Interest-free loan among close relatives including the establishment of a mortgage.
Dear Sir or Madam,
We intend to purchase an apartment. The following scenario applies: My partner and I are buying the apartment together (he = A, I = B). The ownership shares in the land register should be entered as follows: A=76%, B=24%.
The purchase price will be partially financed by us through a bank (first ranking mortgage) and a portion will be financed through an interest-free loan from A's mother. A security for this loan will be a second ranking mortgage in the same amount. The loan will be interest-free. The gift tax consequences are known and accepted. The loan agreement will be concluded between A and his mother. B is not involved in this. However, the notary has now informed us that A and B can only have the second ranking mortgage entered jointly, as they will jointly own the apartment.
My questions are now:
- Does B also have to sign the loan agreement between A and A's mother, so that A and B become loan debtors, or is the agreement between A and A's mother sufficient?
- Does this scenario, i.e. if the loan agreement is only concluded between A and A's mother, result in a gift between A's mother and B, since B also signs for the mortgage? Or does the gifting process only apply to A, i.e. the mortgage is irrelevant in this context?
I would appreciate a prompt response.
Yours sincerely,
