Thursday 14 December 2017

We want to help our daughter


Our only daughter has recently married and she and her husband are renting as they cannot afford a home because they don't have a sufficient deposit built up. We would like to help by way of a loan. Some years ago I picked up a leaflet about a Lifetime Mortgage. Are these still available?

They are not currently available and like a number of other mortgages for the elderly, they are not a great idea. So if they should become available again be very wary.

A Lifetime Mortgage was typically taken out by the over-70s, using equity in their mortgage-free home, where no regular repayments were made and the loan was repaid in full on their death via the house sale.

The maximum amount offered was generally 10-50pc but the interest payments "rolled up" over the person's lifetime and could well end up being in excess of the value of the property at date of death.

In addition, the interest rate charged was generally considerably higher than that available to normal borrowers.

In some cases, the bank would insist on instant repayment if the couple moved into a nursing home.

It is a very expensive method of helping out sons or daughters.

In your own case, your willingness to assist is laudable, but I would steer clear of using your home as collateral. If you have cash elsewhere, you can gift your daughter up to €225,000 without her incurring a tax liability.

If you intend leaving the house to her in your will, she should mention this to her bank when applying for a loan as they may regard it favourably, but bear in mind that lenders like to see a history of savings from prospective buyers rather than a gift or loan from parents.

We can no longer afford our mortgage due to a (hopefully) temporary job loss and we are moving back in with my parents and renting out our house. We actually have a tenant ready which is great. Do we have to tell the bank? I'm afraid of losing our tracker.

Technically, any property which changes purpose (i.e. from a principal private residence to an investment property) breaches the tracker contract. The interest rates applying to investment properties are higher than trackers and banks can seek to void the mortgage and switch you to a variable rate.

There is some "turning a blind eye" by banks in this regard though, and in truth, it's notoriously difficult for them to police in any event. If the mortgage is being paid after a period of arrears they may just be grateful to get it.

Having said that, some lenders would be more aggressive than others in this regard.

Do bear in mind that the bank isn't your only issue.

If you have a tenant you become responsible for all kinds of things such as the second home property tax, registering with the Private Residential Tenancies Board and declaring income tax on your rental earnings.

Your home insurance company would have a right to be informed also and may seek to increase your premiums.

Irish Independent

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