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Is it possible to borrow money from family members instead of the bank for a home purchase?
Main Post:
Instead of taking a mortgage out for $500K, could I borrow $500K from a family member to put down on a home and pay them back at a lower interest rate than the bank without having to pay taxes on the $500k?
Top Comment: no better way to ruin a good relationship than to bring money and loans into the mix
My family is forcing me to co-sign a mortgage loan
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The thing is I’m the only person in the house that doesn’t have debt and have good credit (~700). My mom is forcing me to co-sign a 250k mortgage loan on the house with 5.2% interest. Obviously, I’m not comfortable with this. I’m a full-time college student who work two part time jobs. She and my aunt are the ones who’s going to pay and they promised me that it won’t be an issue where this comes up but nothing is ever guaranteed in life. I need help I don’t know much and my family shunned me when I said I don’t want to sign it.
My question is what is the pros and cons of this? I’m so lost and I need help. They said worst case scenario if we can’t make more payments then they will find someone to buy it off of us and it won’t be an issue but what happens to me if we got foreclosed on?
Edit: I really am overwhelmed by a lot of this. I didn’t expect this post to get a lot of responses but I really appreciate all of the inputs here. Everyone say the same thing but it is really hard for me to process right now since this is such a huge change in my life if things go south.
I just want to say thank you for what a lot of you are saying what I already thought. I still am struggling to go through this. My mom was the biggest support system I had. She made a lot of sacrifices for me but I feel incredibly hurt she threw it back in my face like this when I told her I’m not comfortable with such a big responsibility.
I will update once things settle down more and that we have a talk together as a family
edit 2: a lot of people asked how can it get approved and I have the same question because I don’t make that much money even with two part time jobs. She apparently went to a finance company that deals with mortgage loan specifically and not the bank
Top Comment:
Do not do this under any circumstances. They will ruin your credit and you chances of buying your own home in the future.
Family changed a gift to a loan, is this possible?
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Last year my wife and I (England) were planning on buying a house, but we’re a few £££ short on our deposit.
My parents (also England) stepped in and offered to gift us £4k to enable us to complete the deposit. They were asked to sign a document confirming it was a gift and they had no rights to the money.
Fast forward to last week and my parents have now asked for the £4k back “as it was a loan” and if I take too long to pay them back, then they’ll add interest.
Is this possible? Any advice would be welcome - thanks.
Top Comment:
They were asked to sign a document confirming it was a gift and they had no rights to the money.
This is exactly why the bank asked them to do that. They can ask for the money back all they want but you have written, signed proof that you do not need to give it back and they cannot get a charge over the property to recover the money either.
Loan from parents helpful? : r/Mortgageadviceuk
Main Post: Loan from parents helpful? : r/Mortgageadviceuk
Lending family member large sum of cash
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Hi, just need a word of advice here. I’m a 29m and my parents are divorcing. My mum needs cash (about 29-35k, somewhere in that ballpark). I’m completely willing to lend it to her until the divorce settles and I’ll receive my cash back (about 1 years time). Is there anything I need to be aware of? Bank getting suspicious of that sum of money going out then coming back in? Slightly more coming back than what went out etc (she was saying she might add a bit on)? Or can I just say it’s a gift and then it was returned?
Top Comment:
You need to decide whether you're lending her the money, or giving her the money in the hope that you get it back.
If it's the former, you need to draw up a contract, and you need to be willing to pursue her if she doesn't pay you back (and be prepared to deal with the financial and social costs of doing so).
If you're giving her the money and hoping that she'll pay it back, then you need to be prepared to write off that money in future.
Which option you go down depends on whether you value the money or the relationship more. But you need to tread carefully: a lot of people strongly recommend against lending money to friends or family, because it can easily go wrong and you can end up being forced into making that decision.
Oh, and also bear in mind that if this money is needed for the deposit on a house for her to live in, then it needs to be a gift, not a loan - and the bank will probably require you to sign something to that effect.
Family loan for deposit : r/Mortgageadviceuk
Main Post: Family loan for deposit : r/Mortgageadviceuk
Family member asking for a loan of money. Need advice.
Main Post: Family member asking for a loan of money. Need advice.
Top Comment:
If you expect the money back don’t lend it. If you don’t expect it back lend it. I personally wouldn’t.
Lending money to family: what to tell HMRC
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I plan to lend 10k to my dad, at 0%. I assume banks report to HMRC when they see activities that could be taxable (e.g they could think that this is a gift, or that I’ll accrue interests). Should I tell HMRC (and if so how?) about this loan, or just keep somewhere a paper signed by myself and my dad stating the terms of the loan so I can give it to HMRC if they question me later?
Note: my dad lives in France. I already know we have to give the French tax authorities a paper to let them know it’s not a gift, so that they don’t tax my dad on it.
Top Comment: You don't need to tell HMRC about this, and the chances of them asking you about it are virtually zero.
Loan from family instead of mortgage
Main Post:
Hi, my partner and I are wondering how it will be if we loan from family (his parents, in particular) instead of from a bank. We are considering to ask for the full price of the house.
How will the taxation be (since it’s not a gift)? What can we do to provide legal protections for both parties?
Thank you in advance.
Top Comment: Ask a notary. Their advice is free.
Loaning money to family. Have you done it and how did it end up?
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Interested to hear from people who have lent money to family and if you found it hurt/helped your relationship and the circumstances around it.
Top Comment: Only lend money if you are comfortable with never getting it back. My sister started out by just borrowing $20-$30 at a time and she'd pay it back. The last time I lent her money it was $150 and this was in January 2022. She knows she owes me and the last time she asked for money she promised she'd pay me back the $150 and then what she was asking for that time. I lied and said I was broke so couldn't. I'll never see that money again. We didn't have a close relationship anyway and she has an ongoing drug issue that I didn't know about until recently.
[deleted by user]
Main Post: [deleted by user]
Top Comment: No. I personally don't let anyone borrow money. You won't get it back. If you don't care about getting it back sure go for it but definitely not for a co worker they'll never stop asking.