Buying my parents' house at a discount

J

Jebus111

Registered User
Messages
12
Hi,
My parents are relocating and selling their primary residence. They got house valued at market value. They are giving some money to each of their children. I would like to buy the house. Can I take the money they are giving me as inheritance off the price of the house or must I take a mortgage out on the whole thing and they give me the money after.
Not sure I can afford the whole mortgage on its own.

Thanks you
 
One further question, I'm married so would that affect parents giving me money if mortgage in both our names?
I've no experience of any of this so thank you for help.
 
Jebus111 said:
One further question, I'm married so would that affect parents giving me money if mortgage in both our names?
I've no experience of any of this so thank you for help.
Click to expand...
Are you getting cash, or a reduced price on purchasing their house?
From tax perspective, cash is cleaner. Parents gift to you alone, utilising your Category A allowance. Then you're free to do what you like with it, including sharing with your wife, or purchasing a house together. There's no CAT arising between married couple.

If its a reduction in price of house there's a bigger CAT impact , because the gift to your wife (50%) is category C, which has a much lower threshold.
 
T McGibney said:
Not if it's gifted to him first. He can then if he wishes transfer 50% to his wife without tax implications.
Click to expand...
How would that work in practice? They need a mortgage, so the gift is a reduced selling price, not full house.
Would they have to own the house in unequal shares?

Sorry, I might be missing something. Its been a long day!
 
Jebus111 said:
They got house valued at market value. They are giving some money to each of their children. I would like to buy the house.
Click to expand...

It's better to give the numbers so that you can get more informed answers.
What is the market value of the house?
How much do they plan to give each of you?

And how much cash do you have as a deposit.

If they are giving you €10k each, it doesn't really matter much.
If they are giving you €200k each, it matters a lot.

Brendan
 
RedOnion said:
How would that work in practice? They need a mortgage, so the gift is a reduced selling price, not full house.
Would they have to own the house in unequal shares?

Sorry, I might be missing something. Its been a long day!
Click to expand...
Like yourself I don't particularly have the energy to think this through fully right now but I'd assume the sequence should be 1. House is transfered to son. 2. Son transfers 50% to spouse. 3. Son and spouse draw down mortgage 4. Son uses this to repay his parents the value of house minus the agreed gift element.

I am not a lawyer. Professional advice and guidance is essential here.
 
Thanks Brendan. House 600k. Gifting 100k. We were hoping to treat it as 500k asking price but will not now. Have approx 150k deposit. Need both of us on mortgage for approval. Still doable but would have liked reduced mortgage.
 
I don't see the problem (But like Tommy and Red ... it's late at night and I might be missing something.)

1) Your parents sell the house to the two of you for €600k
2) You pay a deposit of €150k and borrow €450k
3) Your parents gift you on your own €100k - so no CAT for your wife.
4) You pay the €100k off the mortgage , so your mortgage is down to €350k (Take out a variable rate mortgage at least initially so there will be no penalty paying off the €100k. Even better take out a mortgage with €350k at a fixed rate and €100k at a variable rate.)

Alternatively, if your parents have €100k cash, they gift that to you now before the transaction.
Then you get a mortgage for €350k which will be <60% LTV instead of <80% LTV.

Brendan
 
I really appreciate all your input. It's all new to us. I thought fixed was the way to go with rates on the rise. Will look into variable or a mix of both.
 
Jebus111 said:
I really appreciate all your input. It's all new to us. I thought fixed was the way to go with rates on the rise. Will look into variable or a mix of both.
Click to expand...
If you've everything lined up, and your parents on board, you could be paying off the lump sum within a day or 2 of drawing down. Unless there's a shock event in the markets, the chances of any material break fee is minimal.
 
RedOnion said:
If you've everything lined up, and your parents on board, you could be paying off the lump sum within a day or 2 of drawing down. Unless there's a shock event in the markets, the chances of any material break fee is minimal.
Click to expand...
If the fixed-rate period was long, e.g., 7 or 10 years, there could be a large-ish break fee – even if you pay off the lump sum quickly after drawdown. In my experience it can take some time for overpayments to be applied, during which time interbank interest rates could have moved a bit.

Brendan Burgess said:
Even better take out a mortgage with €350k at a fixed rate and €100k at a variable rate.
Click to expand...
Brendan Burgess said:
Alternatively, if your parents have €100k cash, they gift that to you now before the transaction.
Then you get a mortgage for €350k which will be <60% LTV instead of <80% LTV.
Click to expand...
Either of these two approaches is safer from a break-fee perspective. And the second approach should allow the OP have a loan-to-value ratio of less than 60%, which would make them eligible for lower mortgage interest rates.
 
You must log in or register to reply here.
Back
Top