hi - this may well better belong in money makeover so please feel free to move as appropriate.
Salaries:
Me = 120k (Private sector). I get bonuses too but don't like to include them in financial calcs as they are not guaranteed.
Spouse = 65k (Public sector)
Value of house = 450k approx. (Dublin)
Mortgage balance = 90k approx, 10 years remaining. SVR = 3.7%
Monthly payment = €930
Original borrowing was 345k in 2004 and we paid a lot off early.
No other debt. We have about 50k in deposits. I have about 350k in my pension fund and contribute the max (objective being to retire in late 50s with a million fund).
Three kids of schoolgoing age.
We are both in our early 40s.
Per the above details, you can see we are in fairly robust financial health which obviously is good. I have a specific question though and I have no idea whether it's something that can or should be done!
We want to move house and buy a bigger place.
Looking at the market, this will likely cost 6-700k.
In order to give us greater flexibility and freedom to move quickly, I would like to pay off our existing mortgage and replace it with a loan from a relative. This relative has approx 500k on deposit, earning very low rates of return. They have a very low tolerance for risk and will not countenance any form of holding except cash.
My proposal is that I borrow 90k from my relative at a rate of 2%. This is far better than what we pay on our mortage and also far better than they receive on their deposits. Win\win for both parties. We would repay the loan over 4 years on an amortising basis, 22.5k in capital plus interest p.a. which we can easily afford out of our cash flow.
It also means that we become mortgage-free on our current place, thus allowing us to avoid the need to sell it prior to buying a new house. In my mind, this is a significant advantage.
We would take out a large mortgage to buy a new house - but then reduce this dramatically upon sale of our old one. Objective would be to pay off the new mortgage by the time we are 55.
My relative is happy to do this. We're a very good credit risk and they would receive a better return than available anywhere else. We would draw up a loan agreement covering the arrangement in full. We would also make sure our other relatives were happy with it.
Questions:
1. Is this a viable thing to do? Any tax or legal reason why we should not do this?
2. In the context of trading up, would this be as big a help as I think? Or am I overthinking it?
Thanks in advance for all comments, advice etc!
Salaries:
Me = 120k (Private sector). I get bonuses too but don't like to include them in financial calcs as they are not guaranteed.
Spouse = 65k (Public sector)
Value of house = 450k approx. (Dublin)
Mortgage balance = 90k approx, 10 years remaining. SVR = 3.7%
Monthly payment = €930
Original borrowing was 345k in 2004 and we paid a lot off early.
No other debt. We have about 50k in deposits. I have about 350k in my pension fund and contribute the max (objective being to retire in late 50s with a million fund).
Three kids of schoolgoing age.
We are both in our early 40s.
Per the above details, you can see we are in fairly robust financial health which obviously is good. I have a specific question though and I have no idea whether it's something that can or should be done!
We want to move house and buy a bigger place.
Looking at the market, this will likely cost 6-700k.
In order to give us greater flexibility and freedom to move quickly, I would like to pay off our existing mortgage and replace it with a loan from a relative. This relative has approx 500k on deposit, earning very low rates of return. They have a very low tolerance for risk and will not countenance any form of holding except cash.
My proposal is that I borrow 90k from my relative at a rate of 2%. This is far better than what we pay on our mortage and also far better than they receive on their deposits. Win\win for both parties. We would repay the loan over 4 years on an amortising basis, 22.5k in capital plus interest p.a. which we can easily afford out of our cash flow.
It also means that we become mortgage-free on our current place, thus allowing us to avoid the need to sell it prior to buying a new house. In my mind, this is a significant advantage.
We would take out a large mortgage to buy a new house - but then reduce this dramatically upon sale of our old one. Objective would be to pay off the new mortgage by the time we are 55.
My relative is happy to do this. We're a very good credit risk and they would receive a better return than available anywhere else. We would draw up a loan agreement covering the arrangement in full. We would also make sure our other relatives were happy with it.
Questions:
1. Is this a viable thing to do? Any tax or legal reason why we should not do this?
2. In the context of trading up, would this be as big a help as I think? Or am I overthinking it?
Thanks in advance for all comments, advice etc!