I love studying your column, and listening to about all of the completely different points of economic questions, however now it’s my flip to ask to your recommendation. Twelve years in the past, my boyfriend’s brother lent us $6,000 to cowl closing prices on a house buy, plus a little extra for preliminary repairs. (If it’s related, the title and mortgage on the house are in my identify solely, and my boyfriend and I have at all times stored separate financial institution accounts.)

‘No part of this transaction was ever committed to paper, and the only occasional reference ever made to the arrangement.’

Initially, as a result of the house was in horrible form, he seen the mortgage extra alongside the traces of an funding, and deliberate to proceed funding the mandatory repairs and upgrades in return for a share of any improve in worth. Shortly after lending us the cash, nevertheless, he purchased his own residence and instructed us he wouldn’t have the ability to finance any additional renovations.

When I refinanced the mortgage a yr and a half later, I provided to pay him again, however since he knew we have been in the method of renovating and my boyfriend wasn’t making as much cash as he was accustomed to due to some critical well being issues he was experiencing on the time, he mentioned to simply maintain onto the cash, and we might pay it again at one other time.

No a part of this transaction was ever dedicated to paper, and the one occasional reference ever made to the association since then has been throughout visits to our house, once we generally jokingly refer to him as a shareholder who’s due to this fact entitled to his personal room (our one visitor room) whereas different family have to accept a sofa or get a resort room once we host a massive household occasion.

Now, 12 years later, we dwell in a considerably improved house, and with low mortgage charges in every single place, I am getting ready to refinance and use the cash to repay the present mortgage, plus the house fairness mortgage I took out seven years in the past, to make numerous house enhancements.

‘Interest was never discussed, nor do I have any idea what, if any, expectations he has regarding any growth in his investment.’

I purchased the house for $125,000 and it’s now price roughly $285,000, with a whole owed of $185,000. I knowledgeable my boyfriend’s brother in regards to the plan and, this time, when I provided to pay him again out of the extra funds left over from the refi, he accepted, leaving me at a whole loss about how much to pay him over and above the preliminary $6,000.

Needless to say, curiosity was by no means mentioned, nor do I have any thought what, if any, expectations he has concerning any progress in his “investment.” He is clearly a very trusting and beneficiant individual, so even when I have been to ask him what he thinks a honest fee of return can be, I’m sure he would inform me to simply give him no matter I assume is correct. Any steerage you can give me can be tremendously appreciated.


Now It’s My Turn to Be Generous

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Dear Generous,

Let’s leave aside the “investment” angle as I don’t see any scenario where someone, even a beloved relative, loans $6,000 to help with closing costs and renovations and receives an equity stake in the house in return. That seems like an overreach in terms of the status of this gesture.

I’m glad that you all remain close, but I would be remiss if I did not gently chastise you for not putting this loan on paper. What if you had split from your boyfriend? Or if his brother suddenly needed dough that you didn’t have? There are so many ways where this could have gone horribly wrong.

But we almost have a happy ending. That $6,000 would have a purchasing power of nearly $7,500 today. Your house would have appreciated in value over those 12 years, but we are not sure whether you would have managed it without his help, and he was in no hurry to get it back.

I also see the argument for, “What if he had invested the $6,000 in the stock market in 2009?” But he didn’t do that, and we don’t know whether he would have invested it anywhere during this time, wisely or otherwise. It’s also easy to be generous with other people’s money.

On that note, $10,000 seems like a handsome and generous figure to settle upon — or $12,000, but only if you can absolutely afford it. Whatever you decide, do it over a nice dinner, with a card, and explain that you appreciate him trusting you, and helping to make this house purchase possible.

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