Money Moral Dilemma: Should I pay my parents interest?

paulaird

I'd say it depends on the circumstances.
How many years ago did you borrow this sum? How much have you paid back so far? How long were they expecting to wait before it was paid back in full? And how significant was the £7000 to your parents at the time?
If it was their entire life savings 20 years ago then I think they're entitled to be paid back with interest, although they should have mentioned interest at the time but perhaps they weren't expecting to wait too long to be repaid?
However if they are multi millionaires for whom £7000 is a drop in the ocean then it's bit mean to be expecting interest payments from their children, but perhaps being mean is how they became wealthy!

eastcott5

We lent our son the deposit for his house, with no interest . At the time he had just started work and was on his own. When he sold it - better job and working wife - he paid us back the loan and the percentage of the house price increase which we had not asked for. Great - but caused a reverse problem - so we went on holiday!

onlyroz

How much, as a percentage, has the house increased in value since the loan of £7k? Let's say that the house has increased by 20%. Their proportion of this increase amounts to £1400, and so you should pay them back a total amount of £8400, including the payments that you've already made.

pigpen

Obviously not that much of a 'dream house' if you've sold it so quickly after purchase.

I'd just say fine I will continue paying you off the £7000 at £60 a month .. but no as a parent I wouldn't want or expect interest charges unless that was what had been agreed in the first place

Pollycat

Mjkpio wrote: »

Interesting one, I'm going to be in this situation myself soon but will ensure all "terms" are laid out clearly, however awkward it may be.

In order to afford our first house we'll probably be needing some help and my parents have offered a significant sum as a 0% loan with the intention of using what we pay them back as a monthly retirement income (they did the same with my sister). We'll be making it 100% clear that it is £x amount of X years at X% interest and get it signed!

In that case, you're not in the same situation as the OP as you will sensibly address the issue of interest before accepting the loan - unlike the OP.

oliveoil54

Don't normally post on these, but am in same situation. As the Parents we have gifted a large sum each plus loaned both our children considerable sums on the understanding they pay it back slowly. The amount gifted was to enable them to get a foot on the property ladder, but the amounts loaned are enough to reduce their mortgage payments by taking it to the lower % tier, therefore saving them a lot more monthly enough to start paying us back - we could't afford to gift this amount as it would leave us seriously short later on. We have no written agreement it is done completely on trust, so if my children chose to they could sell their homes and not pay anything back. It was also done on the understanding if circumstances changed ie having a baby and taking time off work or redundancy etc, they could take a payment holiday as long as preferably they let us know in sufficient time, because although the monthly repayment money comes into a current account I try and move it straight away into a savings account so it doesn't get eaten up in our day to day living expenses. We did this because our money wasn't really making a lot of interest and mostly we just wanted to help our children own their own homes and not have to struggle like we did.

As a number of people have already commented the post does not give the full picture!

If the poster made a huge profit on his house & didn't offer anything extra just as a thank you; then maybe the parents are justified in feeling a bit peeved!

Or the parent's financial circumstances may have changed considerably and they actually need the money? We are only hearing the view of the OP which is obviously biased.

gertie2011

You should pay your parents interest, especially if your house has appreciated during the period of the loan so far. They have lost what little interest is available these days, but you are gaining. How can you be such a skinflint with your own parents?

oliveoil54

Mjkpio wrote: »

Interesting one, I'm going to be in this situation myself soon but will ensure all "terms" are laid out clearly, however awkward it may be.

In order to afford our first house we'll probably be needing some help and my parents have offered a significant sum as a 0% loan with the intention of using what we pay them back as a monthly retirement income (they did the same with my sister). We'll be making it 100% clear that it is £x amount of X years at X% interest and get it signed!

Be careful regarding this, to enable both our children to get lower mortgage agreements we had gifted some of the deposit & as we couldn't afford to gift the rest we loaned it to them; on the understanding that they repay slowly as and when they could afford it, allowing for holiday repayments for redundancy or childbirth etc.

However their Mortgage Companies & Solicitors both insisted we signed documents saying that we had no claim on the money given as the Mortgage Companies would not lend to first time buyers who didn't provide/own all the money for their deposits!

We trust our children and so far have had no cause to regret our decisions. However we have requested that they each (including their partners) make wills to ensure that the remaining loan is paid back in full on their deaths.

To enable them to meet this payment at what could be quite a difficult time - my son & his wife have both got excellent 'Death in Work' pension deals; and my daughter and her fiancee have both taken out insurances (which doesn't cost a huge amount) to ensure that if anything happened to either of them there would be sufficient to pay us back plus also pay off the outstanding mortgage for the surviving partner.

A mortgage is a massive commitment and its definitely worth it to make sure you do enough research. I'm not sure how legal a written agreement between the parties would be if the situation became acrimonious at a later date?

I hate to be the doom monger - but what would happen to the amount your parents have loaned you, if both you and your partner are killed together in an accident?

mrsammyp

andrewbarnes wrote: »

The terms said £60 PER MONTH, which is £720 per year, or £7,200 over your suggested 10 years - hardly minimal!! £60 per month is over 10% per year, which seems extortionate as "interest".

That said, I agree that terms should have been agreed up front - it depends on parents' current circumstances.

You have misunderstood what I have said, I meant that the repayments of £60 per month were minimal and that it would have taken them 10 years to pay back all of the money (if the loan was interest free).

The parents are the ones that have (we don't know the exact length of time) lost up to 10 years worth of interest on £7k, whereas the child has most probably made a profit on the house that he is unlikely to have been able to afford without the initial loan.

If it was me, I would choose to give something back to my parents and reward them for their help.

Cimscate

It sounds fair enough to me that you should pay interest, after all if they had the money they would have had interest on it. They are your parents, TALK TO THEM, life is too short for family feuds.


Just a thought did you offer them interest or just assume it was interest free.....