Can I borrow 60K from my mother

J

Jerseygirl64

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My Dad gifted me the home I was living in with my wife and children by deed of transfer. It was valued at 320k. Unfortunately my Dad died 18 months later and we have sold our home so we can be closer to my mum.

Using proceeds of the sale of our home along with some savings, we are falling short by about 60k to purchase a new home. (We had to spend 40k on renovations to our home before we could sell it but the improvements made yielded a much higher sale price than it would had we not spent it). However, now applying for a mortgage and the bank are querying all of the spending (new kitchen, new bathroom, labour costs) - money that came from savings used to make home saleable

My mum has savings accumulated and has offered to loan me the 60k instead of a bank - I would repay this back to her by 1,000e per month but would like advice on how/who we'd get to draw up an agreement so that it is all above board legally and for Revenue, tax etc - what interest rate would she need to apply if we did this?
 
Jerseygirl64 said:
My mum has savings accumulated and has offered to loan me the 60k
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Jerseygirl64 said:
Can I borrow 70K from my mother
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Not if she only has 60k?

The issue of such intra-family loans has been discussed before and, if I recall correctly, there is no tax implication in practice. It's up to the two of you to arrange the agreement on interest charged, repayment schedule, contingency planning etc. Ideally in writing for clarity and your own sakes.
 
Jerseygirl64 said:
I have 2 siblings
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The reason I asked is tax is the easy bit. It's the potential arguing over inheritance if anything happened your mum that causes complications down the road.

If your mum charges interest, she'll have to declare it as income.

For tax, I would keep it simple. Just write a letter saying you've borrowed 60,000 interest free to be repaid over 10 years. Note the 10 year state savings rate at the day of borrowing the money. This is the interest 'foregone' by your mother, so is a gift to you and your wife. It falls under small gift exemption.
Do all transfers electronically, and keep a record of them. A common reference will help if there's ever any questions.
Both you and your mum sign & date the letter.
 
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Some previous threads on this topic...
(I think they meant INTRA family loan in the first one).

Is there tax on inter family loan ?

I realise that an interest-free loan could certainly be seen as a method of avoidance in terms of gift tax thresholds etc. but if there was any rate of interest applied to this personal loan, surely this would not affect the gift tax threshold. Just unsure if loans between family members are...
www.askaboutmoney.com

Bank of mum and dad

I note a recent kerfuffle in the media about children being taxed if they receive interest free loan from parent. It seems this has been kicked to touch. But I can't really get to grips with current status. Let's say my mother loans me 40k. How do I 'prove' this is not a gift, and how do I...
www.askaboutmoney.com

Alternative to bridging loans?

Hello We have a house worth around 160k. We are looking to buy one worth around 215k. We have a deposit of around 30k. Thing is, our current house would not be ready to sell for a few months. Would we have to wait until ours is ready to sell to buy the other house? Ideally we'd borrow...
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Loan from my brother

I'm looking to borrow some money from my brother. How much can he loan me without getting tax'ed? Thanks in advance, Aaron
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Clearing off Credit Union Loan with family loan?

The difference between my shares and what I owe on a CU loan is 9000. I can get an interest free loan for this amount from a family member but am afraid to accept it for 2 reasons: 1. Can I be caught for some sort of gift tax? 2. Is the clearing of the loan with such an 'instant' wad of cash...
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Hello, I gave a family member a lend of 100k on the condition that it would be paid back over monthly installments. As I owe some of the money myself to the bank. Due to the timing of the situation there wasn't any agreements in written form but phone conversations, verbal agreements and texts...
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Two bros got "loans" 10K & 5K respectivly from mother since father died 3years ago.

My 2 brothers have both recieved "loans" 10K & 5K respectivly from my mother since our father died 3yrs ago. Both brothers have not paid back said loans, nor 2 other "loans" from family members prior to our fathers death, myself & my sister are a bit concerned that they may be "getting a head...
www.askaboutmoney.com
 
As long as you draw up the paperwork that you both sign saying it is a loan to be paid back at €1K per month over 5 years, and keep an electronic trail of all transactions it will be fine.

When your mum passes away you may need to prove you paid back the loan in full or if it is in the next 5 years you will need to pay the estate the outstanding balance (or else reduce your inheritance by the amount owed to).

If your Mum has sufficient funds to live on even if she gives you the loan that is great, otherwise it would be best practice for her to get independent legal advice to ensure the loan was also in her best interests. And moving closer to home to support your mum and brother does seem like it is in her best interest.
 
Jerseygirl64 said:
My Dad gifted me the home I was living in with my wife and children by deed of transfer. It was valued at 320k. Unfortunately my Dad died 18 months later and we have sold our home so we can be closer to my mum.

Using proceeds of the sale of our home along with some savings, we are falling short by about 60k to purchase a new home. (We had to spend 40k on renovations to our home before we could sell it but the improvements made yielded a much higher sale price than it would had we not spent it). However, now applying for a mortgage and the bank are querying all of the spending (new kitchen, new bathroom, labour costs) - money that came from savings used to make home saleable

My mum has savings accumulated and has offered to loan me the 60k instead of a bank - I would repay this back to her by 1,000e per month but would like advice on how/who we'd get to draw up an agreement so that it is all above board legally and for Revenue, tax etc - what interest rate would she need to apply if we did this?
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You already received a gift worth 320K. From your dad. And now you want to borrow your mother's savings.

Your comments about the bank querying your spending is odd. What is the basis for this line of questioning? Is it to ascertain what happened to your savings.

I don't understand spending 40K if you intended to sell, but fair enough since it yielded the money back. So I assume you sold it for 320 + 40 = 360K minimum.

How much is the new home, how much are you borrowing. Can you afford an extra 1K a month?

Does your other sibling know about this? Did they receive a gift of 320K also?

Your mother needs independent advice and unless she had all the details above I'd advise her not to loan it to you. Because I can quickly see this going pear shaped. So to be fair to your mother you might do a post about this from her point of view.
 
Guys

You are overthinking this.

The OP is borrowing €70k over 6 years from his mother instead of taking a mortgage from the bank.

It is eminently sensible as the mother has plenty more money.

It happens all the time that parents help their children to buy houses, even if in this case, they have already received a gift of a house.

The only issue is documenting it as Red has suggested.

Brendan
 
Thanks all for your replies - much appreciated

@Bronte - yes, bank understandably questioning my reduction of accumulated savings - all of which was on the rural house. We'd started to make improvements before my Dad got suddenly ill and died. House needed substantial repairs including a new wastewater system, fixing water supply and other essential repairs - without fixing these, the house would struggle to sell - we sold for 385k so got our 40k back along with 25k

@Brendan, yes - my mum wants to loan me the money and cut out the need for a mortgage - I'd borrow 60k and repay 1,250e per month so it is repaid in 4 years - Bronte's advice though makes me think its wrong to accept her offer though because my sibling won't know about it - sibling didnt get a 320k gift but will be inheriting the family home and its current market value is 700k

For the best way to document it, am I right to think it best for mum to run this past her solicitor and have him witness our loan agreement - monthly transfers would be made to her account then - I'd try to repay her sooner aswell if I can get a credit union loan to clear balance for her & from then repay the CU instead - this is preferable to me than borrowing for 20 years from a bank

Target house price is 450/460k and to rent that type of house is c2k per month -
 
Brendan Burgess said:
Guys

You are overthinking this.

The OP is borrowing €70k over 6 years from his mother instead of taking a mortgage from the bank.

It is eminently sensible as the mother has plenty more money.

It happens all the time that parents help their children to buy houses, even if in this case, they have already received a gift of a house.

The only issue is documenting it as Red has suggested.

Brendan
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And even then it doesn't have to be a long document. Just the agreement between the two of you on the amount being borrowed, the agreed repayments and the interest being paid. Even if 0%, put will be repaid at 0% interest.
 
Jerseygirl64 said:
Bronte's advice though makes me think its wrong to accept her offer though because my sibling won't know about it - sibling didnt get a 320k gift but will be inheriting the family home and its current market value is 700k
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Bronte is just wrong.

It is much better when you want a comparatively small amount of money to borrow it from the family.

Your mother is probably getting 0% interest and you will be paying about 4.5%.

And no need for the credit union either.

By all means tell your sibling if you wish. Your mother's financial affairs should be private and if she wishes to tell your sibling, let her do so.

You are talking about a €70k loan when the two of you are getting gifts and inheritances worth over €1m. It's just not important.

Brendan
 
It's not excactly a large mortgage were talking about. Personally, I'd just take out the mortgage, it's really not worth any potential issues with siblings or any other relations for that matter.
I'm sure you all get on great and love each other, etc, etc, but once money is involved, families can fall out very easily when there is a perceived inequity. I'm going to make sure and spend all my money before I go so there's nothing for anyone to fall out over :)
 
Brendan Burgess said:
Guys

You are overthinking this.
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Absolutely not overthinking this. My reply is based on life experience. And on what I've read on here and elsewhere. The point of on here is to try and give our best opinion or advise.

The physical and financial part of this transaction is the relatively easy bit. As is the loan document. The wider family, and financial ramifications must also be considered.

Personally I've seen the best of intentions go pear shaped when unforeseen events (death, financial collapses, business failings, inheritance, gifts, sibling rivilary, parental prefrance) come out in the wash.
 
Jerseygirl64 said:
yes - my mum wants to loan me the money and cut out the need for a mortgage - I'd borrow 60k and repay 1,250e per month so it is repaid in 4 years - Bronte's advice though makes me think its wrong to accept her offer though because my sibling won't know about it - sibling didnt get a 320k gift but will be inheriting the family home and its current market value is 700k

For the best way to document it, am I right to think it best for mum to run this past her solicitor and have him witness our loan agreement - monthly transfers would be made to her account then - I'd try to repay her sooner aswell if I can get a credit union loan to clear balance for her & from then repay the CU instead - this is preferable to me than borrowing for 20 years from a bank

Target house price is 450/460k and to rent that type of house is c2k per month -
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Based on this my further comments are:

- why has your sibling not been informed
- I have not said it is wrong to borrow the money. But I advise full transparency
- Why would one sibling inherit the family home
- Nobody can rely on a promise of a family home in the future, that would be pretty stupid
- Why would you get 320K and sibling 700K (which is way over the tax free amount, so that's bad financial planning - unless it's a farm)
- If it's a farm, then it's a different matter. One child gets a house and the other the farm.
- A solicitor giving your mother independent advice on this might be a good idea, but it's not a lot of money, so if your mother is happy enough I don't see an issue other than the sibling not being told. Certainly your mother should have the agreement in writing.
 
Brendan Burgess said:
Bronte is just wrong.

It is much better when you want a comparatively small amount of money to borrow it from the family.

Your mother is probably getting 0% interest and you will be paying about 4.5%.

And no need for the credit union either.

By all means tell your sibling if you wish. Your mother's financial affairs should be private and if she wishes to tell your sibling, let her do so.

You are talking about a €70k loan when the two of you are getting gifts and inheritances worth over €1m. It's just not important.

Brendan
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Well I don't think I'm wrong to point out things. Because things have a habit of going wrong.

The bit in bold is true. And that's a rocky road to family problems. One of my parents did something similar and when it went awol I was called in to deal with the financial mess. And the decision was made not to tell me originally for the very reasons you outline.
 
Bronte said:
Based on this my further comments are:

- why has your sibling not been informed
- I have not said it is wrong to borrow the money. But I advise full transparency
- Why would one sibling inherit the family home
- Nobody can rely on a promise of a family home in the future, that would be pretty stupid
- Why would you get 320K and sibling 700K (which is way over the tax free amount, so that's bad financial planning - unless it's a farm)
- If it's a farm, then it's a different matter. One child gets a house and the other the farm.
- A solicitor giving your mother independent advice on this might be a good idea, but it's not a lot of money, so if your mother is happy enough I don't see an issue other than the sibling not being told. Certainly your mother should have the agreement in writing.
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Thanks and I value all opinions - sibling is not being told as that is my mum's decision - sibling will also look for a loan, substantially larger and going on previous performance, he's not good at repaying family loans - he still owes me 3k and I've been waiting a couple of years for it now

@Rasputin - yes, I agree just getting the small mortgage will be simpler and avoid any of the potential issues that @Bronte is flagging with me - the advantage with the family loan though is that it would make us 100% cash buyer and in todays competitive market, I need any advantage I can get
 
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