Sticky Mortgage Situation

Hi,

I have just come back from Germany after 3 years there and am currently looking for work. I want to buy a house with my sister Fionnuala. My sister Clodagh has agreed to go on the mortgage until I am earning. We then plan to swap the names. We have already put a deposit on the house we want so time is something we don't have much of!

The cost of the house is 490k.
Fionnuala & Clodagh have mortgage approval for 420k.

If I contribute 20k can I also somehow include my name on the mortgage and deeds of the house?

If I can include my name, how difficult /easy will it be to remove Clodagh from all the mortgage and house paperwork in the future?

If my name is not included from the start, how difficult /easy will it be to remove Clodagh from all the mortgage and house paperwork in the future?
Someone has suggested to us that we will need to remortgage the house in order to remove Clodagh's name and add mine.
Another person advised that this would be considered as a "gift" from Clodagh to me and so there would be huge tax implications.

Would there be any other tax implications?

Thanks for any advise.

Aoife

Are you and Fionnuala going to be living in the house? If so I'd recommend all three of you go on the mortgage but only you and Fionnuala go on the title deeds. Then, when you have the income to cover the mortgage Clodagh can be taken off the mortgage with no tax implications as she was never an owner of the house.

Sarah

www.rea.ie

Hi Sarah,

Thanks for the reply - I'm the other Sister Clodagh. Do you think that the bank would be happy for all three of us to go on the Mortgage, although Aoife does'nt have an income as yet?

Aoife and Fionnuala will be paying the Mortgage and Living in the house. I'm just helping them out by being on the mortgage application.

Is it possible for that I could just be on the Mortgage application and not down as occupier?? And therefore not on the deeds of the house

Thanks

Clodagh

Yes - it's an unusual situation but as long as it's presented correctly I don't think the lenders would have an issue with 3 on the mortgage and 2 on the deeds (I've done a couple of cases very similar to this). Also if Aoife and Fionnuala are first time buyers it preserves their status with regard to Stamp Duty and tax relief.

Sarah

www.rea.ie

Hi Sarah,

Thanks for all the useful information. Maybe we should come in and have a chat with you, were are you based??

We are all first time buyers - if it's possible to put all three of us on the application and only Aoife and Fionnuala on the deeds, would I lose my FTB status - and if so what are the implications of that?

Would there be any tax implications involved?

I would be looking to purchase or make an investment in some property over the next 6-12 months - would I be better off staying on the Mortgage - even though I won't be paying anything towards the house to use as collateral?

If I'm down on the mortgage application would I be able to get another mortgage easy enough?

It all seems so confusing so really appreciate you advice

Thanks




Clodagh

I'm in Swords Clodagh but there are REA offices in Dublin 2, Bray, Gorey, Waterford and Newbridge.

By not going on the deeds you will preserve your FTB status however your liability to the mortgage will impact on your future borrowing capacity as you are legally liable for the full amount (as are Aoife and Fionnuala). The answer is to get Aoife working ASAP and you coming off their mortgage before you buy yourself.

(Note to Aoife - get a job! )

Sarah

www.rea.ie

Hi,

We are in the process of going ahead with this agreement. It's seems that I can stay off the deeds of the house. We are going to a solicitor over the next few days. Can anyone give me the low down on questions I should be asking to ensure that we get the most out of our time with the legal eagle.

See above post to explain.

Go raibh mile maith agaibh.


Clodagh

Hi,

It turns out that the mortgage lenders will not allow me (Aoife) to go on the mortgage - although I have a job now but am on 6 months probabtion.

So Clodagh and Fionnuala will go on the mortgage and Fionnuala will go on the deeds.

Once I am made permanent I will transfer the mortgage into my name and will also go on the deeds.

What gift tax would apply?
Would I have to pay stamp duty?
Are there any other taxes that I would have to pay eg CGT etc?

Thanks,

Aoife

Which lender(s) are you talking to?

Sarah

www.rea.ie

Hi Sarah,

We are going through a broker who is using the EBS.

Thanks,
Aoife

So why not ask your broker to answer your questions and make him/her earn their money?

It seems like you've used SarahW to answer some questions and then you go to a different broker. Fair.

Hi,

The broker we are using doesn't know the answer to the questions asked -as these are really for someone with specific knowledge.

I posted the questions in the hope that someone with this knowledge would reply.

Aoife

Why are you proceeding with a lender who can not facilitate the set up that best suits you and does not offer the most competitive interest rates?

Sarah

www.rea.ie

Hi Sarah,

This broker offered us more than any other. They said they were 98% certain I would go on the mortgage so unfortunately we didn't continue to shop around. The signing of the contracts is now overdue so we're a bit stuck!

Aoife

If I read it correctly you will effectively by buying a third of the property (or a half if you are replacing Clodagh) so I can't see that there would be any gift tax (you're not being gifted anything) or any CGT when you sell, assuming the property is your residence whilst you own it. Stamp duty (I think) will be due on 1/3 or 1/2 of the property value so if this is under €317,500 you will be exempt but check with your solicitor.

Sarah

www.rea.ie