Mortgage confusion!

driverdan77

Hi

We financed 30k of our house purchase with a loan from my sister and brother in law (after Nationwide reduced their offer to us due to student loan debt). At the time this was coming from their savings so it was going to be the simple case of paying it back with a suitable % interest figure for the number of months that we borrowed it for. This money was to be repaid with an inheritance that was due (and should arrive any day now).

However, since then they have purchased their own new house, and to fund it they had to take out another 30k mortgage because of the money that they had lent me.

I should be in a position to repay the money in a couple of weeks time, but the query is what I should pay them back in addition to the 30k. I had been thinking that I would just pay the relevant debit interest (2.5% for 5 months) which comes to approx £300. They, however, were under the impression that we would repay all of the payments that they had made during this time (which comes to just over £1000) as they wouldn't have been paying out this money at all if it hadn't been for our loan.

My thinking is that if we cover the full payment then we will be covering the capital that they have repaid which, ultimately, will have come off their overall borrowing. This (in my mind) would mean that they would end up with too much overall? Having said that, if we only pay the interest then they would appear to be out of pocket (for now at least).

Thankfully this is all amicable - we just want to make sure that neither of us end up out of pocket! I find it too confusing and would welcome any guidance (other than don't borrow from family in the first place...)

kingstreet

TBH I'd give them the extra grand and thank them profusely for getting me out of the clag!

GMS

It would have cost you more than a grand to borrow from a bank by the time you paid any early settlement costs etc.

Pay the grand with a box of chocs and bottle of wine. You never know when you may need it again!

Thrugelmir

I assume that your sister and BIL are not paying 2.5% on their mortgage.

So your offer may be on the low side.

driverdan77

The rate is 2.5% on the mortgage, but I can see that other options would have been more expensive and, yes, they did get us out of an awkward mess thanks to Nationwide changing their offer! I wish I fully understood the ins and outs of it but I do want to get it settled (and, yes, not seem ungrateful!) so I guess I'll cover all of the payments. Thanks for the rapid replies.

Thrugelmir

driverdan77 wrote: »

The rate is 2.5% on the mortgage,

Your mortgage, not theirs. That's what I'm suggesting.

bigadaj

If their mortgage is a new mortgage for full term then most of the initial payments are interest, so the difference shouldn't be that great, would the higher figure include fees, erc, or similar?

driverdan77

It didn't include any fees at all, just a reflection of the total repayments so far. I'm thinking that if they were able to settle the mortgage now (without any fees) then my sums and thinking would make sense...but early repayment charges would stop this from being possible so it makes sense to cover the full payments. I think I was being too simplistic in my thinking and forgetting about the charges that would have been involved (both for repayment of their mortgage or if we had looked at alternative sources of funding)

driverdan77

I apologise if I'm rambling...not much sleep at the moment (more to do with 6 week old son than mortgage worries)! Might explain why I've been struggling to get my head around this!

Dave_Ham

Echo above - pay it all with thanks.

Be mindful also that hardly any capital is paid off in the early months/years as the way in the interest is staged..

6 month old kept me up too so head is fuzzy, you do not get much more sleep in the months to come...