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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:
dilbertina · 19/03/2008 13:13

Yes I think YABU. If they had lent you a couple of thousand I would think it was a bit pennypinching. However sounds like they are lending you a big sum. They do not have to do that. If you don't like the generous terms it has been offered on then don't take it.

I think you should be counting your lucky stars that a)they are in a position to help you and b) are willing to do so.

On the face of it they may seem to have pots of money BUT they are using that to produce an income to live on, and probably can't afford to whittle away the capital amount else their long term finacial security would be lost.

Tutter · 19/03/2008 13:13

agree with twig

be grateful fgs

WanderingTrolley · 19/03/2008 13:13

Agree with Twig.

Their money, they can do what they like with it. I think your friend's parents are either far more generous than most, or only ever hand over a few quid.

Your parents aren't mean - it's entirely likely they are taking a financial hit in lending you the money.

LucyJones · 19/03/2008 13:14

why don't they just give you less rather than charging interest?

Chequers · 19/03/2008 13:15

Message withdrawn

FairyMum · 19/03/2008 13:16

Yes weird. My In-laws do this too.

Kewcumber · 19/03/2008 13:16

if you have siblings they certianly should charge you interest or it will disadvantage your siblings.

Perhaps they also think that you give you a "free" bridging loan (which are normally very expensive) is not good for you and that you should expect to pay for it otherwise you might be tempted to made decisions which are not well thought through. If you arent paying interest - where's the incentive to shift your arse and get your house sold?

hanaflower · 19/03/2008 13:16

This reply has been deleted

Message withdrawn at poster's request.

Kewcumber · 19/03/2008 13:17

and I wouldn't decribe them as mean but generous

sophiebbb · 19/03/2008 13:18

I also think it is less about the fact that they are financially losing out by lending you the money in that they are not earning interest themselves on it and more about the fact they want to see you both standing on your own two feet.

If in 20 years my kids asked me for that sort of money I would no way offer it to them for free. I would want them to still appreciate the value of money and I don't believe handing it out easily is the way to do that....

Personal opinion and all that...!

Twiglett · 19/03/2008 13:18

I hope you are drawing up a written agreement

nothing as nasty as borrowing money from relatives or friends

sheesh at some of the attitudes on here ..just sheesh

zippitippitoes · 19/03/2008 13:19

they are taking a pretty high risk...it could all go pear shaped

they are being extremely generous at the least ti is a lot of hassle

Bink · 19/03/2008 13:19

Other thing is that neither you nor they know how long this loan is going to be outstanding for - so the amount they are worse off by (in forgoing the deposit interest they'd otherwise be getting, as others have said) is potentially BIG.

I think they sound lovely.

I have a sort of feeling there may also be a tax implication to charging interest on a family loan - ie that by doing so they will not be penalised for doing a disguised gift. But I am not at all sure about that - and anyway, the bottom line from me is - they are SO NOT being mean. The end.

zippitippitoes · 19/03/2008 13:20

i dont have a writtern agreement with exh..it never occurred to me

come to think of it he must be mad

WanderingTrolley · 19/03/2008 13:20

Twiglett can you please end all your future posts with "....and WT agrees with me" because I have typed "I agree with Twig" about 500 times in the last week and I'm beginning to get RSI.

Thank you.

PS About a written agreement...oh just see above.

wannaBe · 19/03/2008 13:20

agree with twiglet. Also I hate this assumption that because someone is financially comfortable they should just be giving their money away.

lollipopmother · 19/03/2008 13:21

Your parents have given you a loan to buy a house and you think they're mean?! Seriously, you are taking the micky, you've got to be because no one could possibly be this 'me-me-me' and not be on a wind-up!

unknownrebelbang · 19/03/2008 13:21

I'm with Twig.

Nice if they don't charge interest.

Realistic for them to do so.

VictorianPASqualor · 19/03/2008 13:23

Lucyjones, if they give them less then they won't be able to buy the house they want, Obviously.

Also, another take on it, the fact that you can afford to pay £1000 a month back to them and can't just wait to buy your new house says to me you aren't short of a few bob yourself, so why should they lose out if you can afford it?

Plus, I'd imagine when they sold their second hom they had plans for that money, which have had to change AND it's probably going to be your inheritance in years to come anyway.

I know my MiL thinks about all of her finances in relation to what she is going to leave to her sons and losing out on the interest from the bank/building society to her when you would have paid interest to a bank anyway would seem silly.

She'd rather charge interest herself and then put it back into her assets to leave her children in the future.

sophiebbb · 19/03/2008 13:23

Flip it round...what would you think if your kids asked you for that amount in a few years and thought you were mean if you wanted to charge interest? I would be highly disappointed with how I had brought them up....

ninedragons · 19/03/2008 13:24

As you've acknowledged, they have the right to charge you interest.

I still think it's odd. My parents gave us a bridging loan for our place and didn't charge interest. I wouldn't charge my daughter interest should she need help.

Many people of our parents' generation are acutely aware of having benefited from the property boom, and interest-free loans are a small way of passing some of that completely un-earned good fortune down to the next generation.

Bink · 19/03/2008 13:25

Also - have you ever tried to get a loan at bank base rate? It's just not available to your retail customer. So you are getting a super-super-cheap loan.

(Maybe your parents should have a quick word with their financial people - re that tax angle I mentioned - before agreeing to such a low rate!)

CaptainUnderpants · 19/03/2008 13:26

I think you should be very gratefult o them especailly in the stae the money market is in at the moment.

we have a loan from Dh parents - we pay them back with interest . otherwise they lose out on interest on their savings .

They are being careful with their money and probably always have been hence why they are mortage free and have a good income - lessons to be learnt there I beleive

Kewcumber · 19/03/2008 13:31

my mum gave my very hard up brother money for his daughters school fees. Instead of using the money they'd saved to pay off their overdraft, they soent it on big flat screen TV, clothes, holidays cameras etc. My mum was really upset that the money she had worked so hard for was effectively being frittered away. She was sorry she'd given it to them and won't do it again - unltimately their loss.

hotcrossMonkeybun · 19/03/2008 13:34

Good god, of course they are not being mean - pull yourself together!

They are retired, albeit with reasonable income, but did it cross you or your friend's minds that they might well be worrying about their future needs, for example, to pay for care they might need in older age to prevent you from worrying about them having to be dumped in an old people's home or to protect your inheritance later because if they hadn't enough funds to pay for this kind of thing, they might have to sell their house etc...?

They are adults and can do what they like with their money. And you and your friend are adults and should get over yourself.

I have borrowed a small amount of money from my father before - a long time ago to help with a small deposit on a house. I offered to pay interest.