Give a Brother a Hand

Dear Scott,

My husband’s brother and his wife have recently taken out a $360,000 home loan, with $60,000 in an attached offset account. They’re paying 3.99 per cent interest. He works full time while she is a stay-at-home mum with four primary-school-age kids. They are not too stretched by the loan, and they have not asked for any assistance. However, my husband has suggested we could help them reduce the interest by putting $200,000 into their offset account for two years. They would then pay us 3 per cent. The only formality would be an email between the brothers, giving their word that they would honour the deal. What are your thoughts? Generous? Foolish? Both?

Leah

Hi Leah,

I don’t like mixing money with family, so I wouldn’t do it, but that’s just me.While the deal is a good one for your brother-in-law (it’s worth at least $2,000 a year to them, plus the added benefit of the principal reduction), you should only do it if he and his wife feel totally comfortable.

If they are, make sure you have a signed, written agreement between the two families, to guard against anything coming out of left field: what happens if one of the brothers dies? Or gets divorced? Or develops a pokie addiction?Finally, the question I’d ask your husband is why are you limiting yourselves to earning 3 per cent? Over the long term you could do much better than that in the share market -- without muddying the family waters.

Scott