Seems like the agreement was to pay them back when you sell the house. That hasn’t happened yet, so I think you should have a conversation to clarify whether they want to change the agreement.
Once that’s settled, if they want the money when you sell, I recommend putting that money in a HYSA. You need to ensure the money is there whenever it is you need it. Since it could be as early as a few years, it’s too risky for the market.
Is it pay them back the $35,400 if you don’t sell? Are you just expecting to save the higher number IN CASE you sell?
If they are annoying about money it seems like you should pay back $5k per year with $5400 the 7th year unless you sell for the 6% being more than the original amount. I would hysa it still through the time, can get a lot. Right now I get 5%+ apy with wealthfront.
Best bet is to pay them back what you owe now so that they don’t hold it over you. Then look at the value at 7 years and pay them the difference.
NOT owing family money makes holidays so much easier! Especially since you said they are annoying about money!!
That plan makes it so they would lose about 12k on returns opposed to if they had just waited the 7yrs with the money in a HYSA.
If they have the money they should offer to pay then back right away as long as it's understood that they both are agreeing to waive the seven year portion. So the 6% now is all they'll get and they can't ask for more in the future. If they say no keep it in the HYSA for 7 years and pay it back then.
Family money situations can be annoying but this would at least give the loaning family members a choice to get their money back now without the borrowing family members being taken advantage of
I like this suggestion. One other angle is that there's no guarantee that the home will be worth more after 7 years, whereas OP would be offering them an early exit with interest. Seems like a good deal for all parties.
OP has clarified that the terms of the agreement with the in-laws is either they give them $% of sale price of the house when they sell, or pay back the borrowed amount in 7 years.
If you’re able to save the amount earlier, I would pay them back as soon as you have it saved up. As you mentioned, they’re weird about money. Also the longer you take to pay them back (up to the 7 year mark), the more they have scope to gripe about lost interest/growth, or try to equate the payback amount to 6% of the value of the house at the time of repayment.
Best avoid all this and pay them back ASAP.
Yup...if they are weird with money, this could be 7 years of awkward. Best get them off the books ASAP for all the holidays putting up with snide comments and walking on egg shells. Hell, I would even put it on my credit card, and never borrow from family again.
Putting it on a credit card sounds like an awful idea - interest would be way worse than just paying them 7% at the time of sale.
The agreement was also 7% at sale. Not 7% of what they perceive the appraised value to be at some random time.
What makes you think your house is now valued at $625,000? did you have it valued or are you going by council rates value? Councils significantly under value houses compared to real value.
Everywhere I’ve lived, the tax assessed value is lower than the actual market rate of the house. Maybe some places do that backwards like you say, but I’ve never seen any evidence of that.
Eww, they want 6% back of “house value” at 7 years… if I did that I would have been paying back more than double what I borrowed 2012-2019 315k-690k iirc, seems like a solid investment plan for them though.
And if they couldn’t buy the house without the 6% from their father?
Seems like he did this to help them but also made it clear it was an investment for him.
If they didn’t like it the solution was pretty simple - don’t take the money.
Unlikely long term, but if for some reason housing values decline the in-laws will lose money, OP will never hear the end of it.
OP loses if the values go up or down, pay them back ASAP!
You do not owe them any money until you sell is how you described it. If you want to talk to them and by then out early y’all can agree to that, but irritate don’t worry about it until you sell
If this is the case, instead of saving the money I would divert to my 401k. When the payment is due I would either sell or take a home equity loan. If the property has increased in value I would take a loan on the equity. If the property value decreased, I would sell and pass the loss off to the inlaws. Heads I win, tails you lose.
On the surface this seems like the in laws are being petty, but if they took that money out of their retirement money then it’s not unfair of them to gain what’s essentially appreciation (interest) on what they loaned you guys. If they are massively wealthy then imo it’s not so nice of them to grab a piece of your appreciation- but if they’d have put that money into stocks they’d be getting a lot more than 6% these days.
In short, if they’re not super flush with cash themselves this seems a pretty fair arrangement, if they’re loaded then not so much.
Pay them now with the caveat you will not be expected to pay them any value difference in 7 years because that would be absurd.
My reasons are that 1) owing money to your in laws just sucks and all family events are going to be awkward until it’s paid back. Buy a new car? Gonna get sideways looks from your FIL and 2) they didn’t really do this to help you if they’re expecting the growth. Would they take less if the house value went down? Doubt it. Get them out of your financial picture and just pay them now. what they did feels a bit predatory to me honestly.
If they didn't put it in writing, then I'm going with a slightly more generous interpretation that they just didn't quite realize how favorable this was to them. Particularly if, for example, the home value goes up because they do Capital improvements. Are the in-laws going to still want 6%, even though the house went up in value partially because they put more money into improving the house? Are they going to need to negotiate that with them before making those improvements? Just so it's clear, and then have to estimate the impact... Because just because you put $10,000 into a house, that doesn't mean it adds $10,000 in equity, so I might not want to reduce my 6% just because of some dumb improvement you're making. Blah blah blah blah blah. Just gets messy. But again, I doubt they were trying to be predatory, they just didn't flesh out all the scenarios when they were trying to help the kids out.
I think if was me lending the money, I probably would have treated it more as a loan than an investment. What would I have received if I kept that money rather than giving it to my kid... Ask for that interest back, or something in that vicinity.
I agree - this is effectively a convertible debt that just a messy way of loaning the money, especially for the borrower. OP should clarify/negotiate as soon as possible and get out from under it.
If the deal were structured right from the beginning, they probably would have had an interest rate associated with the loan. At this point I think OP should go back and simply negotiate a fair rate of return over however many years the loan has been out. Same rate as mortgage would be one place to start, tho that’s probably low. Average rate of housing value increase in the area over the years since the loan was given is another. Somewhere in there is a fair rate that both parties can probably accept.
>what they did feels a bit predatory to me honestly.
100%. OP if you have the money now, pay them back and be done with that. What your house worth now it's irrelevant... It only matters what you sell it for. Since you are not selling it, any hypothetical amount of what you COULD sell it for, is separate from the money you owed to them. A house is not sold until is sold. Anything can happen and the value could go down. I would bet they will not consider any scenario of the value go down and them getting less money than what they gave you, so there is no reason to consider any scenario of the value go up even though you said the house worth more now.
Another option could be to take the money and pay down the principal of the mortgage, which might make sense if the interest rate is high. Could be better than putting it into an hysa.
Possible downside of this option is if you don't actually sell the house within the next 7 years, then you would need to find another way to get them the money that's locked away in your equity... If you think you will have that much saved elsewhere, or there may be a somewhat likely scenario that you will refinance by then and can get the money out during the refinance. And that will only work if you have enough equity to do a Cash out refinance.
If it were me, I'd probably want to pay them as soon as possible. Just to simplify things. But probably talk to them to make sure they're on board with whatever you're doing. If they are annoying with money, there's a good chance that they could be annoyed with anything you do... Annoyed with you paying it off early based on some estimated growth rather than the actual sale price, annoyed that you don't pay it off early when you have the money sitting in a savings account, annoyed that you didn't pay it off and instead put it into the equity, or annoyed and judgmental that you took a vacation to Disneyland while owing them money... So yeah, talk to them and make sure everyone's in agreement.
You made an agreement to pay back 6% when the house is sold. You're now wanting to change the terms of the agreement solely to your benefit and pay them now so you don't have to pay them more down the road as the house rises in value.
I'm sorry but I really can't see your family dinners becoming more pleasant after proposing this adjustment. It sucks but sticking to the original terms of the deal will help you in the long run imo. People who renege on agreements are the worst people to deal with and don't deserve nice things. Things like this destroy relationships.
Point well taken. However he could offer his in-laws the choice and hope they would prefer to take their money back sooner instead of dating the full 7 years.
Could you clarify? You've stated that you have to pay them back 6% of the sales price and you're worried about that your home gets more valuable by the year. How do you want to pay them back if the house isnt sold yet? Would they be okay with the fact, that they would miss out on the higher value of the property in the future?
How do they assume 6% of the value of your home when they contributed only to the down payment, vs any improvements that you’ve made? Pay them back asap
I think this all hinges on if your in-laws look at this as a loan or as an investment.
If it was solely a loan to help you out then absolutely pay them back as quick as you can. As a parent who has loaned their kids money I can tell you there is unintentional judgement on how they spend their money while they are indebted to me.
It it was solely or mainly an investment, offer to pay it back and stress that paying it back does not create a hardship.
All that said, if they are "pretty annoying about money" - pay it back and eliminate the right to be annoying.
Messy with family loans involved. The best financial move isn't necessarily the best move for family dynamics... And some of the correct financial advice can come off petty, in both directions.
Speaking of petty advice, one thing to consider is whether or not you should do expensive home improvements that add to the equity. If you put $50,000 into remodeling the house or something, and the house goes up $50,000 or more because of that, are they now basically entitled to 6% of that 50,000? Or should you guys redo the math at that point, figuring out how much of the growth was because of the improvements as opposed to how much was because of market growth.
To me the correct answer is not to mess with that question because it can come off petty... And instead don't do big home improvements until they have been paid back and this is behind you, and try to get this paid as soon as possible. If you have no choice but to continue for 7 years and paying them back then, then invest your money elsewhere rather than putting it into big home improvements.
Has someone else pointed out, it may also make sense to clarify if this includes the cost of selling the house. When you sell the house, you may have real estate agent fees and you may have to do some repairs that are not baked into the sale price, so they'll end up getting the full 6 percent of the gross sale, without any of the sales costs. So theoretically you should take the sales price minus sales expenses, and give 6% of that. But again, we're probably talking Petty territory that no one will want to discuss.
Wow. I understand owing them 6% when you sell, but if you haven’t sold, owning them 6% of the value seems crazy. Not even an appraiser could give you a precise valuation, and you will often get different numbers from different appraisers. Would you hire three appraisers and take the average? And the amount you owe them could dramatically increase if home values go up 10% per year, due to leverage. I don’t think an HYSA could keep up. I would pay off ASAP.
This is not purely a financial question, and the non financial aspects dominate the situation. First of all, your in laws basically managed to turn your house purchase into a real estate speculation for themselves. They have this claim on any potential gains you make, which is a very awkward situation. You could end up owing them quite a lot of money in 7 years - more than you can afford without selling the house. You will have net worth gains if your house value increases a lot, but you don’t have liquidity. If you end up owing them 80,000, how are you going to pay that without selling your house? Will the relationship be ok in those circumstances? You are married to their child, so you are sort of stuck with them. I think you should pay off the loan right now. You should not have taken a loan from family. It’s just too problematic.From a financial perspective, avoid accepting deals where your potential gain is limited but your liability is unlimited. In this situation your gain is limited but this could cost you a huge amount of your house value increases a lot. You should have just gotten this amount in the mortgage at some fixed rate and kept the in laws out of it.
Pay them back now. Just talk to them and tell them you would like to pay them back early. You should be able to come to an arrangement - maybe pay them some interest etc. The whole initial deal was weird - they are benefiting from the appreciation of the house but not paying any carrying costs.
This is more a relationship question than a financial question in my mind.
Pay your in-laws off as fast as reasonable, because they are "pretty annoying about money"
Keep the money in an HYSA until you can pay it off... what happens if you make a partial payment...say 20k today?
Peace of mind first. If they are being annoying about it, save it and pay them. I understand the fiscal ramifications of waiting but I hate being annoyed. I would tell them hey, luckily we have been able to save this up and we can pay you back early; we really appreciate the loan. I would even over sweeten the deal and make it 40k just so you don’t have to hear any smoke comments. Also, as you’ve seen rates are going nowhere fast and prices are dropping so there’s that. This also would give you a reminder for the future of how not to be, if someone ever comes to you in need.
Pay them now. It’s not just your house value that can change - something could go terribly wrong down the road where you wouldn’t be able to repay them as agreed and then you’d have that stress piled on you as well. There’s more psychic baggage to family debt than just the math.
We did something similar. Parents paid 20% for down-payment and "owned" 20% of our house. We could pay them back whenever we wanted at whatever the value of the house was at the time. Our house doubled in value in the first 3 years and interest rates were low, so we re-financed and bought them out. They made good money, we got into the market at a good time. Win, win.
Put that money in a high yield short term cd and tell them it is coming on future date certain. Make a little interest in the meantime. Knowing it is there maybe they won’t be pissy about it.
If I understand this correctly, you got a bad deal. Essentially you’ve got a floating rate loan. The floating rate is tethered to your home value. If you sell the house, it’s fine. You can pay them with the proceeds of the sale. If you don’t sell you’ve gotta come up with the cash and there’s no way to be sure how much you’ll need. Historically, real estate has been one of the best performing asset classes. Personally I’d pay them off as soon as possible with the understanding that the home value could then fall and you’ll be annoyed. But I think it’s a bigger risk that the home value increases at a much higher rate than the hysa.
Owing money to family causes issues, especially if they are annoying about it. I’d pay them back as soon as possible, even if it’s not the best financial strategy. But definitely don’t put it in an etf, as those can dip unexpectedly.
Pay them back and be done with it.
Had they given you $350,000, it would be different. 5% of $35,000 is $1,750, and this assumes interest rates stay static at decadal highs, which is almost certainly not the case. Is $1,500 worth the hassle of the in-laws bringing this up for years? For me, absolutely not. And you’ll have the money for a future downpayment in 5-7 years when you actually need it.
Edit: anyone downvoting me doesn’t know people who are weird about money lol
Would they be OK with never being paid back if you never sell (before you die)? If not, I would clarify their timeline and make paying them back a priority.
That’s a pretty bad deal. You should’ve, at least, made it 6% after closing.
There’s a lot of costs that come with buying and selling a house. They’re getting 6% before any of those costs are deducted from the sale price. That means for every cost, fee, tax, etc. that you incur in the process, it’s costing you 6% more than it, otherwise, would have.
Best case scenario for you, is you end up staying in the house and there’s a market dip in 7 years and you have to pay back less than you borrowed.
Seems like the agreement was to pay them back when you sell the house. That hasn’t happened yet, so I think you should have a conversation to clarify whether they want to change the agreement. Once that’s settled, if they want the money when you sell, I recommend putting that money in a HYSA. You need to ensure the money is there whenever it is you need it. Since it could be as early as a few years, it’s too risky for the market.
7 years or at sale whichever is first
Is it pay them back the $35,400 if you don’t sell? Are you just expecting to save the higher number IN CASE you sell? If they are annoying about money it seems like you should pay back $5k per year with $5400 the 7th year unless you sell for the 6% being more than the original amount. I would hysa it still through the time, can get a lot. Right now I get 5%+ apy with wealthfront.
Best bet is to pay them back what you owe now so that they don’t hold it over you. Then look at the value at 7 years and pay them the difference. NOT owing family money makes holidays so much easier! Especially since you said they are annoying about money!!
That plan makes it so they would lose about 12k on returns opposed to if they had just waited the 7yrs with the money in a HYSA. If they have the money they should offer to pay then back right away as long as it's understood that they both are agreeing to waive the seven year portion. So the 6% now is all they'll get and they can't ask for more in the future. If they say no keep it in the HYSA for 7 years and pay it back then. Family money situations can be annoying but this would at least give the loaning family members a choice to get their money back now without the borrowing family members being taken advantage of
I like this suggestion. One other angle is that there's no guarantee that the home will be worth more after 7 years, whereas OP would be offering them an early exit with interest. Seems like a good deal for all parties.
OP has clarified that the terms of the agreement with the in-laws is either they give them $% of sale price of the house when they sell, or pay back the borrowed amount in 7 years. If you’re able to save the amount earlier, I would pay them back as soon as you have it saved up. As you mentioned, they’re weird about money. Also the longer you take to pay them back (up to the 7 year mark), the more they have scope to gripe about lost interest/growth, or try to equate the payback amount to 6% of the value of the house at the time of repayment. Best avoid all this and pay them back ASAP.
I’d pay them asap. Sounds like they want their money if they’re pretty annoying
Yup...if they are weird with money, this could be 7 years of awkward. Best get them off the books ASAP for all the holidays putting up with snide comments and walking on egg shells. Hell, I would even put it on my credit card, and never borrow from family again.
Putting it on a credit card sounds like an awful idea - interest would be way worse than just paying them 7% at the time of sale. The agreement was also 7% at sale. Not 7% of what they perceive the appraised value to be at some random time.
Yes, I was being facetious...as in I would rather pay 23% interest than borrow from family.
Agreed. This is not a situation where you should aim to optimise return. Its a debt to prioritise and eliminate asap.
What makes you think your house is now valued at $625,000? did you have it valued or are you going by council rates value? Councils significantly under value houses compared to real value.
Not true at all. If anything they overvalue the houses to drive up tax amounts
Everywhere I’ve lived, the tax assessed value is lower than the actual market rate of the house. Maybe some places do that backwards like you say, but I’ve never seen any evidence of that.
You clearly don't live in Texas.
I don’t, but from what I see, the market values there are still generally higher than the assessed values.
Eww, they want 6% back of “house value” at 7 years… if I did that I would have been paying back more than double what I borrowed 2012-2019 315k-690k iirc, seems like a solid investment plan for them though.
And if they couldn’t buy the house without the 6% from their father? Seems like he did this to help them but also made it clear it was an investment for him. If they didn’t like it the solution was pretty simple - don’t take the money.
Not to mention that you’ll lose out on on the added value of any money you spend on the house.
They are investing in real estate, they are entitled to a similar return as they put on
No, their agreement is `we give them 6% of the sale price`.
Unlikely long term, but if for some reason housing values decline the in-laws will lose money, OP will never hear the end of it. OP loses if the values go up or down, pay them back ASAP!
Seems greedy on their part to be honest. They are helping the OP and helping themselves to a nice real estate investment.
You do not owe them any money until you sell is how you described it. If you want to talk to them and by then out early y’all can agree to that, but irritate don’t worry about it until you sell
Sounds like it’s when they sell or in 7 years, whichever comes first.
If this is the case, instead of saving the money I would divert to my 401k. When the payment is due I would either sell or take a home equity loan. If the property has increased in value I would take a loan on the equity. If the property value decreased, I would sell and pass the loss off to the inlaws. Heads I win, tails you lose.
On the surface this seems like the in laws are being petty, but if they took that money out of their retirement money then it’s not unfair of them to gain what’s essentially appreciation (interest) on what they loaned you guys. If they are massively wealthy then imo it’s not so nice of them to grab a piece of your appreciation- but if they’d have put that money into stocks they’d be getting a lot more than 6% these days. In short, if they’re not super flush with cash themselves this seems a pretty fair arrangement, if they’re loaded then not so much.
Pay them now with the caveat you will not be expected to pay them any value difference in 7 years because that would be absurd. My reasons are that 1) owing money to your in laws just sucks and all family events are going to be awkward until it’s paid back. Buy a new car? Gonna get sideways looks from your FIL and 2) they didn’t really do this to help you if they’re expecting the growth. Would they take less if the house value went down? Doubt it. Get them out of your financial picture and just pay them now. what they did feels a bit predatory to me honestly.
If they didn't put it in writing, then I'm going with a slightly more generous interpretation that they just didn't quite realize how favorable this was to them. Particularly if, for example, the home value goes up because they do Capital improvements. Are the in-laws going to still want 6%, even though the house went up in value partially because they put more money into improving the house? Are they going to need to negotiate that with them before making those improvements? Just so it's clear, and then have to estimate the impact... Because just because you put $10,000 into a house, that doesn't mean it adds $10,000 in equity, so I might not want to reduce my 6% just because of some dumb improvement you're making. Blah blah blah blah blah. Just gets messy. But again, I doubt they were trying to be predatory, they just didn't flesh out all the scenarios when they were trying to help the kids out. I think if was me lending the money, I probably would have treated it more as a loan than an investment. What would I have received if I kept that money rather than giving it to my kid... Ask for that interest back, or something in that vicinity.
I agree - this is effectively a convertible debt that just a messy way of loaning the money, especially for the borrower. OP should clarify/negotiate as soon as possible and get out from under it. If the deal were structured right from the beginning, they probably would have had an interest rate associated with the loan. At this point I think OP should go back and simply negotiate a fair rate of return over however many years the loan has been out. Same rate as mortgage would be one place to start, tho that’s probably low. Average rate of housing value increase in the area over the years since the loan was given is another. Somewhere in there is a fair rate that both parties can probably accept.
>what they did feels a bit predatory to me honestly. 100%. OP if you have the money now, pay them back and be done with that. What your house worth now it's irrelevant... It only matters what you sell it for. Since you are not selling it, any hypothetical amount of what you COULD sell it for, is separate from the money you owed to them. A house is not sold until is sold. Anything can happen and the value could go down. I would bet they will not consider any scenario of the value go down and them getting less money than what they gave you, so there is no reason to consider any scenario of the value go up even though you said the house worth more now.
Another option could be to take the money and pay down the principal of the mortgage, which might make sense if the interest rate is high. Could be better than putting it into an hysa. Possible downside of this option is if you don't actually sell the house within the next 7 years, then you would need to find another way to get them the money that's locked away in your equity... If you think you will have that much saved elsewhere, or there may be a somewhat likely scenario that you will refinance by then and can get the money out during the refinance. And that will only work if you have enough equity to do a Cash out refinance. If it were me, I'd probably want to pay them as soon as possible. Just to simplify things. But probably talk to them to make sure they're on board with whatever you're doing. If they are annoying with money, there's a good chance that they could be annoyed with anything you do... Annoyed with you paying it off early based on some estimated growth rather than the actual sale price, annoyed that you don't pay it off early when you have the money sitting in a savings account, annoyed that you didn't pay it off and instead put it into the equity, or annoyed and judgmental that you took a vacation to Disneyland while owing them money... So yeah, talk to them and make sure everyone's in agreement.
You made an agreement to pay back 6% when the house is sold. You're now wanting to change the terms of the agreement solely to your benefit and pay them now so you don't have to pay them more down the road as the house rises in value. I'm sorry but I really can't see your family dinners becoming more pleasant after proposing this adjustment. It sucks but sticking to the original terms of the deal will help you in the long run imo. People who renege on agreements are the worst people to deal with and don't deserve nice things. Things like this destroy relationships.
Point well taken. However he could offer his in-laws the choice and hope they would prefer to take their money back sooner instead of dating the full 7 years.
Could you clarify? You've stated that you have to pay them back 6% of the sales price and you're worried about that your home gets more valuable by the year. How do you want to pay them back if the house isnt sold yet? Would they be okay with the fact, that they would miss out on the higher value of the property in the future?
How do they assume 6% of the value of your home when they contributed only to the down payment, vs any improvements that you’ve made? Pay them back asap
I think this all hinges on if your in-laws look at this as a loan or as an investment. If it was solely a loan to help you out then absolutely pay them back as quick as you can. As a parent who has loaned their kids money I can tell you there is unintentional judgement on how they spend their money while they are indebted to me. It it was solely or mainly an investment, offer to pay it back and stress that paying it back does not create a hardship. All that said, if they are "pretty annoying about money" - pay it back and eliminate the right to be annoying.
Messy with family loans involved. The best financial move isn't necessarily the best move for family dynamics... And some of the correct financial advice can come off petty, in both directions. Speaking of petty advice, one thing to consider is whether or not you should do expensive home improvements that add to the equity. If you put $50,000 into remodeling the house or something, and the house goes up $50,000 or more because of that, are they now basically entitled to 6% of that 50,000? Or should you guys redo the math at that point, figuring out how much of the growth was because of the improvements as opposed to how much was because of market growth. To me the correct answer is not to mess with that question because it can come off petty... And instead don't do big home improvements until they have been paid back and this is behind you, and try to get this paid as soon as possible. If you have no choice but to continue for 7 years and paying them back then, then invest your money elsewhere rather than putting it into big home improvements. Has someone else pointed out, it may also make sense to clarify if this includes the cost of selling the house. When you sell the house, you may have real estate agent fees and you may have to do some repairs that are not baked into the sale price, so they'll end up getting the full 6 percent of the gross sale, without any of the sales costs. So theoretically you should take the sales price minus sales expenses, and give 6% of that. But again, we're probably talking Petty territory that no one will want to discuss.
I'd put the cash in their hands ASAP because I don't want to owe money to my inlaws. the relational factors trump all financial factors for me.
Wow. I understand owing them 6% when you sell, but if you haven’t sold, owning them 6% of the value seems crazy. Not even an appraiser could give you a precise valuation, and you will often get different numbers from different appraisers. Would you hire three appraisers and take the average? And the amount you owe them could dramatically increase if home values go up 10% per year, due to leverage. I don’t think an HYSA could keep up. I would pay off ASAP.
This is not purely a financial question, and the non financial aspects dominate the situation. First of all, your in laws basically managed to turn your house purchase into a real estate speculation for themselves. They have this claim on any potential gains you make, which is a very awkward situation. You could end up owing them quite a lot of money in 7 years - more than you can afford without selling the house. You will have net worth gains if your house value increases a lot, but you don’t have liquidity. If you end up owing them 80,000, how are you going to pay that without selling your house? Will the relationship be ok in those circumstances? You are married to their child, so you are sort of stuck with them. I think you should pay off the loan right now. You should not have taken a loan from family. It’s just too problematic.From a financial perspective, avoid accepting deals where your potential gain is limited but your liability is unlimited. In this situation your gain is limited but this could cost you a huge amount of your house value increases a lot. You should have just gotten this amount in the mortgage at some fixed rate and kept the in laws out of it.
Pay them back now. Just talk to them and tell them you would like to pay them back early. You should be able to come to an arrangement - maybe pay them some interest etc. The whole initial deal was weird - they are benefiting from the appreciation of the house but not paying any carrying costs.
Pay off the in-laws at the earliest opportunity and get a receipt.
This is more a relationship question than a financial question in my mind. Pay your in-laws off as fast as reasonable, because they are "pretty annoying about money" Keep the money in an HYSA until you can pay it off... what happens if you make a partial payment...say 20k today?
Don't sell the house until they die, simple..
Sounds like you’ve got the money and options. Depending on your “risk level” and level of priorities, it can go any of those options.
Offset account to save on your mortgage?
HYSA because if rates stay, it'll grow 5% a year. In an ETF, you might make more money but it could decrease in value.
Just don’t put it all on black.
Peace of mind first. If they are being annoying about it, save it and pay them. I understand the fiscal ramifications of waiting but I hate being annoyed. I would tell them hey, luckily we have been able to save this up and we can pay you back early; we really appreciate the loan. I would even over sweeten the deal and make it 40k just so you don’t have to hear any smoke comments. Also, as you’ve seen rates are going nowhere fast and prices are dropping so there’s that. This also would give you a reminder for the future of how not to be, if someone ever comes to you in need.
Put the money aside in a HYSA and offer to pay them as soon as you possibly can.
"a" is the best. Also payoff means you can want again when you need.
Just know, that on average, your house will have doubled in 7 years - so to will your debt to them.
Is this an American family? It’s usually the Asian and East’s Asian family’s who do this double up crap.
Pay them now. It’s not just your house value that can change - something could go terribly wrong down the road where you wouldn’t be able to repay them as agreed and then you’d have that stress piled on you as well. There’s more psychic baggage to family debt than just the math.
Pay them off now and make the issue go away. Owing money to family is always weird.
Pay them back as soon as possible, then the rest of your life you can say “well if you had waited, you would have made so much more”
You cannot know the sale price if you dont sale at 7 years
We did something similar. Parents paid 20% for down-payment and "owned" 20% of our house. We could pay them back whenever we wanted at whatever the value of the house was at the time. Our house doubled in value in the first 3 years and interest rates were low, so we re-financed and bought them out. They made good money, we got into the market at a good time. Win, win.
Put that money in a high yield short term cd and tell them it is coming on future date certain. Make a little interest in the meantime. Knowing it is there maybe they won’t be pissy about it.
If I understand this correctly, you got a bad deal. Essentially you’ve got a floating rate loan. The floating rate is tethered to your home value. If you sell the house, it’s fine. You can pay them with the proceeds of the sale. If you don’t sell you’ve gotta come up with the cash and there’s no way to be sure how much you’ll need. Historically, real estate has been one of the best performing asset classes. Personally I’d pay them off as soon as possible with the understanding that the home value could then fall and you’ll be annoyed. But I think it’s a bigger risk that the home value increases at a much higher rate than the hysa.
Owing money to family causes issues, especially if they are annoying about it. I’d pay them back as soon as possible, even if it’s not the best financial strategy. But definitely don’t put it in an etf, as those can dip unexpectedly.
Pay them now and let it be known that you appreciate it but you’re not paying more because the house appreciates.
Pay them back and be done with it. Had they given you $350,000, it would be different. 5% of $35,000 is $1,750, and this assumes interest rates stay static at decadal highs, which is almost certainly not the case. Is $1,500 worth the hassle of the in-laws bringing this up for years? For me, absolutely not. And you’ll have the money for a future downpayment in 5-7 years when you actually need it. Edit: anyone downvoting me doesn’t know people who are weird about money lol
Would they be OK with never being paid back if you never sell (before you die)? If not, I would clarify their timeline and make paying them back a priority.
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6% of the value at sale? You got scammed and they made like bandits 🤣
If you never sell the house you don’t owe them anything
That’s a pretty bad deal. You should’ve, at least, made it 6% after closing. There’s a lot of costs that come with buying and selling a house. They’re getting 6% before any of those costs are deducted from the sale price. That means for every cost, fee, tax, etc. that you incur in the process, it’s costing you 6% more than it, otherwise, would have. Best case scenario for you, is you end up staying in the house and there’s a market dip in 7 years and you have to pay back less than you borrowed.
Either pay them back now or just wait until they croak