How to calculate interest on a loan made to family member

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We lent £10k to a family member last April. As we had to borrow the money against our own home, we are charging them the same rate as our mortgage of 4%, and have stated on the Loan Agreement that we won't make a profit from this loan. It really was just to help them out.

We don't expect to be repaid until a property they have an interest in is sold at some future date, which is not known at the moment. The timescale has been left open ended.

We would like to provide an annual statement of interest to the borrower, so that it isn't a huge surprise to them when the loan comes to be repaid.

How do we calculate this? £10k with zero repayments, but 4% "mortgage type" interest. Will they pay interest on the interest?

Have a look here www.moneysupermarket.com/loans/calculator/?p=0&cicp1=&source=GOO-3A6A89F0&mckv=sPnDYfZLb%7Cdc_pcrid_152288300377_mtype_p_kword_loan%20calculator_2764ri918980_slid__pgrid_4031427389_ptaid_kwd-12953480&uuid=11111111-1111-1111-1111-111111111111&Device=c&engine=google&ptaid=kwd-12953480&gclid=EAIaIQobChMI7sng5snB4wIVQbDtCh23SgxVEAAYASAAEgKUBfD_BwE&adloc=9045763&pgrid=4031427389

Also bear in mind interest is income and is taxable

Thanks @Brit but that calculator doesn’t really work for us, as the term of the loan is unknown. I am not trying to work out a monthly repayment either. I’m just trying to figure out how much interest is due at 4% to date on a £10k loan, backdated to 01/04/18. We have borrowed this amount against our home, so no profit will be made. We just want to cover our extra mortgage payments.

Do I work this out monthly or annually? And do I add the interest onto the loan amount then recalculate on the higher amount?

If it's 4% per year, the most straightforward thing to do for an annual statement is add 4%.
So at the end of year one, £10,400.
Then at the end of year two you can add 4% of that: £10,816.
If you want to beak it down into shorter periods (eg monthly or weekly or daily) and apply your 4% to the new figure you will have enormously more complicated calculations!
If they eventually repay not on the loan anniversary, you can pro-rata then (eg, they repay after 18 months, so 6 months into year two. Divide the year 2 interest in half (416/2=208) and add that- £10,608)

Thanks @Dusty

Or just keep a record of how much extra you've paid on your mortgage and charge them that?

If you’ve borrowed money from your mortgage provider it’s more complex than 4% annually. It’s a mortising Loan. If you’ve borrowed it on the basis of your mortgage then you need to put the term of your current mortgage into the calculator. Donit as an interest only mortgage.

We have an offset mortgage bank account so not as straightforward as that unfortunately @madroid

I have done an excel spreadsheet now @Wildboar, based on £10k x 4%/12, to get a monthly interest amount, which I’ve added each month, then done same calculation for following month(s), so there’s a cumulative balance. I’m pretty sure this is the most accurate way, although our mortgage is actually recalculated on a daily basis, but I’m not going into that much detail for the borrower!

I don’t think either party is gaining/losing which is what my ultimate goal is.

Thank you all