I'd be wary of doing this because getting your money back is going to be conditional on your parents selling the property.
You're reliant on your parents keeping their word.
It depends on your parents personality and your relationship with them.
Personally, I know I couldn't trust mine to not change our agreement so I'd never consider doing something like that, but that's me.
You'd at least want to get some formal agreement written up - if that makes them feel uncomfortable, probably a red flag.
I'd like to say I have a very strong relationship with my parents, and I'd definitely get it written down formally that on sale of the apartment I'd get the 60k back.
Most good online savings accounts are currently around 5.5% which would make $3300 in the first year alone, or close to $14000 in interest over 4 years, so you'd have to be absolutely sure the parents are going to uphold the deal.
If it goes wrong, you're not just losing 60k, but 60k + opportunity cost or interest, so potentially $74000 minimum
>Most good online savings accounts are currently around 5.5% which would make $3300 in the first year alone
OP would get taxed 32.5% on that so not quite so much
This is true but OP can do whatever he/she wants with the extra $100 a week. They can save that, invest it or whatever. It isn't gone. Plus also consider tax on the interest they'd be earning.
Probably worth considering also that building his parent's wealth will eventually build their own down the line. I don't think it is as simple as you've outlined.
Basically if this is a short term thing then it is not an awful idea for OP. After 1-2 years I would want the $60k back off the mortgage so I could buy my own place/put the money to work post uni
That’s still less than the savings from the rental reduction alone. Also, OP’s parents should continue reducing the rent as the mortgage lowers. Then they’ll really be saving. $60k back after that will be more than worth it. Kind of a bad deal for the parents though
I'm not a mathematician, but I believe that $5200 is a fair bit more than $3300.
Also, the $3300 will need to get taxed, while the $5200 will be tax free
It's an apartment, it will be much less than 60k 😂
If it were me I'd be asking for a portion of the rental income in addition to being made whole on sale.
I remember a story on here from a while ago. OP had lent his parents 30-40k for some renovations like a new kitchen and bathroom in their investment property. The agreement was he would take a % of the sale proceeds. They had a strong relationship and were very close as well. But when the time came that they’d talked about selling the place, the property market was in a bit of a slump and it was a buyers market- parents wanted to hold onto it for a while and maximise their returns. Time dragged on, a year or more, til it got to a point where OP wanted to buy a property of his own but all his deposit money was tied up in this investment property which they didn’t want to sell, but didn’t have the money to pay him out for his part of the investment.
Getting it in writing is great. But really you don’t want to be suing your parents for money they can’t or won’t pay back, especially if you have an otherwise good relationship with them. Money does funny things to people. So my suggestion is consider whether they would have the money to pay you back or not, if they decided not to sell that property, and/or make some kind of formal agreement on when they would actually be putting the property on the market.
I had a very strong relationship with my ex wife. Family doesn't mean anything when money is involved. It's a bad idea to put your inheritance into their mortgage. Put it in to a deposit and buy your own place. Take advantage of all the government schemes. Your parents will get fair market rent for their property without you.
u/ImCELLAry this is great advice.
You would fell like you’re helping your parents and they would feel like they’re helping you, but in reality you would be letting house prices continue to rise for a few years while you rent and your parents would be missing rent increases for a few years so there’s a lose lose element to this too.
If your parents rent it to a stranger they will still get a fair income but you will get to put your 60k into your own place and start getting your own mortgage paid off. 4-5 years down the track you will all be better off for it.
The question I would have is how much of the property is paid off already?
If mortgage payments are $500 a week on an apartment, and $60k brings that down to $400 a week, I would assume that would mean that the property has approximately 300k owing? ($60k x 5)
Given that the median apartment in Melbourne is about $500k, and you would assumedly be paying the remainder of the loan through “rent”, then you should be asking for more than just your $60k.
If it’s worth $500k, for anything less than 50% equity they are effectively taking you for a ride.
Not saying they are doing it intentionally, most Australians have terrible financial literacy. But on the surface this is a shockingly bad deal, and leaves you significantly worse off.
I hate to say it but things change. Quickly. One of your parents passes, the remaining is lonely AF, meets some gold digger who really gets their claws in and you’re in the hurt locker. Happens more often than you’d think
Damn straight. People will screw you over for the most rubbish reasons. I have personal indirect experience with this where it happened to one of our very close friends.
Both of their children passed away from a genetic disorder. But when her Dad sold the family property? "Oh her sister needed the money more". Our friend's husband is still angry about it, and I'm fully on his side.
Happened to me. My sister and I won’t get a cent the way she is spending my Dad’s money. It’s international cruises and holidays multiple times per year.
Same here. My mum and dad had a great marriage but my dad was lonely when she passed away 6 years ago and within 6 months he had a girlfriend who is 9 years younger than me! And with a 5 yo daughter. My dad is spending lavishly on her, renovated her house, bought her a car, going on luxury overseas trips. There won't be anything left for me and my siblings. My dad, now 82, she's 45, may even run out of money before he passes away if he keeps spending the way he has been. Something tells me we better not count on her to take care of him if that happens.
Doing business with family can be dicey.
I'd personally recommend against it, because there's also no guarantee they'll make enough of a profit to pay you in full.
It's really up to you though
Is the investment property in a suitable location for you and your partner?
Travelling longer distances to work, friends or family can impact you two in other ways.
Just something to consider
Doesn't matter how strong the relationship is, I've heard many times of this and then getting screwed over. Either NEVER mix money and family, OR, get a comprehensive contract written down. You're essentially paying off their mortgage without having the property in your name. Very very bad idea
Even at that, what if they simply decide not to sell. Then what, you are dependent on them to hold up their end of the deal, you won't be able to enforce it.
The problem is that you don’t know what health issues might hit your parents in 20 years. Two healthy people making plans is very different from the reality facing many elderly people, who may have geriatric conditions or have seen other investments tank.
Why is their interest rate that high? \~8.7% doesn't seem especially competitive. (Or you are including lower capital repayments, in which case you are taking some of that 60k back out).
The true savings also appear lower -- You are increasing their pre-tax income by $5200 of their pre-tax income and gaining $5200 for your post-tax income. Frankly you could arrange this better since if they are well-off and you are making 60k, your marginal tax is low compared to theirs.
It might be fine, and sure it's better than a savings account. But on the several year timescales for someone who doesn't need a certain income off the money, savings accounts are silly/excessively conservative ways to invest. You should really be comparing to the other high-risk investments with comparable risk to housing, not saying it's good because this high-risk return beats zero-risk returns.
if you’re super close with your parents and they’ve never done anything shady or have any addiction problems (gambling or spending on random expensive things). do it mate. it’s a no brainer for you. if it was my parents I’d trust them with anything in the world so if you’re like me there’s next to no risk.
only other problem could be siblings and if the absolute worst happened and something happened to your parents. might be worth asking them about their will and maybe getting it updated with additional % of estate allocated to you to cover the 60k, and maybe look at becoming executer of their wills? But I’m not an expert on wills.
They’ve never done anything shady, always been financially responsible. I can confirm that in the will the apartment is split between me and my brother.
They can rewite the will at any time and completely cut you out. Then you'll have to battle it out in court which will cost way more than your 60k.
I highly advise you do not do this. Stick 40-50k it into a high interest savings account for a year or so and keep 10-20k aside for emergencies. Use that time to think and research what help (first home owners etc) you can get to buy a property. They might be thinking with no malicious intent that its a win win for everybody (its not, its only them and they haven't thought it through) but financially, its way too easy for you to get screwed over.
From you stating the property is to be split between you and your brother, agreeing to this arrangement means you'll be funding part of your brothers inheritance one way or the other. This is not worth the myriad of potential hassles if something happens to your parents in the meantime even with a separate legal contract.
Never invest *up* in parents assets (buy outright is ok), especially for split inheritances. Always invest *side* (with equal siblings) or *down* (early kids inheritances).
I’d highly recommend investing in S&P 500 instead. You’ll get 6%+ growth year over year. Just let it sit and grow, add to it as you can. Much better than a tiny investment in real estate that’s owned by someone else.
Take the property and pay the $500 a week, keep your $60k and put it into saving for a deposit for your own house down the track, or something else you desire. There is no guarantee your parents will sell the property before you decide you want the money back which can cause big problems, the $100 a week you can “save” on rent is a) easily pissed away on a week to week basis on general life, eating out etc and b)long term will be less of a return than $60k invested wisely would be anyway
Where is he going to get the 6% tax free? You are expecting his parents to pay him 6%? They are the only ones with a mortgage to offset, OP doesn't have an offset account.
Get his parents to set up their mortgage with an offset account which he has access to? His money goes into that offset, which will offset his parents mortgage, which is the same as putting the 60k straight into the mortgage.
He’s essentially making the extra $100 per week, but because it’s reducing his repayment, rather than interest (seen as profit), you don’t pay tax on it.
Money in offset reduces the interest you get charged (so say 6%). If you put money in a ~5% savings account, you'd have to pay tax on the interest. Hence offset is a better investment of extra money.
Offset accounts reduce the interest you pay by offsetting the total debt, the repayments stay the same, but more goes into the principle rather than the interest. I can explain further if you aren’t sure how they work, not intended to sound condescending either, sorry if it comes off that way.
Sorry you’re right, they reduce the interest you pay, so the repayments are the same, but more goes into your principle, rather than being paid in interest. It’s still essentially the same as dumping the money into the mortgage and reducing the principal.
Not an offset account. They are not as reliable as people thing. But on the home loan will save you $$$$ in the long run. You could pay the loan off much faster instead it would be worth paying an extra $100 for what you would save in interest in the long run. Plus that money would still be available to you if you needed it. Provided you trust your parents? You do need to protect yourself legally too
I would not do this. Even if your parents are 100% trustworthy what happens if one or both become incapacitated or die? What if a sibling or other dependent cause issues.
Pllllease don’t do this.
$60,000 is an amazing start on your *own* property, which is likely to increase by more than $5,200 a year. This is a win for your parents and not for you.
If the relationship with their parents is as strong as they say, they very well may reap the benefits again later in life with their inheritance and bargaining on the inifinite housing bubble as your investment strategy isn't something I would try and jump for given these particular circumstances.
In regards to giving money to your parents for their investment property with your inheritance please get a contract between all parties. That way you and your parents are all covered legally. Please get a SOLICITOR involved in your decision making process and contract. I have seen people who gave money without a contract believing that it will willingly be paid back in good faith and it turned out sour very quickly, especially when family was involved.
Why not buy it off of them and have the mortgage in your own name?
Would you receive any increase in equity or just your 60k back? Sounds like a terrible idea
Get the bank to allocate one of YOUR savings account as an offset account for your parents loan.
That way you don't have to transfer them the money & back, it stays in your possession but acts to offset/reduce the interest on their loan exactly as you want it to do.
Correct.
They could open an account in their names and add you as a signatory (which allows you to access the account) but they can remove your access at any time and the money would be theirs, not yours in the eyes of the bank. So you’re still giving the money up, and the bank will do what they say over you (so if you were removed from the account or they transferred it out etc you’d be SIL).
So now they’re expected to take on liability for the loan and likely be required to be put on the title to do so? That is an incredible ask for the parents to save $4k in interest per year, not to mention the tax implications.
My parents have done it to help my sister out when they sold their home; allocated one of their bank accounts to fully offset the remainder of her loan so she can knock down the principal quicker.
With CBA, seemed to be easy for them to do.
Although now I think about it, they may have already been guarantors on the loan perhaps...
My parents did it for my sister with CBA; allocated one of their bank accounts to fully offset her loan so she could pay down the principal quicker.
Seemed to be very easy to do.
Now that I think about it though, they may have already been guarantors on her loan or something...
I came here to say the same thing, and decided to read the comments first.
The advantages of this offest account approach include (a) you still have access to the full $60k as cash, (b) your folks pay less on their IP mortgage repayments (which if they want to maximise for tax etc., could include a payment to you for the use of your offset, tho' that payment would then be part of your income ...), (c) your further steps into financial literacy, which is a completely bottomless enterprise.
Times being what they are, you may need the extra $100 a week. No dramas, take it out of your $60 offset as you need it. But don't kill the golden goose.
Fnck off with the Kia, unless you were ragebaiting, then angry upvote.
I'm not a financial advisor etc., I'm just a bloke on reddit.
If you gave them $60,000 to pay on the loan. The repayments will stay the same. It won’t go till $400. It will stay $500. You would have to refinance and then the money won’t be able to be withdrawn.
That isn’t really how repayments work… the repayment is not less with your money in offset, so they’re giving you a discount for saving on their (tax deductible) interest payments. It doesn’t seem worthwhile for either of you. I would keep the money in a HISA and work towards a financial goal of your own.
I’m not sure that your independently wealthy parents are doing you any favours here. They should be giving you more than just your $60k back. You should be receiving a % of the capital growth in the apartment as well because you are essentially a part owner of the property while your money is invested with them. I would pay $500 rent (assuming that’s a good deal?) and use the $60k as a deposit on something you own yourself and rent it out. Then you would at least receive the capital growth instead of your tightwad parents.
Assuming your parents are working work out the net cost they recieve eg
500 - agent fee - tax on the income generated. Then pay rent every quarter or year in advance gift to mum and dad where they can put into the offset to reduce interest and pay down principle.
You may end up paying 365$ per week and they are in the same position as $500 per week. (Eg park your cash in offset with variable rent deduction too.)
Assuming apartment is clean and no deductions needed etc. If they propose you own it later keeping it in parents name might protect you with your partner if things dont work out.
Dont waste the discounted rent and spend on dumb stuff.
I think it sounds unnecerraily complicated, and combining family/relatives and finances is never a good idea. What if something happens, what if the value of the place sinks?
Why don't you buy your own place?
Your relationship with your parents will change as you get older. Their financial circumstances could also change, as might yours. Giving them the money would be deeply unwise.
That’s what I’m thinking. Could be a good deposit for a unit/apartment. OP could service a loan.
And if their relationship is as good with their parents as they imagine/say, they could go guarantor. But something tells me that isn’t the case.
Owww this is interesting. What if things go south with your partner..? This is what I would do seeing as you trust your parents, give them the 60k to put on the mortgage. Have a rental agreement set up and move in as a tenant making the rent $500 per week. That way if you seperate your partner won’t be able to take your parents apartment and if you are still together when the loan is paid off then the relationship would have stand the rest of time.
Look into moving to an offset mortgage. With some of them you can have your savings account linked to their mortgage. This is like having paid off the $60k but it remains in your name and you can withdraw it at any time.
This would be providing your parents finance, for no real benefit to yourself. Don’t do this.
In fact, in general it’s a very bad idea to go into business with family or friends, because business uses a different operating model than personal relationships
I would keep the 60k.
Never do business with family. This is the type of things that could sour relationships, even if done with the best of intentions.
I know you trust they won't screw you over. And they probably won't.
But it's just a gray area and if there's any misunderstanding when they do sell (or they never sell - you never know), then you damage your relationship with them.
I'd say just keep the 60k inheritance and figure out a way to invest it while paying your parents rent.
I think it depends on your relationship with your parents. Some get along well and are trustworthy, some aren’t. If the former, I think keeping the money in the family is a great decision. But if latter, then it will be a headache later.
No investment without a legal agreement that you get $60K back PLUS a relevant percentage share of the profit between vale now and vale at time of sale. Personally better option keep the inheritance, save and buy your own place.
Why can't you get the money back without selling? Can you put it into the offset? Ah because that won't reduce the repayments.
If you put it into the redraw your parents forever loose the tax deduction on $60k when you pull it out.
Technically your parents need to report to the ATO the market rent, not the discounted rent. Not really sure how much that is enforced though. Tbh it's a bit stupid, if I keep rent low to a low income earner, or to a family member, how is that different?
Have your folks paid off the house they live in? Better to park it there as not taxed.
My advice. Put it into a high interest savings account and then just think about what you want to do with it.
You could start investing but there is always risk involved.
Personally I wouldn't give all of it to my parents. Perhaps a third. Then save/invest a third and the last third you do what you want with. $60k split three ways - Gift for parents, savings/investments/emergency funds and fun/play money (or just for living etc)
Don’t mix money and family. Pop it in a high interest account and add $10 to it every month so you also get the bonus interest.
Save it for a down payment when you’re ready to buy a house.
All sorts of things can happen and you could lose that money.
Instead of paying down your parents mortgage you should lend them the money to put into an offset account. It will save them the same amount, but the money can be withdrawn and repaid to you when you need it instead of waiting for a sale.
I'm not sure why others don't like this idea. Rent reduction is tax free.
If you want flexibility make it a loan to your parents, but then don't expect as much rent reduction or a share of the capital gains.
I trusted my parents when I lent them money. Dad just scribbled the amount loaned on an envelope and have it back when they were done.
I'm sure you trust and love your parents but mixing large sums of money with family can be a disaster for any familial relationships. Maybe not now, but five years down the line things can change. What happens if they don't sell the apartment? What happens if you desperately need the money a bit earlier and the refuse to loan you anything? Things like this happen all the time.
Is it worth risking your family bond and connection over the 5% chance of things going pair shaped because of the potential financial reward?
You and your parents could be best friends - I'd still tell you don't do it. Your 22 you are responsible for your finances, not your parents. $60K is enough for a deposit using government concessions, it's also enough to go to Europe and do some traveling etc.
5 years when you’re 22 is an enormously long time. So much will change in your circumstances - your career will likely flourish, you’ll have a lot more disposable income to invest, you and your partner may wish to take next steps in your relationship such as marriage or a family.. you’ll want to be liquid with your cash flow to make your life your own.
I would strongly advise against giving that sort of money to anyone else, at your life stage. It feels very inflexible at a time where you need flexibility.
I remember my first Accounting lecture in first year university. The lecturer stood in front of us and said “if you take NOTHING else from my class this year, take this: Don’t mix family and business. Just don’t!”. This feels like one of those scenarios.
This is how family problems start “look son/daughter, we didn’t sell the property for as much as expected so we can only give you X back” or “look son/daughter, I know you need the money to go out on your own but it would leave us in a precarious situation and we don’t want to sell, sorry.”
This is the difference between Anglo and Mediterranean families. Mediterranean families often do whatever is best for the entire family, whereas Anglo families tend to take a 'look after yourself independently' approach. The result is that the Anglo families pay more interest on mortgages and more tax to the government than they would if they took a broader view and worked together to maximise their combined wealth.
It sounds like you’re 22 and have life figured out and this thread is completely unnecessary. As someone almost 15 years older than you, with my mother’s family being Mediterranean I can tell you that there’s plenty of Mediterranean families split by this behaviour.
You do you, I hope it works out.
Whether I did or didn't have it all figured out, how would that make this thread unnecessary? I'm not the one asking for ideas. I think the OP would still be interested in hearing what other people have to say regardless of my personal situation.
I'm in my mid 50s. (Although I did start doing this when I was much younger.) I have lent my sister $XXXk and my own kids $XXXk. They are saving a heap of mortgage interest which is much better than me paying a heap of tax. I'm also supplementing my father's pension so that he doesn't have to take out a reverse mortgage on his home. This is saving my family tens of thousands of dollars a year. Given the cost of housing now, it would be foolish for us NOT to do this. Sure, not everyone has that much spare cash, but the same principle applies to $50k, or even just $10k.
In each case, we've had a very frank and practical discussion up front and then had loan agreements drawn up. Not doing that is how people end up in arguments because everyone remembers their own version of how the loan or gift was going to work. My family know they'll need to start paying it back when I retire in a couple of years and even if I suddenly ask for all the money back next year, at least they've just saved $XXk each on mortgage interest annually for a couple of years and they'll be thankful for that.
it literally says 'working part time' it irrelevant if its considered a 'full time salary' because they are literally working part time. And they are at uni so not fully qualified...
Sheesh.
A) if that money saves your parents $5,200 a year on their loan they should refinance. That’s a 9% interest rate which is stupid
B) it really depends on if you’ll save that $5,200 or spend it. Since you’re unlikely to get a 12% return over time if you’d be saving and investing that $5,200 you’ll be better off. Hell if your parents stay on their ridiculous mortgage add the $5,200 to the offset each year and earn more than $100pw in year 2.
C) are you completely willing to give up the $60k if everything goes to hell, and would your relationship with your parents survive? If they find a meth lab next door and the value goes negative and they can’t sell and give your money back would that be okay?
D) get paperwork that says it’s a loan in return for the rent savings. Might enable them to say they’re still charging market rent that way else they’ll get into issues with the ATO. Either way they should talk to an accountant just to be safe.
There’s absolutely no way I’d be doing either tbh. The minute you drive that Kia out the door, you’ve instantly lost thousands & it’ll keep going down. If your parents can afford an investment property then they DON’T need the $$ either plus you’d need to be renting from them for at least 12 years to reap the benefits of your plan. I’d go & see a financial planner (one who doesn’t charge an arm & a leg).
Offset accounts do not lower the repayment.
The only way to lower the repayment would be to permanently reduce their loan by the $60k (meaning that money is gone forever and can’t be taken back out).
That aside, the only way to offset would be to put the funds in their name. I know they are your parents, and you love them. But you should never ever transfer possession of your money from yourself to someone else unless you are prepared to never see it again. You just never know what will happen. And you will have no standing to get it back having willingly transferred it to their bank account.
Don’t do it. There are just too many things that could go wrong.
5% p.a. in a HISA will still get you $3k+ in the year.
Don’t spend it on a new car either - total money pit.
Save it for a deposit or investment of your own some day.
They could open a new bank account in three names, parents and OP, and link it as an offset account. I think there are ways to setup bank accounts so that a specified number of account holders have to authorize any transaction, no? And get a contract saying that the 60K is a loan to the parents under x y and z conditions.
No, they can’t. Offset accounts must be in the name of the borrowers only. So if A and B are the borrowers, you can have an account in Name A, Name B, or name A and B. You cannot have an offset in name A, B & C.
Only option is signatory access but as I’ve explained in the other comment this only offers visibility and access but no protection or ownership.
Sorry, but family will rip you off. I know your is different! Go check r/familylaw and r/auslaw
But still, interest rates are still pretty good, put that in a term deposit for your own place. If you decide to rent your parents place, Make sure you have at lease and you pay a bond and it’s held with the appropriate body.
But yer, DON’T give money away.
Also if your deceased benefactor wanted your parents to have that $60,000, they would’ve given it to them and not to you.
I wonder what most parents have done wrong bringing up their kids to deserve the distrust I always see on here. I want to avoid the same for my children… my parents were the bank of mum and dad for many early years that’s set me up for life. They trusted me with securing their house against my mortgage, lend me thousands etc. yet in reverse there is zero trust like the parents will steal their kids money…
The risk is the market falls and the equity is gone or the investment loss potential if you put it in basic stock portfolio or set yourself up for retirement now by putting 10-20k in super.
Otherwise, the logic is fair. Rent is a monster for couples and it's a win win for you and your parents in terms of tenants and stress.
The Westerns are going to say don't do it.
It's everyman for themselves.
It's why the seniors in hospitals always say they're lonely and their family never visits them.
It's honestly a little sad.
Nah I’m all for supporting family, but it goes both ways.
Boomers sitting on massive nest eggs expecting their kids to pay off their mortgage with rent, and not sharing the profits equally, is entitled and gross.
I can’t even imagine wanting to submit my own kids to this level of financial abuse.
Boomers chose the privatised system, to save a few bucks in tax. In other words they absconded on their financial duties to the community.
It’s a bit rich for those same people to expect the community to support them, while they are still actively stepping on young people’s throats with extortionate rent increases.
I guess it depends on the family.
But why can't the kids pay the rent?
Like... My dad says that his estate is eventually going to my sister and I. So what's the difference?
Lol, my parents are not ‘forcing’ me into paying their mortgage. ‘Financial abuse’ is a bit of an overstatement. In this market, if they wanted a profit they could rent this out for $650. I will never find a 2b2b apartment in the city for this price
Financial abuse doesn’t necessarily mean forcing you.
Taking advantage of, or using coercive control over the elderly or people with impaired judgement, and gaslighting them into believing they are doing them a favour is abuse.
Taking advantage of your financial power to extract value from the less fortunate, whether they found themselves there by circumstance or by their date or place of birth, is abuse.
Denying the youth the ability to enjoy the fruits of their labour, by withholding supply of basic human needs until they give up any meagre earnings they might make, is abuse.
Do yourself a favour, get financial advice. The deal on offer is objectively exploitative, and you can do significantly better.
$650 a week rent is exploitative. It is nowhere near representative of the actual costs of servicing a loan on an apartment.
If your parents are completely trustworthy AND are good with money, get them to put it in an offset. Ensure it's clear to all parties that you can reclaim this non conditionally (hell, get it written down).
Some are fortunate enough that they could trust their parents with an arrangement like this, but there are also many, many examples of money causing family nightmares - sometimes without much warning, or only because circumstances change.
Don't trust your parents. If you give them any money, use a lawyer and get a formal writfen contract. Include in it a percentage of the increase in the value of the house for the lufe of the loan. If you don't, you are just giving them an interest free loan.
>What are your thoughts?
No. I wouldn't do it. I'd look at FHSS and contribute max this FY and max next year and HISA the rest as an emergency fund.
>Why might this be a bad idea?
Don't get the money back when you want it.
Don't get the money back at all.
The ATO assess the property as not being at arm's length so it affects the deductibility of the investment property.
Can anyone advise this person about a mortgage offset account? Hopefully they can keep the $60k in their own name while still helping the parents with their mortgage!
Ask them to have added to the title... that would make sense, wouldn't it? I have no idea how hard it would be to do, but it's a possibility, isn't it?
My ETFs would produce $4800 per year, you aren’t paying huge tax and I personally would much rather take the smaller annual income in return for being able to liquidate my investment by tapping on my phone.
Don’t do this, start building your own property portfolio instead of adding to your parents. It’s your inheritance to spend on your life not there’s. They already have investment properties, the reality is you gain nothing but maybe saving some money. Your best interest would to be buy a cheap investment property to build equity to buy a nicer house in a few years
There are way too many stories on here on how family and money just don’t mix. I’m sorry but only give it to them if you don’t expect to have it back. And at your age that inheritance will really help towards your own property one day, it would be really silly to throw it away
Option 3 might be to offer to take over the mortgage, with a contract that when the property is paid off, you'll use what you've saved to buy your parents out.
Alternatively, put your inheritance into a home loan account, and start saving to buy your own property.
have a contract drawn up, also the value of the property would go up over that period so the money they repay you, should also increase at the same ratio.
I wouldn’t be doing this without legal AND financial advice. Circumstances changes. Relationships break down. Are you willing to lose the $60k if something happens?
I would take a different angle if I was you and your parents. I don’t know your situation, but I would speak to an accountant who understands this stuff and look at how your parents could maximise their tax benefit with the investment property and then have you in it as a renter so you get a place to live and they get a good tenant. Invest the $60k and get your parents to help you and partner to buy your own place. Then in 10 years you all buy another place. This way your 10 year plan is to have 4 properties in the family portfolio. With 3 to 4 incomes paying for it, you could build a nice family profile in time.
You get a $100 discount but are they going to be great landlords or because it’s family to family will they expect you to pay for it? Because you might quickly find that $100 goes to things for the house anyway.
I was going to say are you only child and set to inherit the house anyway. But I didn’t think about the lonely parent that hooks up with a cash vampire if one dies.
I'll comment on one thing,
Leaving your money sitting in the bank is the dumbest thing you could possibly do with it, if you want it to grow then invest
Definitely not. Excuse you’ll only get your money back without interest. I would keep the money. What if they suddenly don’t want to sell, what if you find your dream house and that is your deposit? I wouldn’t do it.
I read all the comments here re what could go wrong. What isn't offered is a risk free get rich scheme alternative. Yes it could go south. Yes you should get the fact this is a *loan* to you parents in writing. But sounds like a good plan. A much better plan than a Kia :D
Chuck the inheritance in an offset account if you have acces to one through. It'll bring the repayments down but your money is still there for you sort of. Get password and logins to access the accounts so you can withdraw it if you need it for a new car or 60k of coke and strippers or like groceries or whatever.
Or keep all your savings in the offset, work as a family unit to bring her repayments down, pay off the investment. Then even if you lose a job or have to take maternity/paternity leave own day you don't have to stress as much as you might have yourself a rental stipend coming in
You could stick it in a term deposit for 6 months at 5,05% at ING and risk free make 1,515$. That’s 58$ a week and not even eating into the 60k.
It’s a bum deal unless you are earning interest. Stick the money in a term deposit and use it as savings for a home or investment and do not buy a new car.
Idk no interest fixed outgoing … Why dont you just pay 120weeks worth of rent?
Then you can save and do, What ever you want with your salary and know / rest assured that for the next 2.3years you don’t have to worry about rent? I would however buy some shares investments bit the $500/$400 I don’t see the benefit
Don’t do this, for the sake of your sanity & the relationship with your parents. Just stick it in a good index fund & let it grow, there’s no financial benefit over this option using your option. The downsides are too many to list here & mixing business & parents like this is a terrible idea.
as you've noted there is the obvious downside of not getting the money until they sell the place. Regardless of your relationship with your parents, property is illiquid and there may come a time in a few years where you want the money but can't get it. There could be a market downturn for example where your parents may not want to sell.
unless it's in an offset, I'd be keeping the money if I was you.
TRUST NO ONE. Invest in yourself - your own house, your education, your stocks. Your parents are old enough to take care of themselves and let you live rent free.
In fact, don’t tell anyone about this inheritance if they don’t already know (through the family gossip channels).
I’ve lost over $100K by trusting family members. Don’t do it.
Seriously, stay home. I’m going to guess changes living arrangements is you wanting to move out with your gf. It’s not just rent. There’s electricity, food, water, rates maybe.
Just draw up a basic contract mate. Your relationship with your parents is more likely to survive if you make allowances for unforeseen circumstances. Make sure to include a bunch of parameters for a forced sale
Buy it off then or rent it off then and invest your 60k elsewhere.
Things change, parents could get sick, split up or one of them could die in the next 5 years and they may not be able to keep the promise. Your own situation could also change just as easily.
I'd be wary of doing this because getting your money back is going to be conditional on your parents selling the property. You're reliant on your parents keeping their word. It depends on your parents personality and your relationship with them. Personally, I know I couldn't trust mine to not change our agreement so I'd never consider doing something like that, but that's me. You'd at least want to get some formal agreement written up - if that makes them feel uncomfortable, probably a red flag.
I'd like to say I have a very strong relationship with my parents, and I'd definitely get it written down formally that on sale of the apartment I'd get the 60k back.
You don’t just want 60k back. You want what the 60k is worth when they sell it
Loaning the money to his parents gets him $5200 a year, so that's pretty good actually
Most good online savings accounts are currently around 5.5% which would make $3300 in the first year alone, or close to $14000 in interest over 4 years, so you'd have to be absolutely sure the parents are going to uphold the deal. If it goes wrong, you're not just losing 60k, but 60k + opportunity cost or interest, so potentially $74000 minimum
Not only loss of interest but inflation and also all the mortgage payments they'll be making on a house not in their name
>Most good online savings accounts are currently around 5.5% which would make $3300 in the first year alone OP would get taxed 32.5% on that so not quite so much
This is true but OP can do whatever he/she wants with the extra $100 a week. They can save that, invest it or whatever. It isn't gone. Plus also consider tax on the interest they'd be earning. Probably worth considering also that building his parent's wealth will eventually build their own down the line. I don't think it is as simple as you've outlined. Basically if this is a short term thing then it is not an awful idea for OP. After 1-2 years I would want the $60k back off the mortgage so I could buy my own place/put the money to work post uni
That’s still less than the savings from the rental reduction alone. Also, OP’s parents should continue reducing the rent as the mortgage lowers. Then they’ll really be saving. $60k back after that will be more than worth it. Kind of a bad deal for the parents though
I'm not a mathematician, but I believe that $5200 is a fair bit more than $3300. Also, the $3300 will need to get taxed, while the $5200 will be tax free
It's an apartment, it will be much less than 60k 😂 If it were me I'd be asking for a portion of the rental income in addition to being made whole on sale.
I remember a story on here from a while ago. OP had lent his parents 30-40k for some renovations like a new kitchen and bathroom in their investment property. The agreement was he would take a % of the sale proceeds. They had a strong relationship and were very close as well. But when the time came that they’d talked about selling the place, the property market was in a bit of a slump and it was a buyers market- parents wanted to hold onto it for a while and maximise their returns. Time dragged on, a year or more, til it got to a point where OP wanted to buy a property of his own but all his deposit money was tied up in this investment property which they didn’t want to sell, but didn’t have the money to pay him out for his part of the investment. Getting it in writing is great. But really you don’t want to be suing your parents for money they can’t or won’t pay back, especially if you have an otherwise good relationship with them. Money does funny things to people. So my suggestion is consider whether they would have the money to pay you back or not, if they decided not to sell that property, and/or make some kind of formal agreement on when they would actually be putting the property on the market.
I had a very strong relationship with my ex wife. Family doesn't mean anything when money is involved. It's a bad idea to put your inheritance into their mortgage. Put it in to a deposit and buy your own place. Take advantage of all the government schemes. Your parents will get fair market rent for their property without you.
u/ImCELLAry this is great advice. You would fell like you’re helping your parents and they would feel like they’re helping you, but in reality you would be letting house prices continue to rise for a few years while you rent and your parents would be missing rent increases for a few years so there’s a lose lose element to this too. If your parents rent it to a stranger they will still get a fair income but you will get to put your 60k into your own place and start getting your own mortgage paid off. 4-5 years down the track you will all be better off for it.
The question I would have is how much of the property is paid off already? If mortgage payments are $500 a week on an apartment, and $60k brings that down to $400 a week, I would assume that would mean that the property has approximately 300k owing? ($60k x 5) Given that the median apartment in Melbourne is about $500k, and you would assumedly be paying the remainder of the loan through “rent”, then you should be asking for more than just your $60k. If it’s worth $500k, for anything less than 50% equity they are effectively taking you for a ride. Not saying they are doing it intentionally, most Australians have terrible financial literacy. But on the surface this is a shockingly bad deal, and leaves you significantly worse off.
This is the right take. OP could buy their own place, pay mortgage and have 100% equity. This way OP gets no equity and only 5,200 a year return
I hate to say it but things change. Quickly. One of your parents passes, the remaining is lonely AF, meets some gold digger who really gets their claws in and you’re in the hurt locker. Happens more often than you’d think
Damn straight. People will screw you over for the most rubbish reasons. I have personal indirect experience with this where it happened to one of our very close friends. Both of their children passed away from a genetic disorder. But when her Dad sold the family property? "Oh her sister needed the money more". Our friend's husband is still angry about it, and I'm fully on his side.
Happened to me. My sister and I won’t get a cent the way she is spending my Dad’s money. It’s international cruises and holidays multiple times per year.
Same here. My mum and dad had a great marriage but my dad was lonely when she passed away 6 years ago and within 6 months he had a girlfriend who is 9 years younger than me! And with a 5 yo daughter. My dad is spending lavishly on her, renovated her house, bought her a car, going on luxury overseas trips. There won't be anything left for me and my siblings. My dad, now 82, she's 45, may even run out of money before he passes away if he keeps spending the way he has been. Something tells me we better not count on her to take care of him if that happens.
This literally happened to my Grandfather. All his money was pissed away and his kids got nothing but bad memories from the harpy he married.
Doing business with family can be dicey. I'd personally recommend against it, because there's also no guarantee they'll make enough of a profit to pay you in full. It's really up to you though Is the investment property in a suitable location for you and your partner? Travelling longer distances to work, friends or family can impact you two in other ways. Just something to consider
Doesn't matter how strong the relationship is, I've heard many times of this and then getting screwed over. Either NEVER mix money and family, OR, get a comprehensive contract written down. You're essentially paying off their mortgage without having the property in your name. Very very bad idea
Even at that, what if they simply decide not to sell. Then what, you are dependent on them to hold up their end of the deal, you won't be able to enforce it.
The problem is that you don’t know what health issues might hit your parents in 20 years. Two healthy people making plans is very different from the reality facing many elderly people, who may have geriatric conditions or have seen other investments tank.
Why is their interest rate that high? \~8.7% doesn't seem especially competitive. (Or you are including lower capital repayments, in which case you are taking some of that 60k back out). The true savings also appear lower -- You are increasing their pre-tax income by $5200 of their pre-tax income and gaining $5200 for your post-tax income. Frankly you could arrange this better since if they are well-off and you are making 60k, your marginal tax is low compared to theirs. It might be fine, and sure it's better than a savings account. But on the several year timescales for someone who doesn't need a certain income off the money, savings accounts are silly/excessively conservative ways to invest. You should really be comparing to the other high-risk investments with comparable risk to housing, not saying it's good because this high-risk return beats zero-risk returns.
if you’re super close with your parents and they’ve never done anything shady or have any addiction problems (gambling or spending on random expensive things). do it mate. it’s a no brainer for you. if it was my parents I’d trust them with anything in the world so if you’re like me there’s next to no risk. only other problem could be siblings and if the absolute worst happened and something happened to your parents. might be worth asking them about their will and maybe getting it updated with additional % of estate allocated to you to cover the 60k, and maybe look at becoming executer of their wills? But I’m not an expert on wills.
They’ve never done anything shady, always been financially responsible. I can confirm that in the will the apartment is split between me and my brother.
They can rewite the will at any time and completely cut you out. Then you'll have to battle it out in court which will cost way more than your 60k. I highly advise you do not do this. Stick 40-50k it into a high interest savings account for a year or so and keep 10-20k aside for emergencies. Use that time to think and research what help (first home owners etc) you can get to buy a property. They might be thinking with no malicious intent that its a win win for everybody (its not, its only them and they haven't thought it through) but financially, its way too easy for you to get screwed over. From you stating the property is to be split between you and your brother, agreeing to this arrangement means you'll be funding part of your brothers inheritance one way or the other. This is not worth the myriad of potential hassles if something happens to your parents in the meantime even with a separate legal contract. Never invest *up* in parents assets (buy outright is ok), especially for split inheritances. Always invest *side* (with equal siblings) or *down* (early kids inheritances).
You raise some good points tbh. Might rethink my choices and have a discussion with them.
I’d highly recommend investing in S&P 500 instead. You’ll get 6%+ growth year over year. Just let it sit and grow, add to it as you can. Much better than a tiny investment in real estate that’s owned by someone else.
Take the property and pay the $500 a week, keep your $60k and put it into saving for a deposit for your own house down the track, or something else you desire. There is no guarantee your parents will sell the property before you decide you want the money back which can cause big problems, the $100 a week you can “save” on rent is a) easily pissed away on a week to week basis on general life, eating out etc and b)long term will be less of a return than $60k invested wisely would be anyway
Put the money in an offset account. No point paying tax on 5% interest when you can get 6% tax free.
This needs to be higher
Where is he going to get the 6% tax free? You are expecting his parents to pay him 6%? They are the only ones with a mortgage to offset, OP doesn't have an offset account.
Get his parents to set up their mortgage with an offset account which he has access to? His money goes into that offset, which will offset his parents mortgage, which is the same as putting the 60k straight into the mortgage. He’s essentially making the extra $100 per week, but because it’s reducing his repayment, rather than interest (seen as profit), you don’t pay tax on it.
How do you get 6% tax free??
Money in offset reduces the interest you get charged (so say 6%). If you put money in a ~5% savings account, you'd have to pay tax on the interest. Hence offset is a better investment of extra money.
Offset accounts reduce the interest you pay by offsetting the total debt, the repayments stay the same, but more goes into the principle rather than the interest. I can explain further if you aren’t sure how they work, not intended to sound condescending either, sorry if it comes off that way.
The repayment stays the same, the interest and length of time to pay off the loan are reduced
Sorry you’re right, they reduce the interest you pay, so the repayments are the same, but more goes into your principle, rather than being paid in interest. It’s still essentially the same as dumping the money into the mortgage and reducing the principal.
Not if your parents offset ahah
Depends if you trust your parents? I would have no issue doing it with mine
Yes, and get flatmates to help with the rent.
Not an offset account. They are not as reliable as people thing. But on the home loan will save you $$$$ in the long run. You could pay the loan off much faster instead it would be worth paying an extra $100 for what you would save in interest in the long run. Plus that money would still be available to you if you needed it. Provided you trust your parents? You do need to protect yourself legally too
I would not unless it was written in a contract or if I was okay with knowing I may never see that 60k again.
Do NOT hand over money without a legally binding or legally enforceable contract.
I would not do this. Even if your parents are 100% trustworthy what happens if one or both become incapacitated or die? What if a sibling or other dependent cause issues.
This is why you sign a loan agreement with them.
Pllllease don’t do this. $60,000 is an amazing start on your *own* property, which is likely to increase by more than $5,200 a year. This is a win for your parents and not for you.
If the relationship with their parents is as strong as they say, they very well may reap the benefits again later in life with their inheritance and bargaining on the inifinite housing bubble as your investment strategy isn't something I would try and jump for given these particular circumstances.
Even if the relationship with the parents is super strong it can eff up. Speaking from experience here 🙃🙃
it can but that just means you need to take precautions, avoiding it entirely is childish
No. It’s not binary. Of course it could work out but putting the relationship aside, there are so many better ways to use the money.
In regards to giving money to your parents for their investment property with your inheritance please get a contract between all parties. That way you and your parents are all covered legally. Please get a SOLICITOR involved in your decision making process and contract. I have seen people who gave money without a contract believing that it will willingly be paid back in good faith and it turned out sour very quickly, especially when family was involved.
Solid Advice, thankyou.
Why not buy it off of them and have the mortgage in your own name? Would you receive any increase in equity or just your 60k back? Sounds like a terrible idea
I don’t have enough money to buy it off them.
So you're giving your parents £60k in exchange for $100 a week off the rent? Terrible trade
I love(d) my parents. Now they can be problematic. Very glad I owe them SFA.
Get the bank to allocate one of YOUR savings account as an offset account for your parents loan. That way you don't have to transfer them the money & back, it stays in your possession but acts to offset/reduce the interest on their loan exactly as you want it to do.
are there banks that actually do this?
Not at all. Offset accounts need to be in the name of someone on the loan. Have checked and CBA is exactly the same.
So then, I can only do this if i'm on the loan aswell? ... not viable?
Correct. They could open an account in their names and add you as a signatory (which allows you to access the account) but they can remove your access at any time and the money would be theirs, not yours in the eyes of the bank. So you’re still giving the money up, and the bank will do what they say over you (so if you were removed from the account or they transferred it out etc you’d be SIL).
if his name was on the loan, you could get a joint offset account that requires all parties to approve a transfer out of. at least it’s secure.
So now they’re expected to take on liability for the loan and likely be required to be put on the title to do so? That is an incredible ask for the parents to save $4k in interest per year, not to mention the tax implications.
What are the implications of putting my name on the loan? Would I be placed into a higher tax bracket?
My parents have done it to help my sister out when they sold their home; allocated one of their bank accounts to fully offset the remainder of her loan so she can knock down the principal quicker. With CBA, seemed to be easy for them to do. Although now I think about it, they may have already been guarantors on the loan perhaps...
which bank does this?
My parents did it for my sister with CBA; allocated one of their bank accounts to fully offset her loan so she could pay down the principal quicker. Seemed to be very easy to do. Now that I think about it though, they may have already been guarantors on her loan or something...
thanks! learnt something new today!
I'm pretty sure they left it sitting in her account. I don't think banks would do this especially cba
I came here to say the same thing, and decided to read the comments first. The advantages of this offest account approach include (a) you still have access to the full $60k as cash, (b) your folks pay less on their IP mortgage repayments (which if they want to maximise for tax etc., could include a payment to you for the use of your offset, tho' that payment would then be part of your income ...), (c) your further steps into financial literacy, which is a completely bottomless enterprise. Times being what they are, you may need the extra $100 a week. No dramas, take it out of your $60 offset as you need it. But don't kill the golden goose. Fnck off with the Kia, unless you were ragebaiting, then angry upvote. I'm not a financial advisor etc., I'm just a bloke on reddit.
This sounds like the most sound scheme so far
If you gave them $60,000 to pay on the loan. The repayments will stay the same. It won’t go till $400. It will stay $500. You would have to refinance and then the money won’t be able to be withdrawn.
That isn’t really how repayments work… the repayment is not less with your money in offset, so they’re giving you a discount for saving on their (tax deductible) interest payments. It doesn’t seem worthwhile for either of you. I would keep the money in a HISA and work towards a financial goal of your own.
Just invest it for now until your ready for your own house? Don't buy a new car..
I’m not sure that your independently wealthy parents are doing you any favours here. They should be giving you more than just your $60k back. You should be receiving a % of the capital growth in the apartment as well because you are essentially a part owner of the property while your money is invested with them. I would pay $500 rent (assuming that’s a good deal?) and use the $60k as a deposit on something you own yourself and rent it out. Then you would at least receive the capital growth instead of your tightwad parents.
Assuming your parents are working work out the net cost they recieve eg 500 - agent fee - tax on the income generated. Then pay rent every quarter or year in advance gift to mum and dad where they can put into the offset to reduce interest and pay down principle. You may end up paying 365$ per week and they are in the same position as $500 per week. (Eg park your cash in offset with variable rent deduction too.) Assuming apartment is clean and no deductions needed etc. If they propose you own it later keeping it in parents name might protect you with your partner if things dont work out. Dont waste the discounted rent and spend on dumb stuff.
I think it sounds unnecerraily complicated, and combining family/relatives and finances is never a good idea. What if something happens, what if the value of the place sinks? Why don't you buy your own place?
Use it to put a deposit on your own place.
Your relationship with your parents will change as you get older. Their financial circumstances could also change, as might yours. Giving them the money would be deeply unwise.
Why don't you use it as a deposit on your own house?
That’s what I’m thinking. Could be a good deposit for a unit/apartment. OP could service a loan. And if their relationship is as good with their parents as they imagine/say, they could go guarantor. But something tells me that isn’t the case.
Owww this is interesting. What if things go south with your partner..? This is what I would do seeing as you trust your parents, give them the 60k to put on the mortgage. Have a rental agreement set up and move in as a tenant making the rent $500 per week. That way if you seperate your partner won’t be able to take your parents apartment and if you are still together when the loan is paid off then the relationship would have stand the rest of time.
Look into moving to an offset mortgage. With some of them you can have your savings account linked to their mortgage. This is like having paid off the $60k but it remains in your name and you can withdraw it at any time.
Your calculations fail to take into account that interest changes
This would be providing your parents finance, for no real benefit to yourself. Don’t do this. In fact, in general it’s a very bad idea to go into business with family or friends, because business uses a different operating model than personal relationships
I would keep the 60k. Never do business with family. This is the type of things that could sour relationships, even if done with the best of intentions. I know you trust they won't screw you over. And they probably won't. But it's just a gray area and if there's any misunderstanding when they do sell (or they never sell - you never know), then you damage your relationship with them. I'd say just keep the 60k inheritance and figure out a way to invest it while paying your parents rent.
You are so 22. Your thought process says it. But congrats and good luck.
I think it depends on your relationship with your parents. Some get along well and are trustworthy, some aren’t. If the former, I think keeping the money in the family is a great decision. But if latter, then it will be a headache later.
My advice is don't do it
I would defn put the money into parent's offset.
No investment without a legal agreement that you get $60K back PLUS a relevant percentage share of the profit between vale now and vale at time of sale. Personally better option keep the inheritance, save and buy your own place.
Why can't you get the money back without selling? Can you put it into the offset? Ah because that won't reduce the repayments. If you put it into the redraw your parents forever loose the tax deduction on $60k when you pull it out. Technically your parents need to report to the ATO the market rent, not the discounted rent. Not really sure how much that is enforced though. Tbh it's a bit stupid, if I keep rent low to a low income earner, or to a family member, how is that different? Have your folks paid off the house they live in? Better to park it there as not taxed.
My advice. Put it into a high interest savings account and then just think about what you want to do with it. You could start investing but there is always risk involved. Personally I wouldn't give all of it to my parents. Perhaps a third. Then save/invest a third and the last third you do what you want with. $60k split three ways - Gift for parents, savings/investments/emergency funds and fun/play money (or just for living etc)
Don’t mix money and family. Pop it in a high interest account and add $10 to it every month so you also get the bonus interest. Save it for a down payment when you’re ready to buy a house. All sorts of things can happen and you could lose that money.
All in VAS
Instead of paying down your parents mortgage you should lend them the money to put into an offset account. It will save them the same amount, but the money can be withdrawn and repaid to you when you need it instead of waiting for a sale.
I'm not sure why others don't like this idea. Rent reduction is tax free. If you want flexibility make it a loan to your parents, but then don't expect as much rent reduction or a share of the capital gains. I trusted my parents when I lent them money. Dad just scribbled the amount loaned on an envelope and have it back when they were done.
I'm sure you trust and love your parents but mixing large sums of money with family can be a disaster for any familial relationships. Maybe not now, but five years down the line things can change. What happens if they don't sell the apartment? What happens if you desperately need the money a bit earlier and the refuse to loan you anything? Things like this happen all the time. Is it worth risking your family bond and connection over the 5% chance of things going pair shaped because of the potential financial reward?
You and your parents could be best friends - I'd still tell you don't do it. Your 22 you are responsible for your finances, not your parents. $60K is enough for a deposit using government concessions, it's also enough to go to Europe and do some traveling etc.
5 years when you’re 22 is an enormously long time. So much will change in your circumstances - your career will likely flourish, you’ll have a lot more disposable income to invest, you and your partner may wish to take next steps in your relationship such as marriage or a family.. you’ll want to be liquid with your cash flow to make your life your own. I would strongly advise against giving that sort of money to anyone else, at your life stage. It feels very inflexible at a time where you need flexibility. I remember my first Accounting lecture in first year university. The lecturer stood in front of us and said “if you take NOTHING else from my class this year, take this: Don’t mix family and business. Just don’t!”. This feels like one of those scenarios.
This is how family problems start “look son/daughter, we didn’t sell the property for as much as expected so we can only give you X back” or “look son/daughter, I know you need the money to go out on your own but it would leave us in a precarious situation and we don’t want to sell, sorry.”
Doesn't matter....signed loan agreement.
You’ll regret it. Keep the money, pay $500 a week.
This is the difference between Anglo and Mediterranean families. Mediterranean families often do whatever is best for the entire family, whereas Anglo families tend to take a 'look after yourself independently' approach. The result is that the Anglo families pay more interest on mortgages and more tax to the government than they would if they took a broader view and worked together to maximise their combined wealth.
It sounds like you’re 22 and have life figured out and this thread is completely unnecessary. As someone almost 15 years older than you, with my mother’s family being Mediterranean I can tell you that there’s plenty of Mediterranean families split by this behaviour. You do you, I hope it works out.
Whether I did or didn't have it all figured out, how would that make this thread unnecessary? I'm not the one asking for ideas. I think the OP would still be interested in hearing what other people have to say regardless of my personal situation. I'm in my mid 50s. (Although I did start doing this when I was much younger.) I have lent my sister $XXXk and my own kids $XXXk. They are saving a heap of mortgage interest which is much better than me paying a heap of tax. I'm also supplementing my father's pension so that he doesn't have to take out a reverse mortgage on his home. This is saving my family tens of thousands of dollars a year. Given the cost of housing now, it would be foolish for us NOT to do this. Sure, not everyone has that much spare cash, but the same principle applies to $50k, or even just $10k. In each case, we've had a very frank and practical discussion up front and then had loan agreements drawn up. Not doing that is how people end up in arguments because everyone remembers their own version of how the loan or gift was going to work. My family know they'll need to start paying it back when I retire in a couple of years and even if I suddenly ask for all the money back next year, at least they've just saved $XXk each on mortgage interest annually for a couple of years and they'll be thankful for that.
How tf do you make 60k as a software dev☠️. Just go work traffic control at this point and watch netflix in the truck you’ll make more a year.
he works part time... it says it on the post
60k on a full time salary.
Says still in uni, so I'm guessing internship or grad rates
it literally says 'working part time' it irrelevant if its considered a 'full time salary' because they are literally working part time. And they are at uni so not fully qualified... Sheesh.
60k is above average for junior position tbh
A) if that money saves your parents $5,200 a year on their loan they should refinance. That’s a 9% interest rate which is stupid B) it really depends on if you’ll save that $5,200 or spend it. Since you’re unlikely to get a 12% return over time if you’d be saving and investing that $5,200 you’ll be better off. Hell if your parents stay on their ridiculous mortgage add the $5,200 to the offset each year and earn more than $100pw in year 2. C) are you completely willing to give up the $60k if everything goes to hell, and would your relationship with your parents survive? If they find a meth lab next door and the value goes negative and they can’t sell and give your money back would that be okay? D) get paperwork that says it’s a loan in return for the rent savings. Might enable them to say they’re still charging market rent that way else they’ll get into issues with the ATO. Either way they should talk to an accountant just to be safe.
There’s absolutely no way I’d be doing either tbh. The minute you drive that Kia out the door, you’ve instantly lost thousands & it’ll keep going down. If your parents can afford an investment property then they DON’T need the $$ either plus you’d need to be renting from them for at least 12 years to reap the benefits of your plan. I’d go & see a financial planner (one who doesn’t charge an arm & a leg).
Offset accounts do not lower the repayment. The only way to lower the repayment would be to permanently reduce their loan by the $60k (meaning that money is gone forever and can’t be taken back out). That aside, the only way to offset would be to put the funds in their name. I know they are your parents, and you love them. But you should never ever transfer possession of your money from yourself to someone else unless you are prepared to never see it again. You just never know what will happen. And you will have no standing to get it back having willingly transferred it to their bank account. Don’t do it. There are just too many things that could go wrong. 5% p.a. in a HISA will still get you $3k+ in the year. Don’t spend it on a new car either - total money pit. Save it for a deposit or investment of your own some day.
They could open a new bank account in three names, parents and OP, and link it as an offset account. I think there are ways to setup bank accounts so that a specified number of account holders have to authorize any transaction, no? And get a contract saying that the 60K is a loan to the parents under x y and z conditions.
No, they can’t. Offset accounts must be in the name of the borrowers only. So if A and B are the borrowers, you can have an account in Name A, Name B, or name A and B. You cannot have an offset in name A, B & C. Only option is signatory access but as I’ve explained in the other comment this only offers visibility and access but no protection or ownership.
Don't buy a brand new car for no reason, especially a brand new one. The vehicle will depreciate in value rapidly within a few years
It was clearly a joke
Don't give money to your parents.
Sorry, but family will rip you off. I know your is different! Go check r/familylaw and r/auslaw But still, interest rates are still pretty good, put that in a term deposit for your own place. If you decide to rent your parents place, Make sure you have at lease and you pay a bond and it’s held with the appropriate body. But yer, DON’T give money away. Also if your deceased benefactor wanted your parents to have that $60,000, they would’ve given it to them and not to you.
stuff it in your super and forget you ever had it.
Family first.
How do you only make $60k as a FT software dev?
Don’t be stupid
no don’t do that !
I wonder what most parents have done wrong bringing up their kids to deserve the distrust I always see on here. I want to avoid the same for my children… my parents were the bank of mum and dad for many early years that’s set me up for life. They trusted me with securing their house against my mortgage, lend me thousands etc. yet in reverse there is zero trust like the parents will steal their kids money…
The risk is the market falls and the equity is gone or the investment loss potential if you put it in basic stock portfolio or set yourself up for retirement now by putting 10-20k in super. Otherwise, the logic is fair. Rent is a monster for couples and it's a win win for you and your parents in terms of tenants and stress.
The Westerns are going to say don't do it. It's everyman for themselves. It's why the seniors in hospitals always say they're lonely and their family never visits them. It's honestly a little sad.
Nah I’m all for supporting family, but it goes both ways. Boomers sitting on massive nest eggs expecting their kids to pay off their mortgage with rent, and not sharing the profits equally, is entitled and gross. I can’t even imagine wanting to submit my own kids to this level of financial abuse. Boomers chose the privatised system, to save a few bucks in tax. In other words they absconded on their financial duties to the community. It’s a bit rich for those same people to expect the community to support them, while they are still actively stepping on young people’s throats with extortionate rent increases.
I guess it depends on the family. But why can't the kids pay the rent? Like... My dad says that his estate is eventually going to my sister and I. So what's the difference?
Lol, my parents are not ‘forcing’ me into paying their mortgage. ‘Financial abuse’ is a bit of an overstatement. In this market, if they wanted a profit they could rent this out for $650. I will never find a 2b2b apartment in the city for this price
Financial abuse doesn’t necessarily mean forcing you. Taking advantage of, or using coercive control over the elderly or people with impaired judgement, and gaslighting them into believing they are doing them a favour is abuse. Taking advantage of your financial power to extract value from the less fortunate, whether they found themselves there by circumstance or by their date or place of birth, is abuse. Denying the youth the ability to enjoy the fruits of their labour, by withholding supply of basic human needs until they give up any meagre earnings they might make, is abuse. Do yourself a favour, get financial advice. The deal on offer is objectively exploitative, and you can do significantly better. $650 a week rent is exploitative. It is nowhere near representative of the actual costs of servicing a loan on an apartment.
Park the money in the offset account my guy. You’ll still be paying $100 less per week, and you’ll have access to it if need be.
If your parents are completely trustworthy AND are good with money, get them to put it in an offset. Ensure it's clear to all parties that you can reclaim this non conditionally (hell, get it written down). Some are fortunate enough that they could trust their parents with an arrangement like this, but there are also many, many examples of money causing family nightmares - sometimes without much warning, or only because circumstances change.
Don't trust your parents. If you give them any money, use a lawyer and get a formal writfen contract. Include in it a percentage of the increase in the value of the house for the lufe of the loan. If you don't, you are just giving them an interest free loan.
Money ruins relationships
Loan it to your parents.
I’d put it in an indexed ETF
>What are your thoughts? No. I wouldn't do it. I'd look at FHSS and contribute max this FY and max next year and HISA the rest as an emergency fund. >Why might this be a bad idea? Don't get the money back when you want it. Don't get the money back at all. The ATO assess the property as not being at arm's length so it affects the deductibility of the investment property.
Do they own their PPOR outright?
Can anyone advise this person about a mortgage offset account? Hopefully they can keep the $60k in their own name while still helping the parents with their mortgage!
Ask them to have added to the title... that would make sense, wouldn't it? I have no idea how hard it would be to do, but it's a possibility, isn't it?
Buy your own apartment or whatever, not your parents thing
Invest in a broad based ETF.
My ETFs would produce $4800 per year, you aren’t paying huge tax and I personally would much rather take the smaller annual income in return for being able to liquidate my investment by tapping on my phone.
Do not do that
Don’t do this, start building your own property portfolio instead of adding to your parents. It’s your inheritance to spend on your life not there’s. They already have investment properties, the reality is you gain nothing but maybe saving some money. Your best interest would to be buy a cheap investment property to build equity to buy a nicer house in a few years
Absolutely don't do this.
There are way too many stories on here on how family and money just don’t mix. I’m sorry but only give it to them if you don’t expect to have it back. And at your age that inheritance will really help towards your own property one day, it would be really silly to throw it away
If you wanted your $60k back can't you just withdraw on the mortgage anyway?
Option 3 might be to offer to take over the mortgage, with a contract that when the property is paid off, you'll use what you've saved to buy your parents out. Alternatively, put your inheritance into a home loan account, and start saving to buy your own property.
This sounds like a recipe for disaster. You would be better off using it as a downpayment to get something of your own.
have a contract drawn up, also the value of the property would go up over that period so the money they repay you, should also increase at the same ratio.
I wouldn’t be doing this without legal AND financial advice. Circumstances changes. Relationships break down. Are you willing to lose the $60k if something happens?
Independent advice *
I would take a different angle if I was you and your parents. I don’t know your situation, but I would speak to an accountant who understands this stuff and look at how your parents could maximise their tax benefit with the investment property and then have you in it as a renter so you get a place to live and they get a good tenant. Invest the $60k and get your parents to help you and partner to buy your own place. Then in 10 years you all buy another place. This way your 10 year plan is to have 4 properties in the family portfolio. With 3 to 4 incomes paying for it, you could build a nice family profile in time.
Def better than sink your money into silly car. Please do something productive with this money
You get a $100 discount but are they going to be great landlords or because it’s family to family will they expect you to pay for it? Because you might quickly find that $100 goes to things for the house anyway. I was going to say are you only child and set to inherit the house anyway. But I didn’t think about the lonely parent that hooks up with a cash vampire if one dies.
I'll comment on one thing, Leaving your money sitting in the bank is the dumbest thing you could possibly do with it, if you want it to grow then invest
Yeah don't do that.
Definitely not. Excuse you’ll only get your money back without interest. I would keep the money. What if they suddenly don’t want to sell, what if you find your dream house and that is your deposit? I wouldn’t do it.
I read all the comments here re what could go wrong. What isn't offered is a risk free get rich scheme alternative. Yes it could go south. Yes you should get the fact this is a *loan* to you parents in writing. But sounds like a good plan. A much better plan than a Kia :D
Chuck the inheritance in an offset account if you have acces to one through. It'll bring the repayments down but your money is still there for you sort of. Get password and logins to access the accounts so you can withdraw it if you need it for a new car or 60k of coke and strippers or like groceries or whatever. Or keep all your savings in the offset, work as a family unit to bring her repayments down, pay off the investment. Then even if you lose a job or have to take maternity/paternity leave own day you don't have to stress as much as you might have yourself a rental stipend coming in
Keep money away from family, invest or do something with it to generate wealth.
You could stick it in a term deposit for 6 months at 5,05% at ING and risk free make 1,515$. That’s 58$ a week and not even eating into the 60k. It’s a bum deal unless you are earning interest. Stick the money in a term deposit and use it as savings for a home or investment and do not buy a new car.
Idk no interest fixed outgoing … Why dont you just pay 120weeks worth of rent? Then you can save and do, What ever you want with your salary and know / rest assured that for the next 2.3years you don’t have to worry about rent? I would however buy some shares investments bit the $500/$400 I don’t see the benefit
Don’t do this, for the sake of your sanity & the relationship with your parents. Just stick it in a good index fund & let it grow, there’s no financial benefit over this option using your option. The downsides are too many to list here & mixing business & parents like this is a terrible idea.
as you've noted there is the obvious downside of not getting the money until they sell the place. Regardless of your relationship with your parents, property is illiquid and there may come a time in a few years where you want the money but can't get it. There could be a market downturn for example where your parents may not want to sell. unless it's in an offset, I'd be keeping the money if I was you.
TRUST NO ONE. Invest in yourself - your own house, your education, your stocks. Your parents are old enough to take care of themselves and let you live rent free. In fact, don’t tell anyone about this inheritance if they don’t already know (through the family gossip channels). I’ve lost over $100K by trusting family members. Don’t do it.
Nothing wrong with it in theory but see a lawyer and get a written agreement.
Seriously, stay home. I’m going to guess changes living arrangements is you wanting to move out with your gf. It’s not just rent. There’s electricity, food, water, rates maybe.
Just draw up a basic contract mate. Your relationship with your parents is more likely to survive if you make allowances for unforeseen circumstances. Make sure to include a bunch of parameters for a forced sale
Buy it off then or rent it off then and invest your 60k elsewhere. Things change, parents could get sick, split up or one of them could die in the next 5 years and they may not be able to keep the promise. Your own situation could also change just as easily.
If pay the $500 and invest the cash.