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  • #31
    You give/loan $X to your sibling. Regardless of what you call it, history suggests your expected return is 0% with full loss of principal. You can hand over the the same amount over a few years to your friendly NWM agent who will give you a fancy WLI policy. While it may take a couple of decades before your return is positive, it will at least have an increasing cash value over time. If a WLI policy is a better deal, you’ve got to walk away.

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    • #32
      Originally posted by kdeva View Post

      We are considering a mortgage between <2x (husband) and 2.5x (me) our income and we are still deciding.
      Well, your current pursuit of a mortgage and expensive home is an easy out for you. "Sorry, I'd love to help, but we are pursuing an expensive home purchase of our own. Hope you can find a home within your budget (from your money from your jobs)"

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      • #33
        Given that you're also looking for a house, I'd ask your sibling for $100k. They'll either get the point or give you $100k. That's what we call a no lose situation and it's one of the best situations to find yourself in.

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        • #34
          Originally posted by kdeva View Post
          Hello,

          I am in a bit of an awkward situation with my sibling.

          My sibling lives in a HCOL area with spouse, no kids. They are interested in purchasing a brand new $1.2M home in an excellent school district, but the mortgage will be 3.5X their combined gross income. So, my sibling called to discuss this situation and I advised against the purchase and recommended a more modest home for $700-$800k which wouldn't stretch them financially. But, apparently the $800k homes are 30 or 40 years old and aren't as appealing to them. They don't have kids now but are planning to start a family soon, so I tried conveying some facts about childcare costs etc. to hint that a $1M mortgage with $5.5k per month PMI will be unsustainable in the long run once they have a family. But, apparently my sibling's spouse really loves that new property and doesn't want to live in a 30 or 40 year old home.

          They have only saved up half the money for downpayment and they want to borrow the other half from me. My husband and I have enough and loaning $100k to them wouldn't stretch us by any means and my husband has no problem with it as along as we do it legally and file for gift tax. My sibling didn't tell me when and how they are going to pay it back since most of their income will be spent on the mortgage. I didn't ask either. However, as I thought more about it, I wonder if I would be encouraging bad behavior by giving the downpayment money on a house that I feel is beyond their means.

          My sibling and I have some history with money. I partly paid for my sibling's college when I myself was a grad student by drastically economizing and living a very frugal life. I never asked for that $30k back and I presume that my sibling considered it as a gift from me (this was before I was married). I was very happy to help out at a time of financial need, I considered college education a necessity, and I didn't want my sibling to take out a student loan.

          Coming to the current situation, I am not sure a large house is a necessity and I really don't know what to do. I don't mind lending, but I know lending to family always ends up affecting your relationship. At the same time, I am not sure I want to gift $100k especially as it encourages bad behavior.

          I want to separate emotions from logic, but it is very hard to keep them separate. I am asking for advice from people who have had to help out family members financially. Did you loan or gift money? If you lend money, did you charge an interest and file gift tax? Did you set payment terms (x months or years)? How do you even have this conversation with a little sibling who you have loved and who has always looked up to you?


          PS> I am not asking for whether my sibling is making the right decision about the 3.5x mortgage since I feel that's unwise.
          I agree with MPMD. You should consider counseling to discuss boundaries.

          I deeply believe in giving money away to support NEEDS. Your sibling and his/her spouse have a WANT. Based on your post, they sound like they want to “keep up with the Jones’”. Imagine now if they are willing to ask you for $100k for a WANT, what’s next? If a bank will not loan then the money, there are red flags/alarms/bells/whistles going off that this is a bad idea for you. Don’t even think of it as a loan like others mentioned, this would be a $100k gift, and it will likely not be your last one.

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          • #35
            You have a really good out.

            "We are currently trying to scrape together enough down payment money purchase a house. In this area, the cost of housing is outrageous! Unfortunately we are not in a position to help."

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            • #36
              That hard part is like rest of america looking at successful people like OP and physicians-in-general -- you've got money to burn. why can't you help us out a little?

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              • #37
                Why would anyone, in these circumstances, consider saying yes? That's the real question. I know I'm a psychiatrist and I think everyone should do therapy at some point in their lives, but really, therapy would be so helpful here. This is not a healthy relationship, my friend.

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                • #38
                  Thank you for that slap in the face and a heavy dose of reality. I am going to say no. I really appreciate all your comments!

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                  • #39
                    Are you Indian? Just wondering.

                    Anyway, there are way too many strikes against this, but the biggest is that they are not willing to settle for a less expensive house, so they are willing to consider their WANT more than they take in to consideration asking for an enormous sum of money. I don't necessarily agree with the calls for therapy, but this specific kind of [WANT without regard for another's need] really does sound like a parent-child relationship with the latter half stuck in the adolescent stage.

                    The other big issue is that this want is going to create NEED in the future when they can't keep up with payments.

                    Hard pass, my friend. There's no reason they shouldn't struggle longer or settle for less, especially with plans for kids. If this is going to create resentment, better it be only on one side now than a couple hundred grand down the line when the resentments will be on both sides.

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                    • #40
                      Originally posted by legobikes View Post
                      Are you Indian? Just wondering.

                      Anyway, there are way too many strikes against this, but the biggest is that they are not willing to settle for a less expensive house, so they are willing to consider their WANT more than they take in to consideration asking for an enormous sum of money. I don't necessarily agree with the calls for therapy, but this specific kind of [WANT without regard for another's need] really does sound like a parent-child relationship with the latter half stuck in the adolescent stage.

                      The other big issue is that this want is going to create NEED in the future when they can't keep up with payments.

                      Hard pass, my friend. There's no reason they shouldn't struggle longer or settle for less, especially with plans for kids. If this is going to create resentment, better it be only on one side now than a couple hundred grand down the line when the resentments will be on both sides.
                      Yes, I am Indian. Why do you ask? Are there cultural aspects to this way of thinking?

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                      • #41
                        The Bay Area has just about the most out of whack rent expense to mortgage service ratio in the country. Rather than worrying about Fear of Missing Out and borrowing from in-laws and outlaws to scrape together a downpayment for a house one cannot afford, embrace the disparity between renting a buying. Realize that the Bay Area (and the south Bay in particular) is tremendously popular and expensive, but rental prices are on sale! Better still, if you live in San Francisco or a few other places, you actually might score a rent controlled place. (Sure, it makes no economic sense and I'm morally opposed to State controls on prices of private housing, but if you can get a good deal for yourself, take it.)

                        Kdeva, you and your husband both are solid earners. You have great jobs at a world class university. Campus housing still might be a better deal than buying, but it makes a fair amount of sense for you guys to buy and stay for the long term. You just aren't going to quit your jobs and move to University of Wyoming or something. But your sibling? Yeah, hitting you up for money to buy a place he or she cannot afford to then lease cars and put vacations on credit cards to keep up with the new neighbors? No way. Most Americans spend far too much on crap they don't need to impress people they don't really like. Don't spend your money to put your sibling on a path that leads to misery rather than happiness.

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                        • #42
                          Giving someone money to procure something with ongoing cost, that is financially unsustainable for them, is actually initiating their downfall and causing them harm.

                          Rest peacefully, knowing you made the uncomfortable but correct decision for the well being of your sibling, and for the relationship overall.

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                          • #43
                            Originally posted by kdeva View Post

                            Yes, I am Indian. Why do you ask? Are there cultural aspects to this way of thinking?
                            Yes, there is culture aspect to this kind of ask and thinking. Happens a lot among Indians - not just families even with friends.
                            I suspected you were Indian too.
                            Our Mantra “Give the amount that you can part with comfortably and with understanding that it’s never coming back”.

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                            • #44
                              Originally posted by kdeva View Post

                              Yes, I am Indian. Why do you ask? Are there cultural aspects to this way of thinking?
                              I could have said with 100% certainty that you were Indian since I am one too and I could see situation clearly. Al I needed to look was to look at a mirror.

                              This happens all the time with Indian families. Money is almost never repaid. It is always a gift. I have done it many times but the difference was that I had more than enough for myself and my sibling was just starting out in life here and he is more frugal than me and also had shouldered a large part of our family burden for years. It was more as a thank you gift.

                              You know what will happen if you say no - she will stop talking to you abruptly and trying to make you feel guilty. You will be tempted to pick up the phone to repair the damage to the relationship by saying yes to the loan / gift. Avoid that urge. Just go on with your lives. They will come around one day. Don't be guilt shamed into giving.


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                              • #45
                                Originally posted by ParleG View Post

                                Yes, there is culture aspect to this kind of ask and thinking. Happens a lot among Indians - not just families even with friends.
                                I suspected you were Indian too.
                                Our Mantra “Give the amount that you can part with comfortably and with understanding that it’s never coming back”.
                                I love that username. I once put on more than a few pounds eating too many of those biscuits.

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