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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To think my parents are weird for charging interest on a loan?

162 replies

aretheymean · 19/03/2008 13:00

I'm genuinely interested to see what other people think about this one. (have namechanged for annonymity)

Background: my parents are both retired, live in a mortgage-free house, have a more than adequate retirement income and do not have extravagent tastes. They recently sold their second house (with no mortgage) so have a large sum of capital.

They have offered to lend me and dh a considerable sum of money, basically as a bridging loan to buy a house before we sell the one we are in.

We have agreed to pay the bank base rate in interest, which will amount to roughly £1000 a month.

I was telling my friend about it and her response was "oh my god, bank of mum and dad don't charge interest!!!!"

I am now thinking they are being pretty mean (although clearly totally within their rights) in charging us interest - what do other people think?

(I have to go out now but will check back later)

OP posts:
Chequers · 19/03/2008 13:02

Message withdrawn

BoysAreLikeBunnies · 19/03/2008 13:03

You might think it mean, but really they are doing you a big fat favour by bypassing the usual routes to finance.

I do see where you are coming from, though.

Twiglett · 19/03/2008 13:03

in order to lend you a 'considerable amount of money' they must be removing a 'considerable amount of money' from either a building society or shares

they earn interest well over the Bank of England rate

they are taking a loss by lending you money

don't let your friend make you an ungrateful sod

loopylou6 · 19/03/2008 13:03

i think they are mean

Chequers · 19/03/2008 13:04

Message withdrawn

swiftyknickers · 19/03/2008 13:04

i think its mean mean mean#sorry i would never charge any child of mine interest on a loan

Twiglett · 19/03/2008 13:05

god, when will people grow up on here

or have I just been brought up in a particularly hard family

people complaining about childcare offered, money offered, help offered .. and always wanting more

it amazes me .. I'm an adult, we live our lives with no expectations of help .. because .... WE ARE ADULTS!

Chequers · 19/03/2008 13:05

Message withdrawn

elliott · 19/03/2008 13:05

Do you have siblings?
I think this is fine as an arrangement. You are saving money, they are losing a bit as they could invest the money more profitably elsewhere. They probably want the reassurance of formality and that you won't take it for granted. What happens if they need the capital for any reason before you ahve paid it back?

Novicecamper · 19/03/2008 13:06

I think it's odd.

Iota · 19/03/2008 13:06

I agree with Twiglett -if you are repaying £1000 pcm, they have lost even more than that in interest and the bridging could go on for months

OrmIrian · 19/03/2008 13:07

Agree with twiglett. Their loan to you means they won't be getting that interest from somewhere else. And perhaps they need it or at least have got used to having it. And I'm sure it's a lot cheaper than any bank you could mention.

My parents did this for us when we needed a new car about 10 yrs ago. Some investment matured and they were able to offer us the money instead of reinvesting it elsewhere. My parents income is largely from such investments these days, so very important to them.

MuffinMclay · 19/03/2008 13:07

We've borrowed money in the past from MIL, once to buy a car and the second time for the deposit on our first house. Both times we paid interest on the amount borrowed, but at a little below the market rate. I'd have felt uncomfortable not paying interest.

They'll be losing interest on their savings by lending it to you.

Bouncingturtle · 19/03/2008 13:07

Well it is a rather considerable amount of money they are lending you, which if they invest will earn them interest at above the base rate. This is income for then that they are not getting while you are in possession of the money. It is still saving you some money plus they don't know when you'll be able to repay since it will depend on how long you take to sell your home - which could take months.
So I think in this situation YABU.
At th end of the day they have worked many years to get to where they are financially. And it is there money to do as they wish.
HTH and good luck with the house move

hecate · 19/03/2008 13:07

They are doing you a HUGE favour. Favours are done on the terms of the person doing it. Be grateful.

Your friend sounds like a charming 'whathaveyoudoneformelately' to me!

zippitippitoes · 19/03/2008 13:07

i would expect to pay them interest yes

tho having said that my exh has lent me 30k interest free

and he doesnbt actually know when he will get it baxck because he cant have it until i sell my house which could be at least a year

Chequers · 19/03/2008 13:08

Message withdrawn

louii · 19/03/2008 13:09

On small amounts no interest but a substantial amount tis only fair to pay the interest, they are doing you a favour after all.

My folks dont charge interest though

Bouncingturtle · 19/03/2008 13:09

Must type quicker...

camillathechicken · 19/03/2008 13:11

if you had to get a loan elsewhere, then you would have to pay interest.... and bridging loans are getting harder to come by at the moment, so the fact they are lending it to you, and charging a reasonable rate, and saving you the bother of applying etc... then it is up to them.

if it was a small sum of money , say £300, i;d think it was a bit mean spirited, but £1000s, when they will lose out on interest by lending it to you, is a different story.IMO

if my parents were going to lend me and DH a significant amount, I would have a proper agreement drawn up with solicitors.

VictorianPASqualor · 19/03/2008 13:11

IME they're weird for lending you the money at all, IME, parents don't do fuck all to help out, so yes, YABU.

Jeez, get a grip, you're an adult and as such should be standing on your own two feet, be grateful they've offered to help at all.

sophiebbb · 19/03/2008 13:11

I think that you are incredibly lucky to have parents with that sort of money to lend you. This takes away loads of hassle for you in terms of having to borrow it from a bank and means you can do what you want eg having two houses at once (not sure why you can't simply sell one before buying the next - that is fairly extravagant!!).

They have every right to then charge you interest on what you are borrowing.

I think it shows they are treating you both like adults.....

camillathechicken · 19/03/2008 13:12

i see have cross posted with lots of others !!

loopylou6 · 19/03/2008 13:12

ahh have just read the other posts, and if they are losing interest by lending u money then yes theya re within their rights to ask u for interest

Lazycow · 19/03/2008 13:13

Well I don't think they are being mean at all.

However I know my parents would never charge me interest but that does tend to mean that I would never ask them for any money as I'd feel bad taking it if and I know they would flatly refuse being paid interest.

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