Me Funding Daughters Apartment Purchase

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glengar

Registered User
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Hello

I recently came into some money and as my Daughter is thinking of buying an apartment I was considering funding her

Is it possible for me to lend her the purchase price and she repay me as against getting a normal mortgtage If its possible who would i have to see to cover all legal issues etc

Thanks for help
Glengar
 
glengar said:
Thanks for that are there any tax issues to think about
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As long as it's a genuine loan there shoudln't be an issue, but your solicitor will help you with structuring it in the correct way. What you haven't asked us is if it's a good idea for you to do this. Is it?
 
To follow up on Bronte's point.

It might be an idea to put the property in joint names. I know of someone who did just that and when circumstances changed, was very glad he had. The problem wasn't between father and daughter, it was between daughter and her husband. Basically when the couple split the husband claimed a half share, but because the father in law was joint owner he got nowhere.
 
If it's an interest free loan, then would the interest that would have been paid in normal circumstances (the gift component) not be taxable, provided it was above the annual threshold?
 
cremeegg said:
To follow up on Bronte's point.

It might be an idea to put the property in joint names. I know of someone who did just that and when circumstances changed, was very glad he had. The problem wasn't between father and daughter, it was between daughter and her husband. Basically when the couple split the husband claimed a half share, but because the father in law was joint owner he got nowhere.
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Thanks for reply and advise I had thought about that and if she got a mortgage the same thing could happen as in any partner could lodge a claim but I presume a solictor could set it up that I had a hold on the property as I held the loan or maybe its too complicated
 
WorstPigeon said:
If it's an interest free loan, then would the interest that would have been paid in normal circumstances (the gift component) not be taxable, provided it was above the annual threshold?
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No. You would calculate the deemed benefit (in this case free use of property) using a reasonable approximation of call deposit rates (e.g. 0.5%). If it's a loan from the OP to his/her daughter, it would have to be more than €600,000 before a tax issue arises.

The OP specified a loan/repayment structure, but if a gift was envisaged, it could probably be done entirely tax free by way of the dwelling house exemption.
 
A few ideas to consider

1) You could buy the apartment in your own name. She could live in it rent free. The notional rent over €3k would be subject to CAT but would be well within the CAT thresholds. After three years, you could give her a present of it, and there would be no CAT.

Big downside: Your money is gone. When you give it to her, you would be liable for CGT on any increase in value.

2) You lend her the money. It is secured on the house as in a normal mortgage. She repays it to you over time. You do up a fully binding legal agreement.

Don't worry too much about her husband/boyfriend claiming ownership unless she is currently deeply involved with some insolvent guy whom you don't trust. Your mortgage has priority. You can issue repossession proceedings and force the sale of the property eventually. He might get half the equity.

3) You could buy it jointly, but that is protecting against a theoretical risk, while causing very real problems e.g. How would she get it eventually into her own name? When it's sold, you would be liable to CGT on half the gain.
 
Gordon Gekko said:
No. You would calculate the deemed benefit (in this case free use of property) using a reasonable approximation of call deposit rates (e.g. 0.5%). If it's a loan from the OP to his/her daughter, it would have to be more than €600,000 before a tax issue arises.
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Ah, interesting. I hadn't realised that; I assumed you'd have to use realistic market rates for a home loan (presumably about 3-4%).
 
Thanks Everybody for all the help I am clueless regards this anyone know of a Financial advisor who could help with setting this up
 
You don't need a financial advisor. You need a solicitor.

But first you have to decide which option you wish to go for.

The solicitor who acts for your daughter in buying the house should be able to do the legal work to reflect what you want to achieve.

Brendan
 
The solicitor acting for the daughter might not want to be involved in setting up the mortgage agreement in case it's seen as a conflict of interests.
 
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