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Getting a mortgage in parents name?

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  • 24-08-2015 4:42pm
    #1
    ruaille buaille
    Registered Users Posts: 123 ✭✭


    Hi Everyone,

    Just looking for some advice please. I would like to by a small one bed house say roughly €80,000. I won't be entitled to a mortgage because my job is not permanent, I am on a contract. I was talking to my parents recently and they suggested that they could take the mortgage out in their name and I could make the repayments to them? They have their mortgage paid off and have no debts etc. To be honest I have no idea if this is possible. Can somebody shed some light?


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    #2
    seamus
    Registered Users Posts: 68,317 ✭✭✭✭seamus


    Yes, it's possible of course. But the bank will want to see an ability to repay and usually won't extend a mortgage beyond a person's retirement age.

    So if your parents are retired with only a pension income, then the bank probably won't give them a mortgage, even with the equity in their own property.

    There are also taxation issues from both points of view. Your parents will effectively own the house so will have to pay the NPPR charge on it, and for tax purposes you may be considered a rental tenant, so they may have to pay income tax on your mortgage repayments.

    On the other hand, if they were to refinance their existing property for €80k and give that money to you as a loan, then the property would be in your name and the repayments not subject to income tax. However there may still be some tax questions around this and whether it qualifies as a gift or a loan.

    I would suggest you all book some time with an accountant and a solicitor to go through the best options.


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    #3
    liquoriceall
    Registered Users Posts: 454 ✭✭liquoriceall


    I was in a similiar position when I bought my house so the bank advised that my mother be named on my mortgage and guarantee it. When I was in a better position her name was removed. Hope this helps


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    #4
    Victor
    Registered Users Posts: 78,423 ✭✭✭✭Victor


    seamus wrote: »
    There are also taxation issues from both points of view. Your parents will effectively own the house so will have to pay the NPPR charge on it
    NPPR was replaced by LPT.


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    #5
    ruaille buaille
    Registered Users Posts: 123 ✭✭ruaille buaille


    Thanks so much for replies. My parents are self employed so I'm not sure where this would leave us. Would it be worth calling into a bank to ask them?
    I have been throwing away money for years on rent but at the same time I'm slightly terrified to take on a mortgage! If I'm not able to pay back the repayments for some reason, would it be as easy as to just sell the house and give back the money?


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    #6
    seamus
    Registered Users Posts: 68,317 ✭✭✭✭seamus


    ruaille buaille wrote: »
    Thanks so much for replies. My parents are self employed so I'm not sure where this would leave us.
    It requires more documentation than a PAYE person, but assuming their accounts are up-to-date and all taxes paid, it's straightforward enough.

    have been throwing away money for years on rent but at the same time I'm slightly terrified to take on a mortgage!
    Rent is not throwing away money. You're paying for the roof over your head, while someone else shoulders the cost of maintaining and insuring that cost.
    Get this "rent is dead money" notion out of your head, because it's not.
    If I'm not able to pay back the repayments for some reason, would it be as easy as to just sell the house and give back the money?
    Oh dear baby jeebus no. On paper, you won't be making the repayments. Your parents will. If you're not able to make the repayments, your parents will have to make them. If your parents can't make them, they will go into arrears, and the bank may come to an agreement about selling the house to cover the mortgage.
    If the proceed of the sale do not cover the mortgage (known as negative equity), your parents will have to continue making repayments to the bank until this debt is cleared off.

    Going into arrears, and worse having the house repossessed, will go on your parents' credit record, which will impact their ability to access finance. Which is devastating for a small business.

    There are many valid reasons why someone cannot get a mortgage from a bank but are well capable of meeting repayments on one.
    However, if you are in way in doubt about your ability to meet repayments, especially on such a tiny mortgage, then getting a mortgage is not for you. Renting is by far the better option in that case.


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