Hi
Any guidance gratefully received on my 2 questions! I posted in another section, but think it might be more suited here as want to know the tax implications for both myself and my parents. We know separate legal advice is required too, but want to get a pure financial view.
We have paid our mortgage off on our current home (lots of scrimping & saving) and are considering trading up. Our house is on the market and are bidding on a property at the moment. We are fortunate that our parents are willing to provide us with an interest free loan to purchase our next home.
Q1) We have mortgage approval for €200k which is what we need (to refurbish the new property), but what are the tax implications if we decide not to avail of the mortgage and take it from my parents instead? We'd plan to pay them back @1200 a month (for the next 2 years or so) and then up it to €2500 when my wife goes back to work. I know we have to pay a notional interest rate, what is it? Is it calculated each month or at the end of the year? Do my parents have to pay tax on that interest? If so, at what rate? Or will all this be covered by exemptions? If I avail of this and pay it back, what happens to my share of any potential inheritance (have I used up my lifetime entitlement by availing of this even though I paid it back?)
Q2) Second, even if we decide to take a mortgage with EBS, we may still avail of a "interest
free bridging loan' from my parents until our house is sold. This could be up to €275k but will be paid back immediately on the sale of our house.
Will i need a tax accountant every year/have to file a form every year.
Just wondering if a mortgage might be simpler option?
Thanks in advance
Any guidance gratefully received on my 2 questions! I posted in another section, but think it might be more suited here as want to know the tax implications for both myself and my parents. We know separate legal advice is required too, but want to get a pure financial view.
We have paid our mortgage off on our current home (lots of scrimping & saving) and are considering trading up. Our house is on the market and are bidding on a property at the moment. We are fortunate that our parents are willing to provide us with an interest free loan to purchase our next home.
Q1) We have mortgage approval for €200k which is what we need (to refurbish the new property), but what are the tax implications if we decide not to avail of the mortgage and take it from my parents instead? We'd plan to pay them back @1200 a month (for the next 2 years or so) and then up it to €2500 when my wife goes back to work. I know we have to pay a notional interest rate, what is it? Is it calculated each month or at the end of the year? Do my parents have to pay tax on that interest? If so, at what rate? Or will all this be covered by exemptions? If I avail of this and pay it back, what happens to my share of any potential inheritance (have I used up my lifetime entitlement by availing of this even though I paid it back?)
Q2) Second, even if we decide to take a mortgage with EBS, we may still avail of a "interest
free bridging loan' from my parents until our house is sold. This could be up to €275k but will be paid back immediately on the sale of our house.
Will i need a tax accountant every year/have to file a form every year.
Just wondering if a mortgage might be simpler option?
Thanks in advance