R1 000 000 loan from a friend

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Turbo_Aspiration

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Electric said:
Maybe I'm confused.
If the OP is paying the transfer fee or whatever tax is required to transfer the money then fine but otherwise it would be the responsibility of the person giving the loan.
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The "Transfer fee" you pay when you buy a house is for the transfer of the property, not the money.

To the OP, sounds like a good deal. Get a lawyer to draw up the papers. Nothing ruins friendships like money. Also, be weary that your friend doesn't make you his b##ch until you pay him back.
 
Other Pineapple Smurf

Other Pineapple Smurf

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Paul Hjul said:
Not sure if you can hire purchase a house, but that is an interesting idea
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Rent-to-own has become the only option for most people. For the first 2-3 years you rent the house paying the bond amount with adjustments up and down depending on your budget. After 2 years you get the option to purchase the house at the original price minus your rent if you were able to cope with the payment.

If you decided not to, or cannot cope, usually they keep this window open for another 2 years. Its a brilliant concept as it allows developers to sell units they cannot get rid off in overdeveloped markets and it allows people to become homeowners in a try-before-you-buy scheme.
 
Other Pineapple Smurf

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Napalm2880 said:
A family friend offered to loan me R1 million interest free to purchase a house. Obviously we'll have a detailed written agreement in place for the repayments, the term, annual increases in repayment, etc.

I'd like to know what the tax implications are for lending this amount? I also heard somewhere that he has to register as a credit provider? Not sure how true this is?
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Best advice on this thread is to speak to a lawyer.

If you are going to buy a bargain property that is very undervalued, then go for it even with all the financial expenses/penalties coming your way. If its just a normal property, then rather use the R1 mill as security for the bank. I was surprised last year what a difference it made to my bond application when I showed I had 10% deposit for my house.
 
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Paul Hjul

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cbrunsdonza said:
Rent-to-own has become the only option for most people. For the first 2-3 years you rent the house paying the bond amount with adjustments up and down depending on your budget. After 2 years you get the option to purchase the house at the original price minus your rent if you were able to cope with the payment.

If you decided not to, or cannot cope, usually they keep this window open for another 2 years. Its a brilliant concept as it allows developers to sell units they cannot get rid off in overdeveloped markets and it allows people to become homeowners in a try-before-you-buy scheme.
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I am aware of all manner of mechanisms by property developers but am thinking specifically of situations outside of sectional title but am simply concerned as to laws relating to alienation of land. Not sure it's quite accurate to say it is an option for most people.
 
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Paul Hjul

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Speak of the devil

SABC news at 1 (on 3) is about to have an insert on alternative ways to acquire home ownership
 
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smallearth

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There is no such thing as a free lunch... even a well meaning person has ulterior motives... even if they don't know it...

My ex-father-in-law did things like this because he liked being in a position of power and people 'owing' him, kinda like a godfather. Don't get me wrong, he was a very likeable guy, but he got a payoff for his generosity.
 
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^^vampire^^

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Just get whoever has the money to transfer the cash to the seller. No one has to be the wiser.
It's only when he transfers the money to you that you will have a tax issue.
 
Napalm2880

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JStrike said:
Normally you might be liable for donations tax, but since it is operating as a loan, it should be fine
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From what I understand, this is considered an unsecured loan which makes it exempt from donations tax.

cbrunsdonza said:
Best advice on this thread is to speak to a lawyer.
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I'm considering this. Any recommendations?

Paul Hjul said:
the main difficulty you are looking to run into is that the National Credit Act. Have a look at: http://www.saflii.org/za/cases/ZACC/2012/29.html

An interest free loan could also be viewed by SARS as a transaction where your friend is donating market related interest to you.
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I'll read up on this. Thanks. I can't understand how this sort of thing is not more common? It's like getting my father to loan me money for a new house and signing an agreement to pay him back? Surely this happens very often?
 
Napalm2880

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^^vampire^^ said:
Just get whoever has the money to transfer the cash to the seller. No one has to be the wiser.
It's only when he transfers the money to you that you will have a tax issue.
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He's going to transfer the money directly into an attorney's account as a deposit for the the property. So the money is never in my account.
 
Electric

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Venomous said:
read again. The person is paying for the house, then amount to be repaid.
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So the person giving the money is paying the transfer fee?
Which brings me back to my original statement.
How is it possible that this person is ok with paying the transfer fee.

If this involves the sale of a house then some financial transfer is required.
 
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Venomous

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Electric said:
So the person giving the money is paying the transfer fee?
Which brings me back to my original statement.
How is it possible that this person is ok with paying the transfer fee.

If this involves the sale of a house then some financial transfer is required.
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I did not say that I agree with the process.

I suggest.
Person buys the house in their own name. (OP must remember that lender will be paying 2nd property tax, probably)
OP then rents-to-own either until paid up or until they are able to afford their own bond
OP to pay transfer fees into their own name.
So even though the friend is giving it interest free, he can still expect to be repaid for all his expenses during this period.

And that should be done with legal paperwork.
 
Electric

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Venomous said:
I did not say that I agree with the process.

I suggest.
Person buys the house in their own name. (OP must remember that lender will be paying 2nd property tax, probably)
OP then rents-to-own either until paid up or until they are able to afford their own bond
OP to pay transfer fees into their own name.
So even though the friend is giving it interest free, he can still expect to be repaid for all his expenses during this period.

And that should be done with legal paperwork.
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Sorry, I didn't mean to only respond to you.
I was responding to the ppl in the thread as a whole that for some reason couldn't understand what I was saying.
 
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