Site Gift from Parents to Fund Mortgage?

househunteri

Hello, first time poster here!

I would like to apply for a mortgage within the next year. In order to do so I will be receiving a site as a gift from my parents which I will then sell to raise what will be 25% of the mortgage cost. I have a full time permanent job.

My questions:

What steps/costs must my parents take to sign the land over to me? I am guessing it will require a solicitor or engineer (or both)?
With a full time permanent job and no other loans, what obstacles might I face when applying for a mortgage? Will it be enough for me to show the bank that I have 25% upfront along with fulltime employment?

Some help would be greatly appreciated!

It’s simpler for them to sell the site and give you the money as from a tax perspective it will be the same in most instances.

househunteri

Thanks for getting back to me. I never thought of that, do you have any official link to which I can provide this advice to my parents, or the name of the tax/non tax categories these routes fall into? I am completely new to all of this. Thanks!

riclad

IF you are working ,put x amount into your bank account every week,
banks usually lend about 3 times your salary ,they expect you to have around 20 per cent deposit.eg 100 euro per week ,if you can afford it.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-thresholds.aspx
let them sell the site ,
get a document from them, i am giving you x amount as a gift .i,ll give you a cheque or transfer it to your bank account signed ,with a date on it.it would take time and money to transfer it to you.

if you want a loan from tsb or aib , open an account there .they look at your salary,deposit, savings etc when they work out how much they will lend you .

myshirt

househunteri wrote: »

Thanks for getting back to me. I never thought of that, do you have any official link to which I can provide this advice to my parents, or the name of the tax/non tax categories these routes fall into? I am completely new to all of this. Thanks!

It's not that difficult. Go to an auctioneer and a solicitor and put the site on the market. You pay them to do the work and you don't worry about the mechanics of it. You will find good information online, but you will also find really bad information, so if you don't have the capacity for this then don't stress yourself about learning about it. Go to the professionals.

Darc19

riclad wrote: »

IF you are working ,put x amount into your bank account every week,
banks usually lend about 3 times your salary ,they expect you to have around 20 per cent deposit.eg 100 euro per week ,if you can afford it.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-thresholds.aspx
let them sell the site ,
get a document from them, i am giving you x amount as a gift .i,ll give you a cheque or transfer it to your bank account signed ,with a date on it.it would take time and money to transfer it to you.

if you want a loan from tsb or aib , open an account there .they look at your salary,deposit, savings etc when they work out how much they will lend you .

Mostly right but a couple of corrections

It's 3.5 times salary. In some cases it can be higher.

Absolutely no advantage to having an account in the bank you are applying to. - years ago, yes, but not now.

They all ask for copies of bank statements and pay slips

househunteri

Thanks for the help everyone. In terms of bank statements, how far back would they look when I apply? My spending can vary but I have been saving 150 a week for 6 months now, not much before then. But I will have the money from the sale of the site by then so will that be a big help in my application being successful?

Del2005

Is selling a site possible? Most councils now have a needs clause when applying for planning permission, if someone can prove that they have a need they most likely have their own land to build on so won't need to buy a site.

Technique

riclad wrote: »

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-thresholds.aspx

Are these annual thresholds or one off?

househunteri

househunteri wrote: »

Thanks for getting back to me. I never thought of that, do you have any official link to which I can provide this advice to my parents, or the name of the tax/non tax categories these routes fall into? I am completely new to all of this. Thanks!

The link in another post give the CAT lifetime thresholds these apply to both the site or to cash. There is also a yearly small gift exemption of 3k.

If you have a wife/patner then it would be more advantageous for your parents to sell the site and give you cash as they can give 6k to your partner and 6k to you under the small gifts exemption so as a couple you can receive 12 without using any of your life time threshold.

Either way for a site you aren’t going to have to pay any tax as it will fall under the parent to child threshold as but it’s worth trying to minimise how much of the threshold you use of you will be getting more gifts/inheritances in future.

However if your parents sell the site then they may be liable to capital gains tax so you also have to keep that in mind. If they gift it to you they may also be liable but there may be some ways to minimize it in this instance . You need to talk to a tax expert in reality.

You need to make sure you can actually sell the site though as another poster said. I’m building a house on our own land for myself and I need to meet fairly strict rules to be allowed to.

Have you considered building your own house on the site rather than buying if you are able to meet the planning rules? You will have a far far better house designed the way you want it and it’s easier from a tax perspective as you will eliminate capital gains tax (doesn’t apply when parents transfer a site to a son/daughter and they build their own house on it). You can also minimise the value for gift tax by getting a friendly auctioneer to value it very low before transfer and then once you have planning get the value increased before you apply for the mortgage.

Technique wrote: »

Are these annual thresholds or one off?

They are lifetime thresholds.

riclad

Unless the site is worth more than 300k,, there,ll be no cgt tax for you to pay to revenue.
you should keep a record of documents, bank statements , in case theres any enquirys in the future from revenue.
i think the banks have to report any large amounts going into a irish bank account
to revenue .

The_Honeybadger

Del2005 wrote: »

Is selling a site possible? Most councils now have a needs clause when applying for planning permission, if someone can prove that they have a need they most likely have their own land to build on so won't need to buy a site.

Was going to say the same thing, it is getting very difficult to secure planning for one off builds. I haven’t heard of anybody selling a site privately in the countryside in ages. Unless it is on the edges of town and zoned residential it might not even be a runner.

riclad

riclad wrote: »

Unless the site is worth more than 300k,, there,ll be no cgt tax for you to pay to revenue.
you should keep a record of documents, bank statements , in case theres any enquirys in the future from revenue.
i think the banks have to report any large amounts going into a irish bank account
to revenue .

You are mixing up CAT and CGT. There will be almost certainly no CAT but there is a very high chance of there being CGT for at least one of the parties involved depending on how the transaction is structured.

The_Honeybadger wrote: »

Was going to say the same thing, it is getting very difficult to secure planning for one off builds. I haven’t heard of anybody selling a site privately in the countryside in ages. Unless it is on the edges of town and zoned residential it might not even be a runner.

Selling to another local from the area would be one of the few possibilities if strict local needs rules are in place.

Your best bet is to speak to a mortgage advisor at your bank. They’ll have all your details and will offer honest advice on how to proceed.

Selling a site sounds a good idea, but is fraught with problems. Planning being the biggest.

Del2005

Judah Tinkling Aftershave wrote: »

Selling to another local from the area would be one of the few possibilities if strict local needs rules are in place.

If they don't already have land then they won't have a local need, if they have land why would they buy?

Del2005

Del2005 wrote: »

If they don't already have land then they won't have a local need, if they have land why would they buy?

It’s unlikely but not impossible on both counts. There would be people who are from the area but may not necessarily have land for example where one of their parents just got a site from a their parent but the rest of the land is farmed by a sibling.

If they want to build in the area they would need a site and if their uncle didn’t want to give them a site they would need to buy. Blow ins to an area too who bought a site when anyone could could now have older children looking to buy.

As for local need, you font have to be farming to get local needs, working in the area (or commuting not too far), growing up in the area, wanting to be around to help look after parents in future etc can all be used as arguments.

namenotavailablE

The OP and his/her parents probably should get professional advice- the parents can transfer the site (subject to certain conditions) tax free to the child. The child won't have to pay any gift tax if s/he complies with certain conditions. However, if the site was sold by the child (which is what's intended per the OP), both the tax avoided by the parents and any tax that arises on the disposal by the child becomes payable.

See here: https://www.revenue.ie/en/gains-gifts-and-inheritance/cgt-reliefs/transfer-of-a-site-from-a-parent-to-a-child.aspx

Aurelian

If the parents transfer it to the child, the parents may still have a tax liability as the value of the land is realised.

You also need to have been saving approx 6 months of your mortgage to show you can pay it. If your mortgage is going to he about 750 a month, you'll need to show an average saving of that each month for 6 months.

namenotavailablE

Aurelian wrote: »

If the parents transfer it to the child, the parents may still have a tax liability as the value of the land is realised.

The link in my preceding post indicates that this Capital Gains Tax Liability of the parents can be relieved on a transfer to a child (subject to the conditions outlined in that linked page).

namenotavailabl

namenotavailabl wrote: »

The link in my preceding post indicates that this Capital Gains Tax Liability of the parents can be relieved on a transfer to a child (subject to the conditions outlined in that linked page).

Only if the child builds their own house on the land and lives in it. If they sell the site again the CGT becomes liable.

Darc19

Get parents to gift you the site.

Build a house on the site.

Live in it for 12 months.

Sell it.

You may be able to avoid pitfalls and taxes quite legally that way.

Try to ensure a selling restriction is not in the Planning grant.

Darc19

Darc19 wrote: »

Get parents to gift you the site.

Build a house on the site.

Live in it for 12 months.

Sell it.

You may be able to avoid pitfalls and taxes quite legally that way.

Try to ensure a selling restriction is not in the Planning grant.

Won’t work, house will have to be lived in for a lot longer than 12 months to get around the various exemptions and planning restrictions.

Also why would they not just stay living there? They won’t buy a house half as good as they will build.

jlm29

Judah Tinkling Aftershave wrote: »

Won’t work, house will have to be lived in for a lot longer than 12 months to get around the various exemptions and planning restrictions.

Also why would they not just stay living there? They won’t buy a house half as good as they will build.

7 years I think usually.
Maybe they don’t want to live there. Perhaps they work in a totally different location. Or Maybe they don’t want the hassle of building.

househunteri

Thanks a lot for the replies here, it's not just answering questions but also making me realise other questions that need asking.

Just to answer some posts, the site is in an attractive location where other houses have been built in recent years in a growing town. However, building is not an option as I live and work over two hours away and would like my own place within the next year. I will need to save hard for 6 months now in addition to selling the site as I only have €5,000 in savings.

jlm29

jlm29 wrote: »

7 years I think usually.
Maybe they don’t want to live there. Perhaps they work in a totally different location. Or Maybe they don’t want the hassle of building.

Of course, but the posters suggesting of living there for 1 year and then selling would make no sense then either even if it was possible (which it almost certainly isn’t).

Edit: the fact the site is in a town changes things completely. Should be no issue getting planning so selling won’t be an issue.