Can my retired parents own a house i bond?

TofuMofu

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You can bond it and then "rent" it to them, but the house will stay yours.
 

newby_investor

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I think the short answer to this is, no.

You might be able to set up a trust to accomplish something like this though.
 

Messugga

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if so how?
Yes, in theory. You'll have to put up sufficient collateral. Usually this is the house, but in your case, this wouldn't be so as you wouldn't be the owner of the house.
I'd guess most banks wouldn't bother with this arrangement, but some do. Also, I suspect that there would be some tax implications going on here, so also something to look into.
 

Affieplaas

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I assume that they don't qualify for a bond as they don't have an income. So you want to pay for the house but the house must be registered in their name.

Let's forget about the bond first and just pause here. You can buy anyone a house. There is no rules that prohibits that. If you bought the place cash, you must however realise that the value of the house will be deemed as a donation at the moment that it was registered in their name and you paid the previous owner and you will have to pay donations tax on that value at 20% (first R100k per year is free of donations tax).

If you do manage to find a bank that will allow the registration of a bond and a third party (you) pays the installments through the provision of a personal guarantee, then the total of those annual instalments will also be subject to donations tax at 20% (first R100k of donations is not taxable).

You can set up a trust, but donation tax will also apply if you donate the property to the trust.
 

Adenoid Hynkel

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If you bought the place cash, you must however realise that the value of the house will be deemed as a donation at the moment that it was registered in their name and you paid the previous owner and you will have to pay donations tax on that value at 20% (first R100k per year is free of donations tax).

then the total of those annual instalments will also be subject to donations tax at 20% (first R100k of donations is not taxable).

Not in the form of a "loan".
 

Dairyfarmer

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Let's forget about the bond first and just pause here. You can buy anyone a house. There is no rules that prohibits that. If you bought the place cash, you must however realise that the value of the house will be deemed as a donation at the moment that it was registered in their name and you paid the previous owner and you will have to pay donations tax on that value at 20% (first R100k per year is free of donations tax).
And also consider the estate duties should the house be bequeathed to you. So you would get hit with a double whammy, donation tax and then estate duty.
 

newby_investor

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I assume that they don't qualify for a bond as they don't have an income.
Banks will also often just not give bonds to people over a certain age, or very short ones (10y or so).

No sense extending a 20-year loan to someone in their 70s, income or not.
 

Speedster

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As mentioned, your suggestion is going to be troublesome from both tax and financing points of view. I'm not sure why your parents need to be the owners? If you're willing to let that requirement go a trust is one viable option, as is you simply buying the house and letting them stay there rent free (or they can cover the municipal account).
 

Jchan11hk

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As mentioned, your suggestion is going to be troublesome from both tax and financing points of view. I'm not sure why your parents need to be the owners? If you're willing to let that requirement go a trust is one viable option, as is you simply buying the house and letting them stay there rent free (or they can cover the municipal account).
So you setup a Trust and then you ask for a bond from the bank and the trust will be the deed owner? But you pay for the instalment? Am I correct?
 

Speedster

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So you setup a Trust and then you ask for a bond from the bank and the trust will be the deed owner? But you pay for the instalment? Am I correct?
Technically the trust will pay for the loan, but you can donate the funds for this to the trust (remembering your first R100k per year of donations is tax exempt). The bank will have the trustees sign surety on the bond, and will base their affordability calculations on the combined finances of the trustees.
 

Nerfherder

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Technically the trust will pay for the loan, but you can donate the funds for this to the trust (remembering your first R100k per year of donations is tax exempt). The bank will have the trustees sign surety on the bond, and will base their affordability calculations on the combined finances of the trustees.
I heard that its going to cost money to setup a trust though (R100k) and you have to do all this compliance stuff with an accountant so may not be worth it for a single house.
 

Speedster

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I heard that its going to cost money to setup a trust though (R100k) and you have to do all this compliance stuff with an accountant so may not be worth it for a single house.
Fortunately that's not true. I'm a trustee of two trusts. First one cost R2500 to set up. Second one we just took the first trust deed, made a couple of changes and registered it ourselves at the Master for something like R50.

You can have the accountant requirement waived if you can show the trustees have sufficient financial acumen (we went this route), although an accountant shouldn't be much more than a couple of hundred rand a year.
 

Jchan11hk

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Technically the trust will pay for the loan, but you can donate the funds for this to the trust (remembering your first R100k per year of donations is tax exempt). The bank will have the trustees sign surety on the bond, and will base their affordability calculations on the combined finances of the trustees.
Oh, I see, needs to explore this route when I buy my next house.
 

Nerfherder

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if so how?
What do you want to achieve though ?

It will cost money to transfer to them and then also when they shuffle off this mortal coil it was cost again to transfer back into your name.

So I imagine they need a place but don't qualify for a bond based on their age and income ?
You could stand surety on the bond for them and then they own the house and either they pay the bond or you just pay it via their account.
Its going to be a problem when they die because it will cost you 100k per mil to transfer back into your name - and if they leave any debt you might even lose the house.

Just get the house in your name and if they have money to pay you rent then they can give you up to 100k per year tax free as a donation.
 

Speedster

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What do you want to achieve though ?

It will cost money to transfer to them and then also when they shuffle off this mortal coil it was cost again to transfer back into your name.

So I imagine they need a place but don't qualify for a bond based on their age and income ?
You could stand surety on the bond for them and then they own the house and either they pay the bond or you just pay it via their account.
Its going to be a problem when they die because it will cost you 100k per mil to transfer back into your name - and if they leave any debt you might even lose the house.

Just get the house in your name and if they have money to pay you rent then they can give you up to 100k per year tax free as a donation.
Or they can pay rent, which he can set-off against the interest on the loan, municipal costs etc so there won't be any tax effect.
 
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