Will partner lose his FTB Interest relief if I buy other half of house.

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brokeagain

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Hi,
My partner is the joint owner of a house. I am thinking of buying other hald of house from his brother. They currently have a FTB interest relief so their mortgage repayments are very manageable. We would be applying for a new mortgage together so that I could buy brother out. There is 178 left on their mortgage and the house is worth about 235-240k(and dropping!!:() We would be applying for a 92% mortgage.

My question is whether my partner would lose out on his FTB interest relief if he applies for a second mortgage with me for the same house?
I am a FTB.

We are planning to sell the house after a year or so to move somewhere closer to town. We will have the option to rent or sell as rent will cover majority of mortgage. Am I crazy to buy half of house now or should we just leave things as they are and let the guys sell house in years time. (I pay rent in the house at the moment). We are saving deposit for other house that is why we are staying put at the moment.

Thanks!
 
Your partner is entitled to FTB mortgage interest relief for seven years from when he first purchased a home. Your buying his brother out won't affect this.

Why are you thinking about buying out the brother at this time?
 
brokeagain said:
My question is whether my partner would lose out on his FTB interest relief if he applies for a second mortgage with me for the same house?
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No. He can still use whatever remains of his "FTB" preferential rate period of 7 years if he gets a new mortgage or even buys a new PPR. The term "FTB" is really a bit of a misnomer when applied to TRS.
We are planning to sell the house after a year or so to move somewhere closer to town. We will have the option to rent or sell as rent will cover majority of mortgage.
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You should check out the Property Investment forum, FAQ, key posts and the many existing threads about converting a PPR to a rental property to understand the tax and other issues involved. You should also crunch the numbers to check that this sort of investment strategy is viable (especially in a climate of falling house prices). The situation could be complicated if a clawback of stamp duty under the two year rule applies in part (e.g. to your share) or in full.
Am I crazy to buy half of house now or should we just leave things as they are and let the guys sell house in years time. (I pay rent in the house at the moment). We are saving deposit for other house that is why we are staying put at the moment.
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As Liam asks - what is the rationale for buying a share in this property now? Presumably you will incur transaction costs which you might be better off avoiding until you buy the other property to which you refer?
 
The guys are not putting house on market at the moment as the garden needs to be dug up and seeded and the backsplash in kithch need to be done as well as a fresh coat of paint to the whole house. This will make it more appealing to potential buyers. We plan to stay in the house and save for deposit while this is being done. I want to buy partners brother out to make thinks less complicated in a years time in making a decision to sell as at the moment there are three of us making decisions about getting garden/painting/etc done. If I buy him out now we can finish house and get it on the market asap.

Apart from solicitors fees, valuation fees, insurance and mortgage protection what else should I expect?
 
brokeagain said:
Apart from solicitors fees, valuation fees, insurance and mortgage protection what else should I expect?
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If you buy now and then by another house and rent this one out within 2 years then you share at least will presumably be subject to a clawback of stamp duty as I hinted at above.
 
Thanks Clubman. I am confused about the clawback. My partner has been living in the house for 3 years so would I be right in saying that his half would be exempt from SD clawback. My half would be worth less than the 125K tax free amount so therefore I would not have to pay SD either. Correct me if I am wrong.

What if we sell the house? Would there be SD implcations then??
 
brokeagain said:
Thanks Clubman. I am confused about the clawback. My partner has been living in the house for 3 years so would I be right in saying that his half would be exempt from SD clawback. My half would be worth less than the 125K tax free amount so therefore I would not have to pay SD either. Correct me if I am wrong.
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You could be right. I'm just pointing it out as a potential implication.
What if we sell the house? Would there be SD implcations then??
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SD is only an issue at the time of purchase or when you rent out a PPR within 2 years (used to be 5) of purchase. CGT might be an issue if you rent the property and/or don't sell on within 12 months of vacating it as your PPR.

Remember that when buying with a non spouse partner you should have a legal agreement in place covering the purchase and just in case things ever got awkward between you (e.g. relationship splits up). See the key posts section.
 
Are you definitely buying the next house in joint names?

I would be loathe to use your FTB relief in buying a share of this house if you are planning on buying again shortly.

Just keep it in mind!
 
Do you mean "FTB" owner occupier mortgage interest tax relief (which will not be lost in full with such a purchase) or FTB SD exemption which will be affected.
 
Yes Eamon22, we are definitely buying the next house in joint names. Will we be considered as Owner occupiers for interest relief anyway as partner already has a house? I have read n some forums that you retain you FTB status for 7 years but does that change if you sell one house and buy another?

As for stamp duty, I presume that we will have to pay this anyway as the house which we intend to buy in future is 1600sqft.
 
We are not considered first time buyers though as partner already is joint owner of his house. I am a FTB but because we are buying new property together we are considered owner occupiers so will have to pay stamp duty. When brokers say that you are entitled to FTB interest relief for 7 years, can you sell one property and buy another and still be entitled to FTB rent relief and not ownere occupier rent relief???


I think SD should be halved as I am a FTB but that is not the way it works:-(
 
We met with the mortgage advisor this evening and explained our circumstances to her. She advised that if I buy partners brother out now that we will both get interest relief as FTBs. The total would be 333 per month. However when we buy again in a year or so that this will drop to 100 per month in total. If I don't buy out the other share of the house and we wait to buy in a year that I will get 166 per month and my partner would get 50 which is a total of 216 interest relief per month.
 
brokeagain said:
We met with the mortgage advisor this evening and explained our circumstances to her. She advised that if I buy partners brother out now that we will both get interest relief as FTBs. The total would be 333 per month. However when we buy again in a year or so that this will drop to 100 per month in total. If I don't buy out the other share of the house and we wait to buy in a year that I will get 166 per month and my partner would get 50 which is a total of 216 interest relief per month.
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This is just wrong information on several counts. You will get FTB interest relief for seven years from whenever you first buy yourself a home, regardless of how many times you change properties during this seven year period.

Your partner is in the exact same position only his seven years started from when he first bought the current property.

FTB tax relief is available on interest of up to €10,000 per person at 20%, so that's €10,000 x 20% / 12 = €166.67 per month each. But to qualify for the full amount, the annual mortgage interest would need to be €20,000 or greater assuming a joint mortgage.

You mention a mortgage above of around €178,000. Total annual interest on that is likely to be <€10,000 per year so you'd each qualify for €5,000 at 20% or around €80 per month relief. If you got a bigger mortgage or interest rates go up sharply, you might get more relief.
 
brokeagain said:
When brokers say that you are entitled to FTB interest relief for 7 years, can you sell one property and buy another and still be entitled to FTB rent relief and not ownere occupier rent relief???
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What do you mean by "FTB rent relief"?!? Once you start claiming owner occupier mortgage interest relief at the "FTB" preferential rates you have 7 years at that rate - whether you change mortgage, move house, sell and buy with a break in between (the "clock stops" during such a break during which you cease to be a property owner occupier).
I think SD should be halved as I am a FTB but that is not the way it works:-(
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Yeah - I think I should pay even less tax than I already do but I don't the Minister for Finance will do me any favours in December... :(
 
"What do you mean by "FTB rent relief"?!? "

Sorry that was a typo. I meant mortgage interest relief!!:eek:

My head is wrecked from reading different definitions of FTBs and owner occupiers.

Just to confirm..we are both FTB for mortage interest relief purposes. My partner has 4 years left as a FTB and I have 7! Is that correct?

I won't even get into SD here.:)
 
brokeagain said:
Just to confirm..we are both FTB for mortage interest relief purposes. My partner has 4 years left as a FTB and I have 7! Is that correct?
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On the assumption that he bought around three years ago and you've never bought, yes that's it. And if you buy and sell 104 houses in the next 4 years, it still won't change as long as each of them is your Principal Private Residence.
 
LDFerguson said:
And if you buy and sell 104 houses in the next 4 years, it still won't change as long as each of them is your Principal Private Residence.
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Well - 104 and Revenue might just ask if they are engaging in a trade such that other tax rules apply! :D
 
ClubMan said:
Well - 104 and Revenue might just ask if they are engaging in a trade such that other tax rules apply! :D
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True. And I'm not sure what they'd need to be engaging in to sell a house every two weeks in this climate. Memo to self: Must cut down on the exaggeration...
 
So, would you recommend that I buy partners brother out of share of house and claim interest relief on a mortgage of 203k or wait until we buy the house we want in a years time and claim on mortgage of 276k??
 
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