The cost of removing sister from joint mortgage.

B

Bobby Peru 2020

Registered User
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Both a house in 2004 with my sister, 50:50 on deposit and stamp duty. She lived in the house and paid half the mortgage for 3 years before moving out. I’ve continued to pay the full mortgage since then. Suited us both fine as I was on a tracker and she wasn’t in the market to buy. She now is closing on a house with her husband but needs to be off the deeds as soon as possible to make this happen and is not looking for any money off me. Luckily I can remortgage for the remaining €230,000 though I’ll lose my tracker in the process. How can I calculate the capital acquisition tax I’ll be liable and will I have to pay stamp duty again on my home. My brain is racing,
Thanks
 
It’s impossible to say without more information. What was the house worth then, what’s it worth now, etc?
 
Bought the house for €440,000. Current valuation would be €480,000. I’ve put in about €40,000 worth of home improvements that would’ve increased the value. Their mortgage payment total is 1/10th of what I’ve paid off. Remaining mortgage is about €230,000
 
Hi Bobby

The first question is what gift is she giving you, if any.

Scenario 1
You could argue that you have a house worth €480k with a mortgage of €230k, so the equity is €250k and therefore you should be paying her €125k for her half share in the equity.

So, if you don't pay her this, you could be seen as getting a gift of €125k.

The Capital Acquisitions Tax between siblings is €32,500

Therefore your CAT calculation would be

Gift €125k
Less €3k small gift exemption
Less €32,500 threshold ( assuming you have received no other gifts from siblings, aunts or uncles before)
Taxable: €90,000
CAT @33% = €30,000

Scenario 2
You could argue that as you have paid the mortgage, you are entitled to the equity in the house other than the increase in value. But there has been no increase in value as you paid €440k for it and spent €40k on it.

In this case, no CAT would be due.
 
Bobby Peru 2020 said:
Luckily I can remortgage for the remaining €230,000 though I’ll lose my tracker in the process.
Click to expand...

Are you absolutely sure about this?

Which lender are you with?

If you meet the lending criteria for a loan of €230k, some lenders can make a decision to leave you on your tracker.

Having said that, it would take a lot of persuasion and a lot of time to get their agreement, and time seems to be of the essence here.

While a tracker is valuable, it's not as valuable as it once was.

With rates of 1.95% available, if your tracker margin is 0.75%, the loss of the tracker will cost you about €2,700 (1.2% of €230k ) in the early years but this cost will reduce quickly as you pay down the mortgage balance.

Brendan
 
It might be helpful to know their total outlay for deposit, stamp duty and total repayments comes to roughly €53K
Brendan Burgess said:
Hi Bobby

The first question is what gift is she giving you, if any.

Scenario 1
You could argue that you have a house worth €480k with a mortgage of €230k, so the equity is €250k and therefore you should be paying her €125k for her half share in the equity.

So, if you don't pay her this, you could be seen as getting a gift of €125k.

The Capital Acquisitions Tax between siblings is €32,500

Therefore your CAT calculation would be

Gift €125k
Less €3k small gift exemption
Less €32,500 threshold ( assuming you have received no other gifts from siblings, aunts or uncles before)
Taxable: €90,000
CAT @33% = €30,000

Scenario 2
You could argue that as you have paid the mortgage, you are entitled to the equity in the house other than the increase in value. But there has been no increase in value as you paid €440k for it and spent €40k on it.

In this case, no CAT would be due.
Click to expand...
thanks for that Brendan, really helpful. Obviously scenario 2 is more to my liking.
No gift has been received. If I was forced down scenario 1, could we say she gifted my wife a one time gift of €16,000 as she’ll be replacing my sister on the mortgage?

To date I’ve paid in €259K as opposed to her €25K. I’d love to think the equity would be viewed by revenue using the ratio of 10:1, (this is all very easy to prove) am I being hopelessly optimistic?
 
Brendan Burgess said:
Are you absolutely sure about this?

Which lender are you with?

If you meet the lending criteria for a loan of €230k, some lenders can make a decision to leave you on your tracker.

Having said that, it would take a lot of persuasion and a lot of time to get their agreement, and time seems to be of the essence here.

While a tracker is valuable, it's not as valuable as it once was.

With rates of 1.95% available, if your tracker margin is 0.75%, the loss of the tracker will cost you about €2,700 (1.2% of €230k ) in the early years but this cost will reduce quickly as you pay down the mortgage balance.

Brendan
Click to expand...
Yes, mortgage was with KBC originally, but they wouldn’t play ball due to financial difficulties I found myself in back in 2017.
New mortgage will be with BOI at 3.2% fixed. Was refused by a lot of lenders so not exactly in a position to haggle
 
NoRegretsCoyote said:
And certainly worth much less than when she moved out in 2007.
Click to expand...
This is what I find frustrating. It’s been in negative equity for a long time and only recently increased in value. I’m not in a position to sell, either financially or from a time in life aspect as we’ve put down roots, schools etc. It feels like I’m really paying for price increases that have no actual gain for me.

I’ve been reading about dwelling house exemption in the hope that it is a way out of this. I’ve lived in the house for the last 16 years and will do so for the next 6 at least. But I’ve a feeling that only applies to parents and children and the parent has to be dead.
 
Bobby Peru 2020 said:
This is what I find frustrating. It’s been in negative equity for a long time and only recently increased in value. I’m not in a position to sell, either financially or from a time in life aspect as we’ve put down roots, schools etc. It feels like I’m really paying for price increases that have no actual gain for me.
Click to expand...
In practical terms the question of how well or how badly you or your sister has done depends a lot on where you start and stop the clock. I have sympathy that you've been shouldering all of the burden but haven't seen any upside.

I think what you really need to know is a precise answer for CAT purposes. Hopefully another poster can help.
 
NoRegretsCoyote said:
And certainly worth much less than when she moved out in 2007.
Click to expand...
This is what I find frustrating. It’s been in negative equity for a long time and only recently increased in value. I’m not in a position to sell, either financially or from a time in life aspect as we’ve put down roots, schools etc. It feels like I’m really paying for price increases that have no actual gain for me.

I’ve been reading about dwelling house exemption in the hope that it is a way out of this. I’ve lived in the house for the last 16 years and will do so for the next 6 at least. But I’ve a feeling that only applies to parents and children and the parent has to be dead.
NoRegretsCoyote said:
In practical terms the question of how well or how badly you or your sister has done depends a lot on where you start and stop the clock. I have sympathy that you've been shouldering all of the burden but haven't seen any upside.

I think what you really need to know is a precise answer for CAT purposes. Hopefully another poster can help.
Click to expand...
You're right. It really depends on what you recognise as the valuation date. Ideally for me it would be the date she stopped paying the mortgage and moved out of the house in 2008, That was after the crash and the market value would've been around €360K (negative €80K) and therefore not much of a gift at all. If you view the valuation date as when I could financially remove her from the mortgage then we'd be up to about €470K

time will tell.
 
Bobby Peru 2020 said:
It feels like I’m really paying for price increases that have no actual gain for me.
Click to expand...

What did your sister gain?
She paid 50% of the deposit and she is getting nothing?

You had a cheap tracker for the last few years, so you have got the accommodation at a very cheap price.

In fairness, your sister should be looking for a payment from you.

Brendan
 
Sorry Brendan, when I say gain, I mean the gain in value from when I originally bought. Notwithstanding it's a fair point.
If I was in a position to pay it back to her I would. It was always my intention down to road,
I won't lie, her need to get off at all costs suits me financially right now. But in my less guilty moments I tell myself she did throw in the towel
while we were in negative equity, and I suppose she got a good credit history of meeting mortgage repayments even though she didn't.
 
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