How much should we be repaying my family member??

Wineandwitches

In December 2021 my sister lent us the exact money to pay off our mortgage as she was working abroad and couldn’t buy for a couple of years. We always talked about her having a percentage share of our house which would be repaid when she came back to the UK.
when we came to remortgage in March this year because she had found a home to buy, we have had to get a whole new roof because of loft foam insulation.
My sister refused to pay towards this but still expects a percentage of the valuation- or about5% return on her “investment “.
Does anyone know how much she would have been able to get from a zero risk investment for 29 months from December 2021, please??

Interest rates were 0.75% then so I’m not sure 5% would have been possible, but would like to know for sure if possible.
we are obviously paying her back plus 2.5% when we get our mortgage but are unsure if the extra 2.5% is fair, especially given that she didn’t pay anything towards the £30k the roof has cost us! Thank you so much for any help.

Voyager2002

It is unreasonable to compare her loan to you with a zero risk investment...

In this case, she used her money to buy a certain percentage of a property without checking the loft insulation. As a result, your home was not mortgeagable and so could not be sold: at the time you tried and failed to remortgage the market value of your home was perhaps zero, or was what a cash-rich investor would have been willing to pay for it. Perhaps the documents from the failed mortgage application give you some idea of the market value of your home once the foam problem had been discovered.

Anyway, you took action and went to the trouble and expense of restoring what was at the time a worthless house, but your sister declined to help with this. So the amount due to her is a percentage of the market value of your home at the time when you could not get a mortgage on it. 

The real question is how much she has lost.

If you are feeling generous you might choose to give her the full amount that she lent you, but that is more than she can reasonably expect according to the terms of your bargain.

Brie

sigh - families and money.

So basically your sister thinks she bought a certain percentage of your house and now wants her money back.  Is she buying a house now in the UK?  Is she otherwise considered a first time buyer with all the perks that brings?  Perhaps you should point out that she isn't really a FTB as she has owned a portion of your house.  

Or perhaps she loaned you some cash that you happened to have used to clear your mortgage and thus saved yourselves £££ interest over the last 3 years.  Obviously you would like to repay all this money with or without a bonus.  And after all it's your house so obviously it's not down to your sister to pay for repairing things in a home she doesn't own or live in.  

Frankly I don't think there really is a right or wrong answer.  The only thing is whether you want to continue to have anything to do with each other.

silvercar

When you when you eventually want to sell you will have needed to get a new roof. So it is costs you would have incurred anyway.

Retrospectively, you should have said to her that in order to raise a mortgage to repay her, the house will need a new roof. Then asked if she wanted that to happen on the understanding that she would be prepared to share the cost in the same percentage as her investment. That way it would have been her choice whether you did the roof and remortgaged or not.

saajan_12

Wineandwitches said:

In December 2021 my sister lent us the exact money to pay off our mortgage as she was working abroad and couldn’t buy for a couple of years. We always talked about her having a percentage share of our house which would be repaid when she came back to the UK.
when we came to remortgage in March this year because she had found a home to buy, we have had to get a whole new roof because of loft foam insulation.
My sister refused to pay towards this but still expects a percentage of the valuation- or about5% return on her “investment “.
Does anyone know how much she would have been able to get from a zero risk investment for 29 months from December 2021, please??

Interest rates were 0.75% then so I’m not sure 5% would have been possible, but would like to know for sure if possible.
we are obviously paying her back plus 2.5% when we get our mortgage but are unsure if the extra 2.5% is fair, especially given that she didn’t pay anything towards the £30k the roof has cost us! Thank you so much for any help.

Do you mean (A) 2.5% p.a. compounding or (B) a straight 2.5% for the whole 2.5 years? On a 100k loan, (A) is approx £6.2k while (B) is £2.5k. Note both of those would under-price the BoE rate, and a mortgage would usually be higher than that (as its not zero risk!),

While BoE was lower in 2022 (avg ~1.5%) it rose rapidly to an average of 4.7% in 2023 and 5.25% so far in 2024. So compounding that since Dec '21, thats approx £8.4k interest on the same loan. 

That's just based on the money as a loan, not taking any capital gain or capital expenditure into account. Same as how a lender wouldn't get involved in your roof! I think its hard to argue it was a capital expenditure and she should take some of the 30k roof if she wasn't consulted. 

Wineandwitches

Thanks all for your thoughts. Yes we are still talking! And I think the £11000 “profit” on top of the original loan will be more than fair for us to repay.