Zero interest loan from parents - How? (2024)

My wife and I are house searching in an area near Chicago to be near family. If it matters, we currently live in northern california.

My dad offered to give us a zero interest loan that amounts to 40-50% of the price of the homes we're looking at. We'll add another 30-40% as a down payment, which means we will only need to finance 10-20% of the purchase amount at the current rate (Somewhere around 6.3% right now).

I'm wondering how we should execute this loan. My dad wouldn't be (nor would he want to be) on the home deed and doesn't require any type of contract. He's getting older and can easily afford to 'give me' such loan terms. I just imagine this would raise red flags with the IRS or something though, so I want to make sure we're doing everything correctly and legally. Assuming we got audited sometime, I imagine the IRS would wonder where this down payment money came from, and would try to get their piece.

Here's an example of what we're thinking:
Home purchase price: $700k
Our downpayment (40%) : $280k
Loan from Dad @0% : $300k
Loan from Bank @6.3%: $120k

Maybe I'm thinking about this all wrong though. Any help/advice would be appreciated.

OP,

1) Why would you want to accept this 0% interest loan?

2) Do you need it?

A) Yes. Then, you cannot afford the house.

B) No. Why would you take the money from your parent?

Your dad can offer it. But, why would you accept it?

If this is a gift, that is a separate subject.

KlangFool

KlangFool wrote: ↑Thu Feb 23, 2023 12:25 pmOP,

1) Why would you want to accept this 0% interest loan?

2) Do you need it?

A) Yes. Then, you cannot afford the house.

B) No. Why would you take the money from your parent?

Your dad can offer it. But, why would you accept it?

If this is a gift, that is a separate subject.

KlangFool

I'm fully aware that he's losing money by giving me this loan, which is a gift. He's been trying to gift us money as early inheritence for quite a while. We can very easily afford the houses we're looking at even without the 0% interest loan. These topics don't really have to do with what I'm asking in my original post though.

I would get together with a CPA to figure out how to structure this properly. I get the concept that your father wants to give with a "warm" hand.

One option that comes immediately to mind is your father gifting the max around 35k/yr to you and your wife.

He could also just gift you a very large down payment and report that to the IRS.

One relationship question is whether you have siblings who might be concerned about things being "fair".

Congratulations on your good fortune and kind father.

on your end, no there the no need to worry the IRS will "take a piece". a loan is not income. not even a 0% loan. if you are going to do this, simply get the deal in writing, accept the funds, and don't worry.

now on your dad's end, the IRS does want to see interest income on his tax return at their minimum rate, which idk what it is right now but it's above zero. that's true even if you do not actually pay the interest.

i am inclined to side with Klangfool that you should think hard about questions like do you want to mix family and money, do you need this help, why not pay market rate interest, etc. i also think it's funny to take a mortgage for only 10% of the price. there's a lot of fees and hassles in getting a mortgage and you give up whatever benefit of appearing to be a cash buyer, so can't you buy a cheaper house, or save up more, or finance the last 10% any other way?

cbr shadow wrote: ↑Thu Feb 23, 2023 12:32 pm

KlangFool wrote: ↑Thu Feb 23, 2023 12:25 pmOP,

1) Why would you want to accept this 0% interest loan?

2) Do you need it?

A) Yes. Then, you cannot afford the house.

B) No. Why would you take the money from your parent?

Your dad can offer it. But, why would you accept it?

If this is a gift, that is a separate subject.

KlangFool

I'm fully aware that he's losing money by giving me this loan, which is a gift. He's been trying to gift us money as early inheritence for quite a while. We can very easily afford the houses we're looking at even without the 0% interest loan. These topics don't really have to do with what I'm asking in my original post though.

A) If this is a 300K 0% interest rate loan, then, he cannot afford to give you 300K.

B) Or else, he would just give you 300K.

C) If your dad cannot afford to give you 300K, why would you take a 300K 0% interest rate loan from your dad?

D) Just tell your dad to give whatever amount that he can afford to give if he wants to. Aka, an amount smaller than 300K.

We as the kid need to protect our parent from their generosity.

KlangFool

Chadnudj wrote: ↑Thu Feb 23, 2023 12:34 pm1. Set it up as a loan with some acceptable market interest rate.
2. Pay the loan back over time.
3. Every year, have your dad "gift" you back the interest (as the annual interest is likely to be well below the gift tax exclusion)

1) use the federal minimum AFR so your dad won't have to pay taxes on inputed income. Just make a simple contract agreement. Make payments and have your dad (and mom?) gift you $32k per year in the form of debt reduction. (16k each from mom and dad) Since you are married. they could double the gift by giving each of your $16k, or $64k total per year.

https://www.nationalfamilymortgage.com/afr-rates/

Chadnudj wrote: ↑Thu Feb 23, 2023 12:34 pm1. Set it up as a loan with some acceptable market interest rate.
2. Pay the loan back over time.
3. Every year, have your dad "gift" you back the interest (as the annual interest is likely to be well below the gift tax exclusion)

That’s the way to do it. Look up the IRS minimum for interest.

Make your father happy. We are in the lucky position to be able to make annual gifts to our children. It gives us a happy feeling to make a difference in their lives while we are still alive, I.e., giving with a warm hand.

I personally don’t gift for home purchases (long story) but the spirit is similar.

Carefreeap wrote: ↑Thu Feb 23, 2023 12:38 pmI would get together with a CPA to figure out how to structure this properly. I get the concept that your father wants to give with a "warm" hand.

One option that comes immediately to mind is your father gifting the max around 35k/yr to you and your wife.

He could also just gift you a very large down payment and report that to the IRS.

One relationship question is whether you have siblings who might be concerned about things being "fair".

Congratulations on your good fortune and kind father.

Thanks for the response - that's really helpful.
My parent's go to great lengths to be sure everything is fair between my brother and I. He will gift my brother an equal amount that I'm saving by accepting his 0% interest loan.

So are you going to pay him back the $300k or just hold the "loan" in perpetuity?

I also agree with the previous post about taking out a mortgage at all given the limited amount you would need to borrow. If you are already getting a "loan" for $300k, just get the other $100k or so from Bank of Dad and don't deal with a mortgage at all.

It is possible to structure this as a loan, but I'm not certain that's the best. The substance of the transaction is a really a gift, not a loan, so that's automatically a negative if you ask me. In addition, there's some complexity and probably cost in setting up the loan. And, your dad will have to pay income taxes on the imputed interest, whether he collected it and/or gifts it back to you or not. It won't be a huge tax cost, but not nothing either.

One alternative is for him to gift you the lump sum. There would only be taxes owed after he passes away if his estate is worth more than $13M (single) or $26M (married). Some states have a much lower exemption, however. If the chances of him leaving an estate greater than this size is negligible, I'd just file the gift tax form and be done.

Another alternative is for him to gift you an amount of money each year that's under the gift tax exclusion (currently $17,000). If either if you are married, this doubles to $34,000, and if both are married this doubles again to $68,000. That amount, deposited into your checking account the first week of the year, can pay the year's mortgage payments on a pretty nice house.

I'm not seeing an upside to treating what's really a gift as a loan.

Chadnudj wrote: ↑Thu Feb 23, 2023 12:34 pm1. Set it up as a loan with some acceptable market interest rate.
2. Pay the loan back over time.
3. Every year, have your dad "gift" you back the interest (as the annual interest is likely to be well below the gift tax exclusion)

+1. Write up a loan document with terms, interest rate and amortization schedule, and partial or early pre-payment conditions. I think the interest rate could be lower than market rate without being a gift. Stick with the schedule and pay monthly. Although not necessary, I would try to keep the loan separate from gifting. He could gift you funds, and then you could officially pre-pay the loan. Also, suggest that he adds to his will that the loan is forgive upon his death. $120K from the bank does not require much income, so report his loan in the application. The bank will want to know where you got the $300K unless the funds were present in your accounts earlier than their look-back period.

From your response while I was writing mine, the whole loan seems like a gift not just the reduced loan. So, is father gifting the present value of saved interest payments for the entire length of the loan when he makes the load? Again, suggest a real loan and gifting to the two of you as separate transactions.

KlangFool wrote: ↑Thu Feb 23, 2023 12:40 pm

cbr shadow wrote: ↑Thu Feb 23, 2023 12:32 pm

KlangFool wrote: ↑Thu Feb 23, 2023 12:25 pmOP,

1) Why would you want to accept this 0% interest loan?

2) Do you need it?

A) Yes. Then, you cannot afford the house.

B) No. Why would you take the money from your parent?

Your dad can offer it. But, why would you accept it?

If this is a gift, that is a separate subject.

KlangFool

I'm fully aware that he's losing money by giving me this loan, which is a gift. He's been trying to gift us money as early inheritence for quite a while. We can very easily afford the houses we're looking at even without the 0% interest loan. These topics don't really have to do with what I'm asking in my original post though.

A) If this is a 300K 0% interest rate loan, then, he cannot afford to give you 300K.

B) Or else, he would just give you 300K.

C) If your dad cannot afford to give you 300K, why would you take a 300K 0% interest rate loan from your dad?

D) Just tell your dad to give whatever amount that he can afford to give if he wants to. Aka, an amount smaller than 300K.

We as the kid need to protect our parent from their generosity.

KlangFool

You keep questioning the "why" which is between my dad and I and isn't what I'm asking. He lives well below his means and has a massive surplus. To him this is a way to 'help' my family in a nice way but will not impact him in the slightest. He can afford to give us $300k (and match the gift to my brother to be fair) but I've turned down gifts from him in the past and am gratefully relenting at this point.

cbr shadow wrote: ↑Thu Feb 23, 2023 12:32 pmI'm fully aware that he's losing money by giving me this loan, which is a gift. He's been trying to gift us money as early inheritence for quite a while. We can very easily afford the houses we're looking at even without the 0% interest loan. These topics don't really have to do with what I'm asking in my original post though.

[emphasis added]

Here.... you said it: This appears to be a way to try "to gift [you] money as early inheritence for quite a while".

Have him just gift you the money and fill out the gift tax form.

If he has an estate less than $12 million, there won't be any gift tax later.
If he has more than that, then either expect the gift taxes, including for this transaction, or do it as a loan, but the proper way, with interest paid by you and declared by him.
Or have the interest be forgiven as its own gift, etc.

RM

Oddball wrote: ↑Thu Feb 23, 2023 12:55 pmSo are you going to pay him back the $300k or just hold the "loan" in perpetuity?

I also agree with the previous post about taking out a mortgage at all given the limited amount you would need to borrow. If you are already getting a "loan" for $300k, just get the other $100k or so from Bank of Dad and don't deal with a mortgage at all.

Fair point! We do have funds to cover the extra $100k and should consider using that and not get a loan at all.

ResearchMed wrote: ↑Thu Feb 23, 2023 1:09 pm

cbr shadow wrote: ↑Thu Feb 23, 2023 12:32 pmI'm fully aware that he's losing money by giving me this loan, which is a gift. He's been trying to gift us money as early inheritence for quite a while. We can very easily afford the houses we're looking at even without the 0% interest loan. These topics don't really have to do with what I'm asking in my original post though.

[emphasis added]

Here.... you said it: This appears to be a way to try "to gift [you] money as early inheritence for quite a while".

Have him just gift you the money and fill out the gift tax form.

If he has an estate less than $12 million, there won't be any gift tax later.
If he has more than that, then either expect the gift taxes, including for this transaction, or do it as a loan, but the proper way, with interest paid by you and declared by him.
Or have the interest be forgiven as its own gift, etc.

RM

ResearchMed, I'm surprised at you. You know that some states, eg MA, have much lower estate limits.

Big Dog wrote: ↑Thu Feb 23, 2023 12:41 pm

Chadnudj wrote: ↑Thu Feb 23, 2023 12:34 pm1. Set it up as a loan with some acceptable market interest rate.
2. Pay the loan back over time.
3. Every year, have your dad "gift" you back the interest (as the annual interest is likely to be well below the gift tax exclusion)

1) use the federal minimum AFR so your dad won't have to pay taxes on inputed income. Just make a simple contract agreement. Make payments and have your dad (and mom?) gift you $32k per year in the form of debt reduction. (16k each from mom and dad) Since you are married. they could double the gift by giving each of your $16k, or $64k total per year.

https://www.nationalfamilymortgage.com/afr-rates/

Super helpful - thank you!

cbr shadow wrote: ↑Thu Feb 23, 2023 1:10 pm

Oddball wrote: ↑Thu Feb 23, 2023 12:55 pmSo are you going to pay him back the $300k or just hold the "loan" in perpetuity?

I also agree with the previous post about taking out a mortgage at all given the limited amount you would need to borrow. If you are already getting a "loan" for $300k, just get the other $100k or so from Bank of Dad and don't deal with a mortgage at all.

Fair point! We do have funds to cover the extra $100k and should consider using that and not get a loan at all.

There isn't such a thing as a 0% loan.

Does your father expect you to pay it back? If not, it's a gift. That requires a form to be filed with the IRS and will reduce his estate exemption, at both the federal and state levels, by the amount over $17,000/$34,000.

If he does expect you to pay it back, then the loan needs to be at the IRS minimum interest rate. Your father will pay income tax on the interest. He can forgive the interest each year as an additional gift to you and your wife, but that doesn't reduce the tax burden.

If it is a loan, you may have problems getting a mortgage as you are effectively getting a second mortgage from the bank.

If it's not a loan, the bank may require documentation from your father saying it's a gift with no expectation of repayment. This step will necessarily require him to document it with form 709.

Be aware that if your parents die before you have paid back the loan, the IRS will call this a gift in the amount of foregone interest.

Do you have other siblings? Are they on board with you getting this imputed gift?

There are BHs who know this stuff much better than I do, and they might correct me, but here what we did several years ago.

My parents gave DW and I a family loan, I believe the rate was ~4% compounded annually. I didn't pay interest, but he declared the interest on his return, and DW and I offered to gift back the tax liability from the interest. He didn't accept it, but it was a way to make this a very low cost to all involved. This is the key, and the AFR describes different rates for different compounding periods, is annual compounding opposed to daily compounding most typical bank mortgages apply.

So in your case, based on March 2023 AFR with annual compounding, its 4.5%. If your folks loan you $280k at 4.5%, that is $12,600 a year in interest. Regardless if you actually pay them interest or not, they simply need to declare that $12.6k as interest income. Now based on their tax rate, you can "gift" him back the tax liability. Assuming he's in the 24% bracket that is $3k you have to gift back. That is well below the annual gift limit so it requires no disclosure, and it allows you to have an actual loan at a very very nominal cost and no cost to your parents.

cbr shadow wrote: ↑Thu Feb 23, 2023 12:14 pmMy wife and I are house searching in an area near Chicago to be near family. If it matters, we currently live in northern california.

My dad offered to give us a zero interest loan that amounts to 40-50% of the price of the homes we're looking at. We'll add another 30-40% as a down payment, which means we will only need to finance 10-20% of the purchase amount at the current rate (Somewhere around 6.3% right now).

I'm wondering how we should execute this loan. My dad wouldn't be (nor would he want to be) on the home deed and doesn't require any type of contract. He's getting older and can easily afford to 'give me' such loan terms. I just imagine this would raise red flags with the IRS or something though, so I want to make sure we're doing everything correctly and legally. Assuming we got audited sometime, I imagine the IRS would wonder where this down payment money came from, and would try to get their piece.

Here's an example of what we're thinking:
Home purchase price: $700k
Our downpayment (40%) : $280k
Loan from Dad @0% : $300k
Loan from Bank @6.3%: $120k

Maybe I'm thinking about this all wrong though. Any help/advice would be appreciated.

You basically have two choices here: have your dad gift you the money, and at some uncertain time in the future you can gift him money back.

OR

Write up a promissory note with an IRS-minimum interest rate and a fixed repayment schedule with your dad paying taxes on the interest. (You do not need to actually make the payments as long as the forgiven payments are documented as gifts.)

There are so many wrong answers in this thread and only one or two good ones. Go see a tax or trusts & estates attorney for help with this.

https://www.irs.gov/pub/irs-pdf/p550.pdf
p 6 section title Below Market Loans

html version
https://www.irs.gov/publications/p550#e ... nk10009882

Lee_WSP wrote: ↑Thu Feb 23, 2023 2:37 pmThere are so many wrong answers in this thread and only one or two good ones. Go see a tax or trusts & estates attorney for help with this.

https://www.irs.gov/pub/irs-pdf/p550.pdf
p 6 section title Below Market Loans

html version
https://www.irs.gov/publications/p550#e ... nk10009882

I can't figure out why he keeps calling it a loan.

cjcerny wrote: ↑Thu Feb 23, 2023 12:29 pmThat is not a loan. That is a gift. Your father would need to report that on a 709. Any loan is going to need to meet the current AFR (applicable federal rate), or the IRS does not consider it a loan.

It can be a loan with the forgiven interest being the gift. But you're right that the interest needs to be "charged". And if it above the gift tax amount, a gift tax return must be filed. If the loan is forgiven, that is also a gift.

But I agree that parental/family loans are problematic.

cbr shadow wrote: ↑Thu Feb 23, 2023 12:32 pm
I'm fully aware that he's losing money by giving me this loan, which is a gift. He's been trying to gift us money as early inheritence for quite a while. We can very easily afford the houses we're looking at even without the 0% interest loan. These topics don't really have to do with what I'm asking in my original post though.

Sounds like it is not a loan. He should just report it on the tax form for gifts and estate tax.

From a tax standpoint it may be more advantageous for him to keep the funds in his name and then pass on the assets with stepped up basis when he dies. What is the rush to do it now?

exodusNH wrote: ↑Thu Feb 23, 2023 1:23 pm

cbr shadow wrote: ↑Thu Feb 23, 2023 1:10 pm

Oddball wrote: ↑Thu Feb 23, 2023 12:55 pmSo are you going to pay him back the $300k or just hold the "loan" in perpetuity?

I also agree with the previous post about taking out a mortgage at all given the limited amount you would need to borrow. If you are already getting a "loan" for $300k, just get the other $100k or so from Bank of Dad and don't deal with a mortgage at all.

Fair point! We do have funds to cover the extra $100k and should consider using that and not get a loan at all.

There isn't such a thing as a 0% loan.

Does your father expect you to pay it back? If not, it's a gift. That requires a form to be filed with the IRS and will reduce his estate exemption, at both the federal and state levels, by the amount over $17,000/$34,000.

If he does expect you to pay it back, then the loan needs to be at the IRS minimum interest rate. Your father will pay income tax on the interest. He can forgive the interest each year as an additional gift to you and your wife, but that doesn't reduce the tax burden.

If it is a loan, you may have problems getting a mortgage as you are effectively getting a second mortgage from the bank.

If it's not a loan, the bank may require documentation from your father saying it's a gift with no expectation of repayment. This step will necessarily require him to document it with form 709.

+1,000.

KlangFool

Lee_WSP wrote: ↑Thu Feb 23, 2023 2:37 pmThere are so many wrong answers in this thread and only one or two good ones. Go see a tax or trusts & estates attorney for help with this.

https://www.irs.gov/pub/irs-pdf/p550.pdf
p 6 section title Below Market Loans

html version
https://www.irs.gov/publications/p550#e ... nk10009882

Thanks for this---so many wrong answers......

My parents got a loan from my grandparents with market rate interest charged and then gift back as described earlier. This was in the late 70s- early 80s and I don’t know how/if the law has changed. It worked out fine for my family, although I understand why some might steer you away from family loans.

The bank issue is something others will need to weigh in on, since you will need to declare that you aren’t receiving any other loans and if they see a large deposit for your doe payment they will ask your dad to declare it a gift.

pizzy wrote: ↑Thu Feb 23, 2023 2:42 pm

Lee_WSP wrote: ↑Thu Feb 23, 2023 2:37 pmThere are so many wrong answers in this thread and only one or two good ones. Go see a tax or trusts & estates attorney for help with this.

https://www.irs.gov/pub/irs-pdf/p550.pdf
p 6 section title Below Market Loans

html version
https://www.irs.gov/publications/p550#e ... nk10009882

I can't figure out why he keeps calling it a loan.

Interest free loans are still loans. The better question is why he refers to it as a "gift" which is clearly confusing people because the gift of the loan is not the loan itself, but the fact that dad isn't charging interest.

If dad doesn't actually expect repayment, then it becomes problematic, but that's a question of fact and intent at the time the loan was made and there's no way I will dissect that particular issue without a retainer.

Lee_WSP wrote: ↑Thu Feb 23, 2023 4:33 pm

pizzy wrote: ↑Thu Feb 23, 2023 2:42 pm

Lee_WSP wrote: ↑Thu Feb 23, 2023 2:37 pmThere are so many wrong answers in this thread and only one or two good ones. Go see a tax or trusts & estates attorney for help with this.

https://www.irs.gov/pub/irs-pdf/p550.pdf
p 6 section title Below Market Loans

html version
https://www.irs.gov/publications/p550#e ... nk10009882

I can't figure out why he keeps calling it a loan.

Interest free loans are still loans. The better question is why he refers to it as a "gift" which is clearly confusing people because the gift of the loan is not the loan itself, but the fact that dad isn't charging interest.

If dad doesn't actually expect repayment, then it becomes problematic, but that's a question of fact and intent at the time the loan was made and there's no way I will dissect that particular issue without a retainer.

I referred to it as a gift only after several people commented telling me it's not a loan. I thought it would simplify things to agree that it's a 'gift' since it's 0% rather than a 6.5% mortgage that a bank would give. I never stated that I wouldn't pay it back - I'd plan on, and be expected to, pay it back. Klangfool jumps to incorrect conclusions in his first post and I think that derailled things a bit.

To give a little context, we bid on a house (without dad's help) and didn't get it. We found out from the sellers realtor that the winning offer for the house paid in cash and that made the seller go with them. My dad's offer for a 0% loan was so that we could come with more cash (Cash in the sellers eyes) for the down payment. I didn't offer all of this information initially because I thought it would complicate the post, but I see now that it was important information.

cbr shadow wrote: ↑Thu Feb 23, 2023 12:14 pm
My dad offered to give us a zero interest loan that amounts to 40-50% of the price of the homes we're looking at.

My parents gave my brother a loan for a home a few years ago... but charged 3% interest (slightly lower rate than the market rate at that time).

1. Win for my brother --- no closing costs / good rate

2. Win for my parents --- they got a monthly income stream with some interest.

Maybe that's your solution. Split the baby down the middle between loan vs gift. None of my other siblings care / have hard feelings over the plan.

--- Brian

cbr shadow wrote: ↑Thu Feb 23, 2023 5:51 pm

Lee_WSP wrote: ↑Thu Feb 23, 2023 4:33 pm

pizzy wrote: ↑Thu Feb 23, 2023 2:42 pm

Lee_WSP wrote: ↑Thu Feb 23, 2023 2:37 pmThere are so many wrong answers in this thread and only one or two good ones. Go see a tax or trusts & estates attorney for help with this.

https://www.irs.gov/pub/irs-pdf/p550.pdf
p 6 section title Below Market Loans

html version
https://www.irs.gov/publications/p550#e ... nk10009882

I can't figure out why he keeps calling it a loan.

Interest free loans are still loans. The better question is why he refers to it as a "gift" which is clearly confusing people because the gift of the loan is not the loan itself, but the fact that dad isn't charging interest.

If dad doesn't actually expect repayment, then it becomes problematic, but that's a question of fact and intent at the time the loan was made and there's no way I will dissect that particular issue without a retainer.

I referred to it as a gift only after several people commented telling me it's not a loan. I thought it would simplify things to agree that it's a 'gift' since it's 0% rather than a 6.5% mortgage that a bank would give. I never stated that I wouldn't pay it back - I'd plan on, and be expected to, pay it back. Klangfool jumps to incorrect conclusions in his first post and I think that derailled things a bit.

It’s the internet. Everyone has opinions, but the vast majority is wrong for complex topics. It’s like asking an ai for legal advice.

Earlier you said:

cbr shadow wrote: ↑Thu Feb 23, 2023 1:09 pmHe can afford to give us $300k

But are you saying he's not giving it to you?

Offering more cash is not the same as all cash. If the whole purpose of this is to make an all cash offer you're going to need more.

cbr shadow wrote: ↑Thu Feb 23, 2023 12:14 pmMy wife and I are house searching in an area near Chicago to be near family. If it matters, we currently live in northern california.

My dad offered to give us a zero interest loan that amounts to 40-50% of the price of the homes we're looking at. We'll add another 30-40% as a down payment, which means we will only need to finance 10-20% of the purchase amount at the current rate (Somewhere around 6.3% right now).

I'm wondering how we should execute this loan. My dad wouldn't be (nor would he want to be) on the home deed and doesn't require any type of contract. He's getting older and can easily afford to 'give me' such loan terms. I just imagine this would raise red flags with the IRS or something though, so I want to make sure we're doing everything correctly and legally. Assuming we got audited sometime, I imagine the IRS would wonder where this down payment money came from, and would try to get their piece.

Here's an example of what we're thinking:
Home purchase price: $700k
Our downpayment (40%) : $280k
Loan from Dad @0% : $300k
Loan from Bank @6.3%: $120k

Maybe I'm thinking about this all wrong though. Any help/advice would be appreciated.

I would not do a loan with my parents. Thanksgiving dinner will never be taste the same. If your pops wants to give you money then have him gift it to you. But a loan from a parent is not a good thing. Good luck

Doctor Rhythm wrote: ↑Thu Feb 23, 2023 1:37 pmIt sounds like there’s no expectation for pay back, and if you do so, the money will just come back to you eventually as inheritance. This really sounds like a gift, and it might be easier for them and you to treat it as such. They file 709, and you keep the money (which makes your parents happy).

If OP, returns back, what form does need to be filled?