Can I buy a % share of my mothers house?

davejacko

Hi,
I was wondering if you could advise me.

My elderly mother owns and lives alone in her 4 bed family home in South Dublin, she has no mortgage and has been living in the house for 45 years. She wants to downsize and at the same time I want to buy a house for my family as we have been renting for years and we want to start paying a mortgage rather than renting. The value of her house is cir. €700k so its too expensive for us to buy, the max loan Ulster Bank have approved us for is €450k + 20% deposit which we have saved (we are second time buyers).

Could we buy an approx 75% share in her house (€525k)? This would allow us to start paying off a mortgage and allow my mother to buy herself a smaller house. It would keep the house in the family which everyone fully supports. The 25% share that she would still own would go back into her estate when she passes and at this time we would either buy her share out or sell the house and give her estate 25% of the proceeds. It means we can start building equity in something while staying in the family home close to my mother so its a win win for everyone.

My mother wouldn’t expect us to pay rent for her 25% share, she would keep a room in the house for when she wants to come and stay with us.

We would get contracts drawn up to agree all of this.

Would the bank support this and what are the legal and tax implications for us and her?

Thanks.

davejacko

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Thanks. We want to keep it legal and there are implications for buying below market value of the house.

jamesthepeach

Buy the other house yourself and then just swap living arrangements.

Samuel T. Cogley

davejacko wrote: »

Thanks. We want to keep it legal and there are implications for buying below market value of the house.

Absolutely fair enough - in that case then you have a simple focused question to ask the bank.

athtrasna

davejacko wrote: »

<deleted quote snipped>

Thanks. We want to keep it legal and there are implications for buying below market value of the house.

Precisely this. As per forum charter, suggestions outside the law will attract sanctions.

Mod

Casati

jamesthepeach wrote: »

Buy the other house yourself and then just swap living arrangements.

This is a good idea, and something that is quite common

davejacko

Casati wrote: »

This is a good idea, and something that is quite common

Tax implications for this as well. We would both be liable to Capital gains when the properties are sold as they would not be our PPRs.

Mrs OBumble

You need to consider the Fair Deal implications too: if she got sick and needed nursing home care, the 25% would need to be accessible.

davindub

davejacko wrote: »

Hi,
I was wondering if you could advise me.

My elderly mother owns and lives alone in her 4 bed family home in South Dublin, she has no mortgage and has been living in the house for 45 years. She wants to downsize and at the same time I want to buy a house for my family as we have been renting for years and we want to start paying a mortgage rather than renting. The value of her house is cir. €700k so its too expensive for us to buy, the max loan Ulster Bank have approved us for is €450k + 20% deposit which we have saved (we are second time buyers).

Could we buy an approx 75% share in her house (€525k)? This would allow us to start paying off a mortgage and allow my mother to buy herself a smaller house. It would keep the house in the family which everyone fully supports. The 25% share that she would still own would go back into her estate when she passes and at this time we would either buy her share out or sell the house and give her estate 25% of the proceeds. It means we can start building equity in something while staying in the family home close to my mother so its a win win for everyone.

My mother wouldn’t expect us to pay rent for her 25% share, she would keep a room in the house for when she wants to come and stay with us.

We would get contracts drawn up to agree all of this.

Would the bank support this and what are the legal and tax implications for us and her?

Thanks.

I don't think the bank will accept any part purchase, they want a clean ownership in case of repossession.

What you could do is buy the house and your mother can gift the remaining value (310k lifetime limit).

You would be paying 60% of the house value now. You can figure out your mothers intentions later. But you can gift €32500 to your siblings or their children at the moment but the problem with a deciding a cash amount now is inflation is likely to eat it up.

Another option as mentioned was for you to buy the other house and let your mother live there. There is an extension of the PPR rule to your widowed mothers residence so it can be included in your PPR until her death, but the reverse does not apply and there are CAT implications for living in a house rent free (deemed gift of the MV of rent).

You would be best to talk about it and visit an accountant to figure out how to proceed.

Samuel T. Cogley

Bear in mind that swapping houses will technically be a breach of the mortgage contract, just on the 100% legal side.

davejacko

Thanks, there are options, I think legal advise is what I need.

The_Conductor

Are you a sole child?
There may be ways to play around with the information you've imparted- from a tax perspective- that may line up all your ducks for your Mom, you, and any siblings.
You need to find a decent tax consultant- and get independent advice for you, your Mom and any siblings- cognisant of the potential needs of all parties going forward.

Invest a couple of grand in decent advice- it'll be the best investment you ever make.

Pkiernan

You can be legally gifted a percentage of the house and buy the rest.
Assuming the percentage gifted to you is declared as a gift it would make up what part of the 310000 she can gift to you before tax is due.

The_Conductor

Pkiernan wrote: »

You can be legally gifted a percentage of the house and buy the rest.
Assuming the percentage gifted to you is declared as a gift it would make up what part of the 310000 she can gift to you before tax is due.

In conjunction with this- a legal right of residence, for the duration of one's life, typically, and legitimately, reduces the value of a property (the open market value of the property is typically reduced by a set percentage depending on the age of the person gifting the property to the recipient in a situation like this- a recent case of a farmhouse residence outside Tubbercurry in Co. Sligo- was, after negotiations with Revenue, reduced by 50% for one of 4 children- on the basis that the gifter was 62 years of age.).

The OP needs to sit down with a tax consultant who is well versed in inheritance planning- and see what exactly their options are- for both their parent, and their best interests- cognisant of the future needs of the parent (think nursing home costs etc)- and how the whole series of transactions can be best managed to minimise that portion of the asset that accrues to the Revenue Commissioners.

Get proper advice- it'll cost you, but it'll be money well spent.

davejacko

Thanks, I'll start looking around for the right people to give the right advice.