Repaying Family Loan

Discussion in 'Money makeover' started by Dublin2017, 28 Oct 2018.

  1. Dublin2017

    Dublin2017 Registered User

    Posts:
    3
    Age: 28
    Spouse’s/Partner's age: 29

    Annual gross income from employment or profession: €35,000
    Annual gross income of spouse: €37,000
    Rent a room: €1000 monthly. Let's assume €10,000 annually as not always occupied.

    Monthly take-home pay: €5,500 approximately

    Type of employment: e.g. Civil Servant, self-employed

    Both public sector permanent positions

    In general are you:
    (a) spending more than you earn, or
    (b) saving?

    Generally we save more than we earn. At the moment our saving is in the form of mortgage overpayment. This is €1,000 monthly

    Rough estimate of value of home €450,000
    Amount outstanding on your mortgage:
    €230,000
    What interest rate are you paying?
    We are currently with EBS (3.5%) variable but should complete our switch to UB (2.6%) next week. Repayments will drop from €1000 to €850.


    Other borrowings – car loans/personal loans etc

    We have a small loan from family. The outstanding balance is €12,000.

    No other debt.

    Do you pay off your full credit card balance each month?
    If not, what is the balance on your credit card?

    No credit cards.

    Savings and investments:

    We have €5,000 in current account. This is the normal month to month balance.

    Do you have a pension scheme?

    Yes, both DB pensions that are apparently very good although don't know the details.

    Do you own any investment or other property?

    No

    Ages of children:

    No children

    Life insurance:

    We have standard mortgage protection insurance. Plus death benefits from work.

    What specific question do you have or what issues are of concern to you?

    We got a family loan of €40,000 when we purchased our house. We have been repaying this at a rate of €1,000 a month plus the occasional lump sum.

    For tax purposes the family member has asked if we could pay back the balance next month.

    As we have been aggressive overpaying the mortgage and repaying this loan we don't have any real savings.

    What is the best way to repay this source this money?

    Mortgage.

    I don't think UB will allow us to add this to the mortgage during the switch process.

    Overdraft, credit card or credit union.
    In my mind that leaves the above three options. Not too familiar with any of the above as I have never used any of them.

    Any thoughts on the best way forward would be much appreciated.

    The €1,000 a month that we currently use to pay off the loan to parents will then be directed towards this debt so in a Max of 12 months we will be debt free (apart from mortgage).
     
  2. cremeegg

    cremeegg Frequent Poster

    Posts:
    2,696
    It is hardly a case of which is best.

    Unless you have an existing relationship with the CU they are unlikely to loan you €7 next month.

    An overdraft might be possible with your existing bank, more difficult if you have just pulled your mortgage business from them.
     
  3. Bronte

    Bronte Frequent Poster

    Posts:
    13,044
    You need to borrow 12K from a bank at the cheapest interest rate possible. You say you currently pay 1K a month. So you need a loan that equals 12 X 1K plus interest.

    I don't understand the tax reason for the money being repaid this tax year? You've 2 more repayments this year, Nov & Dec so you may need to only borrow 10K. In December.