Conveyancing and Remortaging Q&A

RomaineScallySolicitors > > Conveyancing and Remortaging Q&A

Conveyancing and Remortgaging


Q. We are a couple in our late 60’s and have one child. Our mortgage has been paid off on our family home.  At the moment, it would be worth about €400,000.00.  We would very much like to leave it to our daughter.  However, as it presently stands, she would probably have to sell the house to pay the inheritance tax.  We were wondering if it would make sense legally to take out a mortgage on the property now so that by the time our daughter might come to inherit the property, the value of the house would be reduced by the amount of any outstanding mortgage.  We are unlikely to get life cover at our age.  What do you think?

A. Before you consider re-mortgaging your family home particularly for reasons which are not financially driven by your own needs, you need to consider what other options you have available to you. Have you considered the special exemption available for the dwelling house under Section 86 of the Capital Acquisitions Tax Consolidation Act 2003?  This provides for an exemption for a gift or inheritance of your home from inheritance tax provided certain conditions are met.  In particular, the property must be the dwelling occupied by the beneficiary as his or her only main residence.  You do not say whether or not your daughter lives with you at home.  She does not necessarily have to live with you now but, she must have lived in the house as her main residence for a period of three years up to the date of the gift or inheritance.  There are exceptions in the case of beneficiaries temporarily working abroad on contract but, the most important thing is that the beneficiary cannot be entitled to an interest in any other dwelling at the date of the gift of inheritance.  In addition, the beneficiary must retain ownership of the property for six years after the date of the gift or inheritance unless the beneficiary was over the age of 55 at the date of the gift or inheritance.  In addition, they must continue to occupy the dwelling as their main residence for 6 years from the date of the gift.  In effect therefore, this is the ideal situation to resolve your issues and avoid a re-mortgage which you probably do not really want anyway.  Assuming that your daughter has not purchased an alternative property then, provided she qualifies under the conditions set out above, you can either gift the property to her during your lifetime or leave it to her in your Will.  You would need to discuss it with your daughter to ensure that she is aware of your plans and that she must avoid purchasing an alternative property up to the time of the gift or inheritance and must retain ownership and use the property as their principal private residence for the period of six years after the gift or inheritance.  In effect therefore, there is no need for you to consider re-mortgaging provided that your daughter qualifies under the above exemption.


Q. My parents are in their seventies and have no mortgage over their house. They would like to raise some money to pay for a deposit for my sister to buy her first home.  Would this be possible?

A. Given the elderly age of your parents, it might be difficult for them to secure a mortgage and, if they have to look at a reversion scheme, they will be discounting the value of the share they sell to the finance company considerably just to get your daughter a leg-up on the property ladder. You do not say what the property is worth.  However, would it be possible for your parents to sell the house to one or both of you reserving to themselves a right of residence for life?  Remember that they can avail of the generous gift tax relief available to children and currently, this would mean a Capital Acquisitions Tax allowance for each of you of €310,000.00.  In addition, if your sister does not own any other property, she could benefit from the special tax exemption for dwelling houses under Section 86 of the Capital Acquisitions Tax Consolidation Act 2003 and I would refer you to our earlier question for further information on this.  On balance therefore, it would seem best for all of you to consider other options rather than for your parents to try to raise money on a house at their age or to be tempted to sell a portion of it to a finance company under the Reversion Scheme thus discounting the value of the share hugely, often by 50%.  I hope that this has been helpful.


Q. My mother is a widow and lives alone in the family home. Her health is not great and she herself is thinking about moving into a nursing home.  However, she is thinking about gifting the house to her three children before she does so.  Would this have any impact on an application for the Fair Deal Scheme?

A. It is very important that your mother would take independent legal advice before considering making a gift of her property to her children. Obviously, it would of course be her intention to benefit her children on her death.  However, if she does seriously need to consider nursing home care then, she needs to be aware that in assessing the contribution for the Fair Deals Scheme, all assets including those known as “transferred assets” will be taken into account when assessing the contribution required to be paid by the beneficiary of the scheme.  Relevant assets means all forms of property whether situated in the State or not other than cash assets.  Transferred assets are defined separately as “an interest of the person in any assets (whether a cash asset or a relevant asset) which have been transferred at any time in the period of five years prior to the date on which an application for State support is first made by or on behalf of that person.  This includes any transfer made either;

a) for no consideration or;

b) for nominal consideration or;

c) for consideration that is less than 75% of the estimated market value of the     interest of the person in the asset at the time of the transfer.

It must be pointed out therefore, that if your mother were to make a gift to her three children of her property for no consideration then, under the Fair Deal Scheme, the value of the asset will be included in her assets in assessing her contribution as the house would then be regarded as a “transferred asset” assuming that it was done within five years of her moving into a nursing home.   Remember, it does not mean that your mother cannot transfer the house to you, merely that she cannot ignore the value of the asset in assessing her contribution towards the Fair Deals Scheme.

I hope this information has been helpful.


Q. We are a young couple who hope to buy our first home early next year. People are telling us that we should make a Will when we buy a house but we are only in our twenties!   Do you think this is necessary.

A. Firstly, congratulations on your forthcoming purchase. This is always a very exciting time and I hope that the purchase will be a happy and successful one for you.   With regard to making a Will, it is really never too early to make a Will.   Remember that when you take out your mortgage, you will also be taking out a Mortgage Protection Policy.   Effectively this means that if anything were to happen one or both of you then, the mortgage would be paid off in full.   If you are a married couple, it may well be your intention to leave everything to the survivor and similarly if you are a couple living together.   However, the situation you need to consider is in the, albeit very unlikely one, that something should happen both of you together.   In this instance remember that you have a very valuable property with no mortgage and, no instructions as to what should happen the property after your death.   It would be a terrible shame to have both your respective families possibly fighting over who was to benefit from the house.   The most sensible thing to do is to chat together and agree on who would benefit in the unlikely event of something happening both of you together.  You would need to agree this between you and, once agreed, you should immediately instruct your solicitor to draft such a Will. It may seem like a very unlikely scenario and indeed thankfully it is.   However, it is a small investment in protecting your most valuable asset in the event of some catastrophe arising resulting in family having to sort out what should happen to your assets.  Obviously, if you have children, then it is imperative with or without property to make a Will giving clear instructions as to who should act as guardians in the event of something happening.   Whatever about people fighting over your assets, you certainly do not want them fighting over your children!    On balance therefore, it is essential for people with children to have properly executed Wills which indeed should be up-dated as the years go by.   In addition however, for young couples who buy their first home together, or indeed single people, they should equally make sure that they make a point of having a Will prepared at the same time as the house purchase is completed.   It is very easy to forget about something like that and the years can pass by very quickly.  Many solicitors will offer either a discounted rate if you are executing a Will at the same time as buying a house or indeed, might even offer the Will inclusive of the legal fees on the house purchase.     We hope that this has been helpful.

** Please note that the dwelling house relief referred to is subject to changes which are part of the Finance Act and if enacted will be confined to inheritances and not gifts.  We will update you if and when the legislation has passed.


Q. Could you explain what is meant by Equity Release and how does it differ from remortgaging?

A. Remortgaging is usually where the borrowers decide to switch Lender for any number of reasons including the possibility of a more favourable rate of interest with a new Lender or, a promise of a cash back bonus. It is not always done to raise money for personal use and sometimes is merely to avail of a better deal from a different Lender.  Equity release however is the difference between the value of your property and what you owe on your mortgage loan.  If the value of your home is greater than what you now owe on your mortgage, you may be able to ‘Top-up’ your mortgage through Equity Release which is an additional mortgage loan secured on the property.  Borrowers may wish to raise money for educational expenses, home improvements or any number of reasons.  If your home is worth, for example €300,000.00 and your existing mortgage is €100,000.00 then, you could certainly release Equity of €150,000.00 depending on the particular conditions attached to the mortgage.  All borrowers would have to go through all the usual criteria and satisfy the Lender that they qualify for the loan in the first place.  Again, depending on what Lender you might choose, some will also give you the cash back of 2% of the amount of the mortgage.  If you are thinking of raising Equity on your property, you will need an idea of the value of your property and start by applying to your current Lender to see if they can offer you an attractive Equity Release package which might also include a cash back payment.  Again, we would urge you to shop around as the rates vary between Lenders and all are keen on getting new business so it is a good time to shop around.  We wish you the best of luck.


Q. We are an elderly couple living at home with no mortgage. We find it very difficult to meet all our bills and there never seems to be money left over for any extras.  We have not had a holiday in years.  We are wondering if we would qualify for Equity Release?

A. It is hard to face a future when you know that your income will be very limited with nothing available for any exceptional expenses. On the other hand, you are obviously living in a house which has a considerable value and no mortgage.  However, choosing an equity release scheme is not something anybody should enter into lightly.  There is always the risk that you might need the equity in home later on to secure an arrangement with the HSE under the Fair Deal Scheme offering Nursing Home Support.  Also, obviously if you release some Equity from your home, you will not be to pass on its full value to your family or chosen beneficiaries.  Before you decide on an Equity Release scheme, you should consider alternatives including:

a) Selling your home and moving to a cheaper or smaller home.

b) Getting a small mortgagee if you have income to meet the repayments.

c) Renting out one or more rooms which allows a tax free income to the householder of up to €12,000 a year.

d) Transferring ownership to a family member in return for the cash you need reserving to yourselves the right to live in the property for life.

It would be a good idea to take legal advice before you decide on what you really want to do and to consult with a Solicitor to discuss your options and indeed to make a Will ensuring that you wishes will be carried out.  We hope that this has been helpful.


Q. I went as Guarantor for my son on his mortgage when he took it out some eight years ago. I was under the impression that I was only to be Guarantor for eight years.  However, when I questioned this with the bank recently they said that this was never the case and that I am to be a Guarantor for the entire mortgage.  Can I do anything about this? The mortgage is not in arrears but my wife and I no longer want the responsibility of being Guarantor now that we are retired and living on a pension.

A. You are quite right to look into this now and try to have it resolved.  To be a Guarantor for any loan is affectively a liability over your head and if you are planning for a retirement on a reduced income it is vitally important to resolve this now.

Firstly, we definitely recommend that you ask the bank to send you out a copy of the original letter of offer in relation to the loan.  This letter of offer which would have been addressed to your son sets out the conditions of that offer.  One of the conditions obviously was that your son needed a Guarantor.  The letter should set out the conditions attached to the requirement for a Guarantor.  Hopefully, the letter will clarify that the Guarantee was to be in effect for 8 years only.  If there is no mention in the letter of offer, then you will need to secure all the documents attached to the drawdown of the loan.  These documents should clarify exactly the conditions attached to the requirement to have a Guarantor.

Whereas it is not unusual for a Guarantor to be limited in the number of years it would apply, Lenders do not offer this as a matter of routine.  It would generally have to be suggested by the Guarantor and negotiated before anything is signed.  As you can imagine, all the Lenders want the Guarantors  to be in place for the duration of the mortgage and are the least likely people to suggest a shorter guarantee period.  If your recollection is that you asked for this and successfully negotiated a reduced term then there should be some documentary evidence to support this.  If you do not have it, it should be with the bank and you should request all this documentation.  You should go back to the Solicitor who acted for your son in the purchase and see what documentation he or she will have on file.  You may have been referred on for independent advice in relation to acting as Guarantor and whoever gave you the independent advise could still have documents to clarify exactly the nature of that guarantee.

If it transpires that there is no documentary evidence to support a shortened Guarantee then, you will simply have to start negotiations now to allow yourself out of the guarantee.  Whether or not the Lender will agree to this will depend on a number of matters particularly how compliant your son has been on the mortgage and the present loan to value ratio and market value of the property.  Assuming that your son bought eight years ago, then, he would have purchased in or around 2009.  Hopefully he is not in negative equity as if so then, the Lender is very unlikely to let you out of the guarantee.  However, we strongly advise you to pursue this urgently as it will take some time but, you are absolutely correct  in that a peaceful retirement requires you to reduce all your liabilities and a Guarantor would be one of the most serious ones. We wish you the best of luck.


Q. My daughter wants me to go as Guarantor on her mortgage. I am anxious to help but want to limit the terms of the guarantee.  Are any of the Banks prepared to do this?

A. The answer to your question is that this is always a matter for negotiation. The Bank will listen to any reasonable proposal and will obviously take into account the loan, the loan to value ratio, the value of the property, your daughter’s income and expenditure and other relevant matters.  Whereas we never recommend family members to go as Guarantor (see earlier question) nonetheless, if you are adamant that you wish to proceed and have discussed it with your spouse and explained the risks to your own assets then, you should limit the guarantor as much as you can.  You could for example offer to go Guarantor for the first year only of her mortgage or at most two years.  If such a limited proposal is acceptable to the Lender then you will need to take the proposal to a Solicitor to ensure that the conditions are written into the term of the guarantee. It has happened in many instances where Guarantors have genuinely believed that they were not committed for the duration of the mortgage, only to find that there is nothing in writing to prove this.  If you are successful in limiting the terms of the guarantee, then you must ensure that you take legal advice and consider the precise wording of the guarantee to ensure that what you have agreed is written into the terms of same.


Contact Us