opt_out Posted October 7, 2016 Share Posted October 7, 2016 I'm going to lend my brother 50k towards a 300k house (he has 250 cash). Assume he will pay the capital back over 5 years. What would be a reasonable interest rate? or, in other words, what would a 5year mortgage or loan cost him all in? Link to comment Share on other sites More sharing options...
AThirdWay Posted October 7, 2016 Share Posted October 7, 2016 Don't do it..... Link to comment Share on other sites More sharing options...
Errol Posted October 7, 2016 Share Posted October 7, 2016 Bad idea unless you have an unusually close relationship. And if you do have that close level of relationship, then you shouldn't charge any interest at all. Link to comment Share on other sites More sharing options...
JoeDavola Posted October 7, 2016 Share Posted October 7, 2016 51 minutes ago, Errol said: Bad idea unless you have an unusually close relationship. And if you do have that close level of relationship, then you shouldn't charge any interest at all. Yep, exactly. Link to comment Share on other sites More sharing options...
Imp Posted October 7, 2016 Share Posted October 7, 2016 If lending money to family and friends, it is better to think of it as a gift, and then be pleasantly surprised if the money is returned. Link to comment Share on other sites More sharing options...
goldbug9999 Posted October 7, 2016 Share Posted October 7, 2016 1 hour ago, AThirdWay said: Don't do it..... Agreed stay well clear. In times of financial hardship, debt to family members will always be lowest priority. Surely he can get a great deal from a normal lender borrowing at such a low LTV. Link to comment Share on other sites More sharing options...
dgul Posted October 7, 2016 Share Posted October 7, 2016 Unsecured commercial rates * 0.5-0.8 (depending on how good a brother he is). But why wouldn't he just get a mortgage? Link to comment Share on other sites More sharing options...
The XYY Man Posted October 7, 2016 Share Posted October 7, 2016 Well if you're in the lending business, I need another two grand towards my deposit - any chance you can help..? XYY Link to comment Share on other sites More sharing options...
jfk Posted October 7, 2016 Share Posted October 7, 2016 don't .... do ... it ... Link to comment Share on other sites More sharing options...
Frank Hovis Posted October 7, 2016 Share Posted October 7, 2016 I did the same for my parents about fifteen years ago and let them have the money at whatever I was getting on it (this is was in the days when I did cash deposits) rather than looking at mortgage rates. That way they got it much cheaper than a mortgage (and paid it back when they wanted) and I gained by not paying tax on the interest (sssshhh!) so made money off of HMRC but not off them. It was all totally open and transparent between us; they didn't want me to lose out and I didn't want to profit from them. Which is as it should be. Link to comment Share on other sites More sharing options...
anonguest Posted October 7, 2016 Share Posted October 7, 2016 Judging by some of the replies here so far I am saddened by there being so many heartless and unchristian sods here! All I can say is you must all have had miserable family backgrounds. Each case depends on its merits of course and every family is different. So, given the absence of background detail, its impossible to give a sensible opinion. But, in general, I would say that blood is thicker than water/family all important/charity begins at home/etcand so, unless you have very strained/distant relations with family members/siblings and/or good reason for not lending/helping (e.g. the would be borrower is of bad and unreliable character) the decent thing should be to help IF reasonably possible (e.g. lending the money will not adversely effect you) and without seeking to profit from it. That does not, of course, mean sensible safeguards should not be mutually agreed. For example, for the sums involved here, it would not be unreasonable to ask for a charge to be put on the property until the loan is repaid. This would be merely to protect the lender from sudden death/insanity/etc of the borrower. My brother and sister have borrowed from me and I have borrowed from them - all with no fallout or recriminations. Link to comment Share on other sites More sharing options...
frankief Posted October 7, 2016 Share Posted October 7, 2016 I'd say if you can spare the money, and are sure he can/ will pay you back in regular installments, then let him have it interest free. Just put a simple letter together outlining the agreement and date & sign a copy each, no solicitor required. Not because of lack of trust, but you have to think about what would happen in the case of a sudden death to one of the parties. Anybody who has got involved with a family probate will know. You/ he or your/ his executor may then be dealing with a spouse or offspring who does not know about the agreement or for other reasons doesn't want to recognise the agreement, if it was purely verbal. Anyway good luck, best of health, take care! Link to comment Share on other sites More sharing options...
happy_renting Posted October 7, 2016 Share Posted October 7, 2016 Just get your brother to sign over the house to you and let him have it back if he repays the loan. Hold nieces and nephews hostage if you can. Link to comment Share on other sites More sharing options...
SarahBell Posted October 7, 2016 Share Posted October 7, 2016 Get something properly drawn up if you're lending money even to family. When they have a hissy fit about that bit you know you've not wasted £50k. Link to comment Share on other sites More sharing options...
StainlessSteelCat Posted October 7, 2016 Share Posted October 7, 2016 I would not charge interest at all, or assume you will get it back. Mentally treat it as a gift, and if it is returned so much the better. Never remark on it. But I only lend money to close family (and I am not looking to adopt) - and only when I can afford to do the above. £50k would be more than I could afford to lose personally so I would point any relative in the direction of the bank. anonguest - unfortunately we cannot choose our families and there are some seriously dysfunctional ones out there. Link to comment Share on other sites More sharing options...
SNACR Posted October 7, 2016 Share Posted October 7, 2016 I wouldn't. The problem is most family members will see the fact you can afford to lend that sum as an indication you have far more money than you need. TBH this is exactly the sort of malinvestment ridiculously low savings interest rates provoke Link to comment Share on other sites More sharing options...
opt_out Posted October 7, 2016 Author Share Posted October 7, 2016 Looks like I didn't ask my question very well. I'm not worried about any risks. Even if he dies it wouldn't be a problem as I'm his next of kin. The bit I was hoping to get answered here was how much it would cost him to get the loan/mortgage from the market. Then I'll undercut that by a little bit. Link to comment Share on other sites More sharing options...
The Knimbies who say No Posted October 7, 2016 Share Posted October 7, 2016 3 hours ago, anonguest said: Judging by some of the replies here so far I am saddened by there being so many heartless and unchristian sods here! All I can say is you must all have had miserable family backgrounds. Each case depends on its merits of course and every family is different. So, given the absence of background detail, its impossible to give a sensible opinion. But, in general, I would say that blood is thicker than water/family all important/charity begins at home/etcand so, unless you have very strained/distant relations with family members/siblings and/or good reason for not lending/helping (e.g. the would be borrower is of bad and unreliable character) the decent thing should be to help IF reasonably possible (e.g. lending the money will not adversely effect you) and without seeking to profit from it. That does not, of course, mean sensible safeguards should not be mutually agreed. For example, for the sums involved here, it would not be unreasonable to ask for a charge to be put on the property until the loan is repaid. This would be merely to protect the lender from sudden death/insanity/etc of the borrower. My brother and sister have borrowed from me and I have borrowed from them - all with no fallout or recriminations. Can an individual put a charge on a property? You have to be careful that you don't inadvertently set yourself up as some sort of loan shark. The interest rate applied does have a bearing on whether a sum of money loaned can be reasonably treated as informal rather than commercial iirc. Like others have said, don't do it on anything other than a gift basis, and set it out as such. If he has 250k it won't take long to get the rest...? Link to comment Share on other sites More sharing options...
rw42 Posted October 7, 2016 Share Posted October 7, 2016 Would like to hear why he wouldn't just get a mortgage - at that LTV i'm sure he could get some pretty decent rates. I'd guess <1% interest might be appropriate at market rates, and for 50k over 5 years i'd probably say it would be not worth the potential hassle/badwill agreeing an interest rate to charge anything at all. Link to comment Share on other sites More sharing options...
Scunnered Posted October 7, 2016 Share Posted October 7, 2016 A pound of flesh. Link to comment Share on other sites More sharing options...
Frank Hovis Posted October 7, 2016 Share Posted October 7, 2016 2 hours ago, opt_out said: Looks like I didn't ask my question very well. I'm not worried about any risks. Even if he dies it wouldn't be a problem as I'm his next of kin. The bit I was hoping to get answered here was how much it would cost him to get the loan/mortgage from the market. Then I'll undercut that by a little bit. I'd recommend you do what I did; charge him no more than you currently get but ask gross rather than net. You're not a mortgage lender so don't pretend to be one and don't try to profit from your family. Link to comment Share on other sites More sharing options...
ccc Posted October 7, 2016 Share Posted October 7, 2016 Tell him to buy 5 x 50k holes - live in one himself and rent the others out. Live the dream. Link to comment Share on other sites More sharing options...
Dorkins Posted October 7, 2016 Share Posted October 7, 2016 5 hours ago, anonguest said: I am saddened by there being so many heartless and unchristian sods here! Didn't Jesus throw the moneylenders out of the temple? Link to comment Share on other sites More sharing options...
Bruce Banner Posted October 7, 2016 Share Posted October 7, 2016 If you're certain it's what you want to do, I think that covering the cost of any interest you lose would be fair. Link to comment Share on other sites More sharing options...
SarahBell Posted October 7, 2016 Share Posted October 7, 2016 4 hours ago, opt_out said: Looks like I didn't ask my question very well. I'm not worried about any risks. Even if he dies it wouldn't be a problem as I'm his next of kin. until he marries ... Link to comment Share on other sites More sharing options...
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