Important Note on Planning as Part of Your Refinancing
Financial Gift - Property Purchase
Given the high purchase price of properties, it is inevitable, in many cases, that you need some financial assistance to be able to buy your dream home. This is a really welcome addition if you are lucky enough to receive such help. This may come in the form of a gift from your family, other relatives, or indeed friends.
This is a short note to explain what happens in this type of scenario.
When you are applying for your loan, whether dealing with the lender directly or through a broker, the bank (the lender) will want to know the sources of all the money that you have accumulated to complete the purchase.
If you have received a financial payment from parents or other relatives, the lender will want to see the source of that funding. The lender will also request that the people who have given you the money (donors) sign a gift letter.
This is a simple confirmation from the donors that the money given to you is a gift and that they are not expecting it to be repaid. The reason for this is that if it was a loan and had to be repaid, then this would affect your capacity to repay the mortgage and would have implications for you getting your loan.
Your broker will give you guidance on this. The signing of a gift letter by those that have given you a financial gift is quite normal and routine. We would have no issue with that.
If the amount of the financial gift is large (generally over €10,000 but this amount varies from lender to lender) then the lender will require that the person giving you the gift (donor) complete a legal document known as a deed of confirmation.
If someone gives you a financial gift to assist in the purchase of the property, they (the person giving you the gift) could, in theory, argue that this money gives them an interest in your property.
If this were the situation, then this would mean that, should the lender have to move to recover possession of the property in the future (because the mortgage account has fallen into arrears), the person giving you the gift could allege that they have an interest in the property and try to interfere with, and prevent, the actions of the lender in recovering possession.
To prevent this scenario, the lender will require the person giving you the gift to complete a deed of confirmation.
This is a standard document where the person giving you the gift:
This is a standard document, and it is completed in many transactions.
You need not have any issues or concerns about the people giving you the gift signing this document; it is quite normal and routine.
If it is necessary to complete a deed of confirmation, it will be sent to you when all the contract and loan documentation is forwarded to be signed. We will go through the process of signing the deed of confirmation with you at that stage.
The only thing that you should be aware of is a potential tax liability when you are receiving a financial gift to assist in the purchase of your new home.
If it is a direct gift from parents to children, the threshold is very high at €400,000.
Once the payment is under this amount, then no tax liability would arise (subject to aggregation rules – this means it is the only gift from your parents).
If the gift is from somebody who is not related to you, then the amount that can be gifted is much lower, and you would need to ensure that the gift amount does not create any liability for capital acquisitions tax.
1. Group A: children (including adopted children, stepchildren, and certain foster children).
2. Group B: siblings, nieces, nephews, grandchildren, and lineal ancestors or descendants other than those in Group A.
3. Group C: all other individuals not covered in Groups A or B.
Each Group has a threshold which is the amount that each person is entitled to receive tax-free. Budget 2025 has brought in significant changes to the threshold amount, increasing the amount that each person is entitled to receive before they are liable to pay CAT.
• Group A threshold is increasing from €335,000 to €400,000.
• Group B threshold is increasing from €32,500 to €40,000.
• Group C threshold is increasing from €16,250 to €20,000.
The people giving you the money may have to sign some documents both for the lender and some for legal purposes, but we would have no issue in them signing these documents, and this is quite normal and standard.
The main concern is that you make sure that the receipt of a gift by you does not create any liability for capital acquisitions tax. If you are unsure about this, you should seek advice from an accountant or tax advisor who would be best placed to give you proper financial advice on this.
Jacob Law LLP, January 2025
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