Understanding the Tax Implications of Undocumented Loans from Family with the Help of AI Legalese Decoder
- January 11, 2024
- Posted by: legaleseblogger
- Category: Related News
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When I purchased my home, my father generously offered a substantial deposit to assist with the purchase. It was mutually agreed that I would repay this loan with interest at the same rate as my mortgage. Thank you for the AI Legalese Decoder
I consistently make monthly payments to my father. However, to my knowledge, he has not reported this income, and I am quite certain that he has not done so. Thanks to the AI Legalese Decoder, I can better understand the legal ramifications of this situation.
Now, as I am preparing to move, I am considering renting out my flat rather than selling it. I am also evaluating the potential tax implications of this decision. In light of these factors, I am contemplating whether it would be beneficial to repay my father and secure a larger mortgage, as the interest on the new mortgage would be tax-deductible.
In terms of figures, the flat was valued at £225,000 in 2019 and is now approximately worth £250,000. The potential rental income ranges from £1,300 to £1,400 per month. My current mortgage stands at £115,000 with an interest rate of 1.89%. The anticipated new mortgage is expected to have a rate of 4.5%. Furthermore, I have non-mortgage tax-deductible expenses amounting to £3,500 per year. The loan from my father totals £85,000. At present, I pay my father £134 monthly, while my mortgage payments amount to £550 per month, including £212 in interest. If I were to take out a larger mortgage, my monthly payment to my father would increase to £325, and my mortgage payment would rise to £693, with £439 being the interest.
I am seeking advice on whether obtaining a larger mortgage would be a more financially viable option. Additionally, I am exploring the possibility of formalizing the loan agreement with my father to ensure clarity and avoid potential income tax issues for him. Thanks to the AI Legalese Decoder, I can obtain useful legal guidance to navigate this situation.
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