Small mortgage options

johnny onion

Myself and my wife are in a lucky position in that her parents transferred their dublin house into her name a few years again on the condition that we would pay their mortgage on a house in cork until paid off. approx 60k left. (not sure how many yrs)
So its like we are paying them rent of 900 a month( this is going straight off their mortgage)

Can we get a mortgage of 60k and pay off their house and then have a much smaller monthly repayment in our own name ( 300pm for 20yrs for example)

Or do we have other options. We basically just want to be paying less and take the hassle away from the parents so they are paid off fully.

Any advice would be appreciated

Mrs OBumble

You, and possibly the parents too, need professional tax advice. Have they been declaring the income they have been receiving from you?

johnny onion

Mrs OBumble wrote: »

You, and possibly the parents too, need professional tax advice. Have they been declaring the income they have been receiving from you?

Could you explain why we would need professional tax advice. I can see why you might think the parents would but why us? And i dont know if they are declaring anything as it wouldnt be in any way relevant to me or any of my business.

johnny onion

Anyone got any advice for me?
The house is in our name and there is no mortgage on it. Should we remortgage it to pay off the parents loan and in turn have much lower payments to make every month.

newacc2015

johnny onion wrote: »

Anyone got any advice for me?
The house is in our name and there is no mortgage on it. Should we remortgage it to pay off the parents loan and in turn have much lower payments to make every month.

Need to go to a tax advisor end of. There is a way of structuring handing over a house like this, that you pay no capital gains tax. If you move in a house tomorrow and pay the owner a fraction of its worth, they or you are liable to a massive CGT bill.

You can get some bad advice off boards and end up with a massive tax bill from revenue in a few years

johnny onion

newacc2015 wrote: »

Need to go to a tax advisor end of. There is a way of structuring handing over a house like this, that you pay no capital gains tax. If you move in a house tomorrow and pay the owner a fraction of its worth, they or you are liable to a massive CGT bill.

You can get some bad advice off boards and end up with a massive tax bill from revenue in a few years

I appreciate your reply but you start by mentioning handing over a house. The house has already been handed over years ago and is in our name. This was all done properly. Im talking about remortgaging our house with the intention of giving them the money to basically pay off their mortgage..

mirrorwall14

But you are handing over a chunk of money. You need to do it in such a way as to minimise your tax liability, particularly if a house has already changed hands between you all

johnny onion

mirrorwall14 wrote: »

But you are handing over a chunk of money. You need to do it in such a way as to minimise your tax liability, particularly if a house has already changed hands between you all

So i cant just transfer 50 k into someones bank and say nothing? Excuse my ignorance on this

mirrorwall14

To be honest i know very little about it myself but I'm pretty sure you can't!

Toots

johnny onion wrote: »

So i cant just transfer 50 k into someones bank and say nothing? Excuse my ignorance on this

You would be very unwise to do this TBH. The banks have monitoring systems and if 50k just lands in your in-laws accounts, they might report it to revenue. The advice you've been given is to see a tax advisor, and really this is what you need to do. It would be all very well paying off the parents' mortgage, but then they could get hit with a tax bill.

CIARAN_BOYLE

Toots wrote: »

You would be very unwise to do this TBH. The banks have monitoring systems and if 50k just lands in your in-laws accounts, they might report it to revenue. The advice you've been given is to see a tax advisor, and really this is what you need to do. It would be all very well paying off the parents' mortgage, but then they could get hit with a tax bill.

They will report it to Revenue, Revenue may or may not do anything with it but they know straight away for any transaction above something like 10K.

Its not likely that this income is rental income for your wife's rent. Instead you are paying for the house at a delay rate.

Whats concerning for you is that you may not have either paid CAT when you received your house, or deducted properly the cost that you assumed by paying for their mortgage.

A tax professional would be able to assist in this regard.

phormium

To answer your original question (I'll leave you to sort out any tax issues!) you could in theory take out a small mortgage on your existing mortgage free property, however I'm not sure if any bank will do this for the purpose you need. As far as I know equity release like this would mainly be issued for home improvement purposes if it is done at all these days.

You would need to either ask a broker what your chances are or try around the banks yourself.

Another alternative if that fails is the credit union, if you have a large cu that you can become a member of if you are not already one they may have the option of a secured loan on your property. This would not be at a rate as low as a mortgage rate and not for as long a term but for example my cu will do 5.5% over 15yrs on something like this. They all differ in their lending limits, savings requirements etc but well worth asking.

newacc2015

CIARAN_BOYLE wrote: »

They will report it to Revenue, Revenue may or may not do anything with it but they know straight away for any transaction above something like 10K.

I asked the teller before about this, as the limit is $10k in the US. She said there is no limit in Ireland, they are supposed to report anything they consider dodgy. I imagine a ultra high income individual constantly moving €20k a month would not raise questions. However someone who is a low income earner transfer €6k might raise a red flag

OP I cant understand how were properly able to transfer a house into your name with a mortgage that relates to your parents on it. Your parents now have a mortgage on an asset that is no longer their own ? It doesnt make the slightest bit of sense IMO

Hazydays123

I recently transferred 2 sums of money, both >5k, into a family member's bank account. I was asked by the bank on both occasions to verify the source of the funds.

phormium

Read the original post again, there are two houses, one which was transferred to OP in Dublin on condition they pay the mortgage on a second house in Cork.

On the money laundering front any transaction outside the norm for the account would usually be questioned, I lodged 5k cheque lately and was asked where it came from. Cashier then decides whether or not they are happy with the answer, if not they refer it to the institutions Money Laundering Officer who takes it from there.

johnny onion

newacc2015 wrote: »

I asked the teller before about this, as the limit is $10k in the US. She said there is no limit in Ireland, they are supposed to report anything they consider dodgy. I imagine a ultra high income individual constantly moving €20k a month would not raise questions. However someone who is a low income earner transfer €6k might raise a red flag

OP I cant understand how were properly able to transfer a house into your name with a mortgage that relates to your parents on it. Your parents now have a mortgage on an asset that is no longer their own ? It doesnt make the slightest bit of sense IMO

Judging by what youve said here you misunderstood the situation..
The parents mortgage has nothing to do with our house. its a mortgage on their own house..i want to pay it off for them basically.
So judging by all the comments i need to get tax advice. i will do this. Thanks

But you are all telling me that if i won the lotto tomorrow i couldnt pay off my parents mortgage without worrying about them being taxed ?? This sounds ridiculous

Toots

Yeah that's pretty much exactly what we're telling you. Depending on the amount, it could be liable for gift tax. AFAIK you can gift a certain amount to family tax free, but it the upper limits are different depending on if it's a child, sibling, parent, etc. If you won the lotto, they'd be providing tax advice to you so you'd know if you'd be liable for tax or if they would.

jcon1913

Mrs OBumble wrote: »

You, and possibly the parents too, need professional tax advice. Have they been declaring the income they have been receiving from you?

There is an annual Small Gift Exemption of €3,000 AFAIK.

On hols now so I cant check but im 95% sure €6,000 (€3,000 per parent ) would be covered each year.

That should cover most of the "rent".

newacc2015

johnny onion wrote: »

Judging by what youve said here you misunderstood the situation..
The parents mortgage has nothing to do with our house. its a mortgage on their own house..i want to pay it off for them basically.
So judging by all the comments i need to get tax advice. i will do this. Thanks

But you are all telling me that if i won the lotto tomorrow i couldnt pay off my parents mortgage without worrying about them being taxed ?? This sounds ridiculous

So when they transferred the house into her name. She lived there for a while before hand?

Welcome to Ireland! We have one of the lowest threshold for inheritance/ gift tax in the developed world ( unless you are a farmer, in which is a totally give away).

http://www.citizensinformation.ie/en/money_and_tax/tax/capital_taxes/capital_acquisitions_tax.html

If you won the lotto tomorrow and give your brother a cheque for more than €30, 150 he would be taxed at 33%. If you won the lotto tomorrow, you wouldnt pay a cent on the winnings. Where as if you won the lotto in America, IRS takes a massive chunk.

If you think it bad for inheritance or gifts. Getting company shares is the worst

boege

johnny onion wrote: »

Judging by what youve said here you misunderstood the situation..
The parents mortgage has nothing to do with our house. its a mortgage on their own house..i want to pay it off for them basically.
So judging by all the comments i need to get tax advice. i will do this. Thanks

But you are all telling me that if i won the lotto tomorrow i couldnt pay off my parents mortgage without worrying about them being taxed ?? This sounds ridiculous

The revenue look at any transfer of funds or assets as a transaction, and therefore liable to tax depending on the nature of the transaction and any exemptions/rule that apply. If I were in your shoes, I would be checking that the transfer of the house to your wife was done in accordance with revenue rules and any tax liability considered. Right now you appear to be in the 'don't know what you don't know' space so bone up a bit by checking revenue web site (capital acquisition tax & gift tax) and then, as people keep saying, get expert tax advice.

2012paddy2012

johnny onion wrote: »

So i cant just transfer 50 k into someones bank and say nothing? Excuse my ignorance on this

Over 10k attracts bank interest and obligations to report it
..

Toots

There actually isn't a minimum amount; it's any amount that's "out of the norm" for that particular account. Say for example my personal account has a small weekly lodgement of about €200, and then €140 per month children's allowance. If a transfer of €4000 suddenly landed in my account, it could be flagged. Basically any transaction where there is a question on the source/destination of the funds the bank is obliged to report.

ted1

johnny onion wrote: »

Anyone got any advice for me?
The house is in our name and there is no mortgage on it. Should we remortgage it to pay off the parents loan and in turn have much lower payments to make every month.

How will you have much lower repayments ? The parents owe 60, you want to borrow 60 to repay 60.

Do they have a much higher rate?

phormium

I'd say the answer to that is the parents have a very short term left and OP wants to go for a longer term loan to reduce payments.