Parents supported me, but looking to upsize!

enthusiasticsaver

John-K wrote: »

How on Earth can you reach that conclusion? They gave lent him money, and he is paying it back with interest.

We see this sort of thing a lot on here, a clear-cut situation but people thinking that you can just declare it not be by fiat. People repay loans and swear blind it was a gift, and so on.

Do people honestly think that you can just deny the reality of a situation, and if you do it with a straight face it has to be accepted?

Could my company just declare my salary a gift to let me avoid tax?

You presumably have an employment contract so that comment is ridiculous. The OP says no formal loan agreement between his parents and him so they can say what they like. Anyone else has to prove otherwise.

silvercar

davidmcn wrote: »

Interest received from loans is taxable under Income Tax. Being family isn't relevant (in the same way that you pay normal tax if you're employed by a relative).

Except it is relevant. It is not unreasonable for family members to give each other gifts, to help each other out in times of difficulty and to support each other. Whereas it is unreasonable to expect banks to give people loans without interest being paid.

John-K_3

enthusiasticsaver wrote: »

You presumably have an employment contract so that comment is ridiculous. The OP says no formal loan agreement between his parents and him so they can say what they like. Anyone else has to prove otherwise.

So to you, something being hard to prove changes reality?

I give up, the morals of some round here are simply staggering.

enthusiasticsaver

John-K wrote: »

So to you, something being hard to prove changes reality?

I give up, the morals of some round here are simply staggering.

I fail to see why families helping each other out displays poor morals.

Moneyextra-Matt

enthusiasticsaver wrote: »

Your parents did what we presumably did which was borrow against their mortgage free property to buy a flat for our daughter to live in as it was cheaper to buy rather than rent. In our case though we bought in our name rather than hers but we gave her the profit when we sold and she benefitted from much lower rent.

I don't think it will matter that your parents loaned you the money to buy the flat as it was bought in your name. All a bank or building society will see is that it is mortgage free. They are not going to go into the ins and outs of how you bought it in the first place unless your parents have a registered interest in it or a charge on it.

If you buy the new property at £285k then as you say you will need the £115k mortgage. Is your girlfriend going to be buying the new property with you?

If you intend saving £70k over the next 3 years then you will need to remortgage to give them £70k back and the only thing I am not sure of is whether gifting money to your parents is going to be something that will be agreed as a reason for remortgage. Another option is that you get a mortgage for £185k and give your parents £70k back when your flat is sold and then pay them the remaining £70k over the next 3 years. That seems quite a high amount to save though and it leaves you vulnerable should you get ill or lose your job. Would your parents be happy to wait or are they depending on getting the money back definitely in 2021?

Thanks very much for this. Really helpful.

I don't think i've explained myself very well in the OP. Clearly my lack of knowledge on this subject showing through. My parents aren't actually charging my interest at all. All i'm actually doing it paying them back the amount they pay the lender. E.g. they pay £140 p/m for the loan, and I transfer them £140 p/m to cover the cost.

Should anything happen e.g. lose my job or become unwell I pay monthly income protection insurance and my parents would happily extend the time period to help me out.

Appreciate your help guys.

enthusiasticsaver

Moneyextra-Matt wrote: »

Thanks very much for this. Really helpful.

I don't think i've explained myself very well in the OP. Clearly my lack of knowledge on this subject showing through. My parents aren't actually charging my interest at all. All i'm actually doing it paying them back the amount they pay the lender. E.g. they pay £140 p/m for the loan, and I transfer them £140 p/m to cover the cost.

Should anything happen e.g. lose my job or become unwell I pay monthly income protection insurance and my parents would happily extend the time period to help me out.

Appreciate your help guys.

Yes, I got that. I think you need to ignore many of the posts who seem to be more interested in why your parents helped you than helping you with your question. I think the gist of your enquiry is will you be able to realise £140k or £70k if you repay through savings by remortgaging your property in 2021. I am unsure if repaying a gift/loan or whatever would be allowed as a reason for remortgage. My suggestion is when you come to look for a new mortgage if and when you move you ask at that point but it may be better to keep more of the flat sale proceeds back to repay your parents then.

getmore4less

Moneyextra-Matt wrote: »

Thanks very much for this. Really helpful.

I don't think i've explained myself very well in the OP. Clearly my lack of knowledge on this subject showing through. My parents aren't actually charging my interest at all. All i'm actually doing it paying them back the amount they pay the lender. E.g. they pay £140 p/m for the loan, and I transfer them £140 p/m to cover the cost.

Should anything happen e.g. lose my job or become unwell I pay monthly income protection insurance and my parents would happily extend the time period to help me out.

Appreciate your help guys.

That is taxable income your parents there is no offseting of interests on their loans.