Help please. Buying house from parents.

B

Bcoll05

Registered User
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I know this is an old post but I badly badly need advice on the same subject.

Myself & my wife are looking to buy a house from my father which he has built & rented for the last 17 years.
We have been approved a mortgage up to 300k.
The house because of the area is valued around 300k.
My father would like to get 150k for the property & pay off his mortgage for my parents I would like 70k to renovate the house.
What I'm looking for is the best way to buy the house? I don't want to be handing away thousands to change the first name on the deeds.
I want my parents to have a bit of money out of it & not be burdened with debt.
Thanks you.
 
You need to give more information.

How much cash do you have?
What are your incomes?
When did your father build the house?
How much did it cost him to build it? This is necessary to compute the capital gain.

Bcoll05 said:
My father would like to get 150k for the property & pay off his mortgage for my parents
Click to expand...

Can you spell this out. It's confusing. "My father ... his mortgage... my parents"
Are you saying that he has a mortgage of €150k on the property and he wants to pay it off?

What do you mean "changing the first name on the deeds"?
If the house is in your father's name and he sells it to you and your wife - it's a full change of ownership and not just a bit of paperwork.

Brendan
 
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Beware of some potentially dire tax consequences; market value will be applied so potentially CGT for your Dad, and stamp duty plus potential CAT for you and almost certainly CAT for your wife.

It’s essentially a €75k gift to you (probably covered by your Group A threshold) and the same to your wife with tax leakage on that front.
 
Hi Gordon

If the father gifts the house, he will be subject to CGT on the increase in value from the purchase price to the value on the date the gift is made.
While the wife will be subject to CAT, will she not get a credit for the CGT paid as both taxes arise from the same event?

Brendan
 
Apologies Brendan
My parents would like to get 150k for the house they would be selling to myself & my wife to pay off there own mortgage on there own house & debts.
I don't see what our incomes has to do with it but we are both working & have money saved for a deposit.
 
Your incomes determine how much a lender might give you.

The amount of the deposit is important. If you have €70k for example, you could pay for the work out of that.

Brendan
 
Hi Gordon.
Even tho we have a joint mortgage approved can the house be put in just my name to avoid my wife paying a tax?
I know it's a mine field I'm just looking for the simplest way out without us all paying massive taxes.
Any suggestions considered.
 
Assuming your father's base cost for the house is €100k

Your father should do the renovations cost €70k bringing his base cost up to €170k, he should then sell you both the house. For market value probably still €300k. He will have to pay €40k CGT.

You then have not received any gift so no gift tax.

Your father then pays the builder for the renovations, pays off his own mortgage, pays the CGT leaving him with €40k.

If he then loans the €40k to you at interest of say 2%, he can gift you and your wife €3k each per annum with no tax implication. Until the balance is cleared. Be sure to use the €40K to reduce the mortgage not as a windfall.

A bit messy, but you end up in the right place and the tax cost is "just" €40k
 
Brendan Burgess said:
Hi Gordon

If the father gifts the house, he will be subject to CGT on the increase in value from the purchase price to the value on the date the gift is made.
While the wife will be subject to CAT, will she not get a credit for the CGT paid as both taxes arise from the same event?

Brendan
Click to expand...

She should alright...good spot
 
Without knowing the base cost of the house it's a bit of a shot in the dark. Built 17 years ago!!!

Let's assume there is a gain of €100k for him based on a value of €300k.

So he has a CGT liability of €33k.

He "sells" you and your wife the house for €150k and you pay the tax so €183k.

The gift is €300k - €183k - €3k - €3k / 2 = 55.5k each.

So you have no CAT under the threshold and your wife €55.5k - €15k = €40k x 33% = 13k - 13k (CGT of father) = 0.

Then the house is in your joint names you have to come up with €183k and €70k for the renovations and €3k for stamp duty and probably €3k for your legal and your dads legal.
 
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