Mortgage to buy out a sibling - bank wants her to sign it over first

[SCOTTPLASMA]

Inherited a house between two siblings. One sibling is buying the house from the other sibling. The house value is €220000. 50/50 split. The sibling who is purchasing requires a mortgage. He is looking for a mortgage of €220000 as they want to do substatial renovations. The banks have said if the other sibling signs over the house it would make things less complicated and he would get the full mortgage. My partner is the other sibling. My concern is if the asset is signed over to the sibling who is applying. Once the morgage is drawn down would that then be considered a gift from the sibling or is it still considered as my partners inheritance or part of the estate. Is there anything else that is applicable ? I know there is also a trust issue. Thanks

 

[Brendan Burgess]

Johnny and Mary own a house together which is worth €220k.

Johnny wants to buy out Mary, so he needs a mortgage of €110k.

He is going to do a further €110k on renovations, so he needs a mortgage of €220k.

And he will then have a house worth €330k.

Mary renounces her interest in the house. Then Johnny would be getting a gift of €220k which might be subject to CAT depending on who left the house.

Johnny later gives Mary €110k , so that would be a gift from Johnny and Mary would be subject to CAT.

Mary should sell her share of the house to Johnny for €110k - no tax implications.

Johnny owes Mary €110k.

The bank gives €220k mortgage to Johnny and he pays Mary.

I don't see why the bank would insist on this? They will give the mortgage money to Johnny's solicitor and insist that it not be passed on to Mary until the conveyance is completed.

Brendan

 

[Monbretia]

Strange thinking by the bank, it's surely the same as buying any house and renovating. The solicitor will ensure that the house is fully registered in the mortgage holder's name when drawndown.

Has it something to do with needing a deposit maybe based on if they owned the full house there would be a lot more equity when doing the application based on final renovated value? Maybe they need a deposit if going ahead as a purchase rather than as an equity release which it would be if owned outright.

I still wouldn't do the transfer first, let the bank figure it out and make it a condition of loan offer. If they won't do it try other banks.

 

[SCOTTPLASMA]

Thanks for explaining. Both were left an equal share in the property. I thought that would be the case in relation to tax.

As we are only hearing 3rd party it's hard to speculate. I suspect the morgage advisor wasn't thinking about tax liability just about the amount being lent.

It's a now a non runner from our side.

It could be deposit related. It should be a simple transaction as Brendan stated. When I heard the amount they were looking to borrow alarm bells were ringing as it would make getting the morgage more difficult in the first instance.

Thanks again