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

[aretheymean]

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)

I look at it this way - if they lend you money and don't charge interest, the money isn't worth the same as it was when they first gave it to you. It has gone down in value, so they are effectively having to pay for the priviledge of lending you money. So is it right to charge parents to lend you money (IYSWIM... it made sense when I thought about it anyway!!!)

Being mean would be not to offer you any loan at all and leave you to get it from a bank or building society.

And I write from the opposite perspective ( I am more likely to lend money to my parents than vice versa - we are 'comfortable', they not)

sorry but I think YAB totally U

(and by the way I think you're a little bit mad to take out a bridging loan in the current economic climate. Will you be able to afford to keep paying it for, say, 18 months, and then sell your house at a loss? That's worst case scenario, sure, but if I couldn't cover worst case scenario I sure as wouldn't do a bridging loan if I were in your position)

your friend is either dead jealous, or dead spoilt.

They are not being mean. YABU.

If you don't like it you should go and find a bank to give you a loan instead I recon.

agree they are doing you a favour, since you wouldn't need an additonal commercial loan or have the hassle of negotiating one. I daresay they've been careful for years and accured the money either on the same basis or by prudent investment . Maybe they don't want to deny you the opportunity but think you should experience the same to appreciate the value of economy plus they would be out of pocket to the tune of the investment income from the amount, over an indefinite period. The alternative would be for them to buy either one of your properties.

Your parents aren't being mean whatsoever.

If they didn't charge interest, then they would, in effect, be giving you money for each month that the capital sum remains outstanding (in terms of the interest they are losing by that money not being invested).

I should have thought that interest - at, presumably, less than bank rates - is a small price to pay for the convenience of a family loan (no credit checks, no application forms, no security required etc) and for the ability you now have in securing the property you have you hearts set on before your current property is sold.

You are actually very fortunate to have their help to fall back on. Obviously, the vast majority of parents are unable to lend their children anywhere near approaching as large a sum as one which could purchase a property outright. Furthermore, the vast majority of families, even if such help was available to them, would actually be unable to meet the costs of servicing both their existing mortgage and the bridging loan. So, all things considered, I think you are being mean for moaning about this.

I am quite saddened by those who seem outraged at the idea parents shouldn't charge their children interest on money lent. This really does equate to people thinking that their parents "should" give them money no matter what. Of course, everyone's money is theirs to do with as they wish and wealthier parents may therefore be able to afford to gift their kids money - which is great. But this expectation and sense of entitlement as regards their parents' assets seems very selfish.

Also, too, they have to live on what they have, for what could be a number of years.

And pay for whatever nursing care they may need out of that.

Haven't read whole thread, but I think they are generous and sensible really. You never know, they may waive the interest or something if you're really nice and invite them to stay and cook for them loads!

If they didn't charge interest, they would LOSE money by lending to you. Some people take their time paying their parents back so I think it's reasonable for them not to lose out on the interest they'd get if the money was in the bank.

I think if someone (I don't mean you) wasn't happy with this deal, they're free to try their luck with a bank loan.

If it were a smaller loan then perhaps. But their loss will be considerable if you don't pay the loan back pronto.

I've made it clear to my oldest 3 (at university stage) that I've paid for their education and university and after that it's up to them. They've got tools to create whatever life they choose but I'm not funding it. So yes they're being very generous and in some ways they may be better not getting involved. Look at the flack they are getting from their own child - which is probably why most people think lending to people you know is never wise.

Also on divorce very very often what were parental gifts are suddenly said to be loans to stop the divorcing spouse getting hands on more money and parents lending money need to be very live to that issue too.

'which is probably why most people think lending to people you know is never wise.'

I couldn't agree more.

If you can't or aren't willing to give it as a gift, best to keep schtum entirely and keep your hands in your pockets, IME.

In courts, you see a lot of this loan/gift stuff from parents go pear-shaped and get ugly.

yanbu - get a loan from the bank instead

As my granddad always said, 'My relationship with my relatives is more important than money, so if I can't give it as a gift it's up to them to find it somehow.'

I absolutely think that they are right to charge you interest

They are taking a huge risk - what if the property market crashes before you manage to sell the house

(I must say I would think long and hard about taking out a bridging loan in the current climate - I can remember a few people getting TOTALLY carried out in the last crash on them and ending up with reposessions)

Personally I think it's abit mean - if I had that money and could lend it to a family member I would do so interest free but I suppose at least you have parents who will even lend you the money. Mine wouldn't even lend me a fiver when I had no food in the fridge!! (I was married but no kids then mind)

Your parents are not wierd, YABU and childish TBH.

Why do some so-called adults dislike thier parents treating them like adults? We seem to be surrounded by a generation of grown-up children who think their parents should be willing to hand over whatever is theirs, with no benefits for themselves whatsoever (and that includes one of my own), as well as those who are convinced that their parents will leave them their money when they die.

As for mentioning what money you think they have, you really do not have the right to start 'totting-up' your parents income and assets. It really does not have anything to do with you.

I think your parents are being tightfisted.

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too right, joash