Borrowing from Parents instead of Bank

Marvel1

letitbe90 wrote: »

You have no option but to declare it as a gift, they won’t give you a mortgage if they believe your family members have loaned it to you.

Ignore this advice, it's fraud.

Linton

Taking out and providing loans should be a strictly business relationship. Mixing this with family could cause considerable ill-feeling on their part or guilt on yours if for example circumstances prevent you repaying the loan when the parents need the money. Much better to give and receive a gift with no expectations on either side of repayment.

Keep_pedalling

dgerrard wrote: »

Hmm, a good question.

Initially it was just going to be a gift towards the deposit, but we didn't feel comfortable taking that much money from them so we talking about it being a loan.

These responses are making me think now: would that just be the more straightforward option, just to have it as a gift with no structured payback set up? And then if we DO pay them back in the future, treat that like a gift as well?

If your parents estates are likely to be in IHT territory then it would be sensible to revert to the gift idea, as just pretty standard inheitanx tax planning and nothing to feel uncomfortable about.

davidmcn

Keep_pedalling wrote: »

If your parents estates are likely to be in IHT territory then it would be sensible to revert to the gift idea, as just pretty standard inheitanx tax planning and nothing to feel uncomfortable about.

Yes, realistically if they can do without the money now, are they likely to need it again in the future? I'm sure it feels nicer to offer to repay it but it would be considerably simpler if they gifted it.

Annisele

I think that whether it's better to do this as a gift, a loan, or not at all depends on why your parents are wanting to transfer the money to you.

As a completely non exhaustive set of possible reasons:

If they're wanting to reduce their future IHT bill, this has to be a gift.

If they're wanting to help you onto the property ladder, that would be a confusing motivation given that you've got an AiP for considerably more than you need.

If they're wanting to save you money in interest charges, then it's probably worth calculating the potential interest charges over the time period you expect to owe the money to them, and then comparing that to the additional costs you'll have to make sure the loans are properly set up. (I don't think those additional costs will be huge - but if you get into needing to set up second charges to secure the loans, those costs might wipe out relatively small savings).

If they're wanting to make money by charging you interest, it's unlikely that's a good deal for you. (I doubt that's the case given the other things you've said though!)

If they're wanting to maintain fairness by giving you the same deal they've given siblings, it might be best to politely decline on the basis you simply don't need the help.

I completely accept that there are many other possible reasons!