their current home. No disrespect to Brehon's best intentions to help out his parents, but the parents need to ensure that any arrangement does not leave them losing their rights to their home.

brehon6789 said:

I have two other properties one in belfast and one nexty door to my parents.

My income from the house next door is 900 euro and i have an interest only mortgage which costs me 526 a month.

The property in belfast is also Buy to let and costs me 133 pound and i get rent of 260 pound a month from that.

Click to expand...

So how much equity do you have between these two properties? Have you thought about selling up your investments to clear (or dramatically reduce) your parents outstanding mortgage and having them leave their property to you in their will. That way you're not enriching the banks with interest payments (on both sides) each month and your parents still have their rights to their home protected. Obviously it won't please the brokers or the banks as they won't make any money out of the deal (in fact, they'll lose money).