I was wondering if someone could see any problem with the following.
A friend of mines mother currently has about $50,000 sitting in a bank account receiving little or no interest. Her son has suggested that she at least put it in a term deposit where she could get say 5%. Her son has a mortgage.
I was just thinking, what would stop her loaning her son the full amount, he put it on his mortgage and simply pay her what he would normally pay as mortgage interest. This would mean she would get the 6.5-7% instead of the bank which is better than 5%.
He wouldn't really be getting any advantage as he's still paying the same interest but if they were both happy to come to some written agreement where she received the interest by direct deposit at regular intervals, and the money was not used for any other purpose and could be provided on request, then surely this would be a better option for her?
I can't immediately see any tax implications for him and as long as she paid any required tax on the interest she received, then what would be the problem?
Any thoughts?
A friend of mines mother currently has about $50,000 sitting in a bank account receiving little or no interest. Her son has suggested that she at least put it in a term deposit where she could get say 5%. Her son has a mortgage.
I was just thinking, what would stop her loaning her son the full amount, he put it on his mortgage and simply pay her what he would normally pay as mortgage interest. This would mean she would get the 6.5-7% instead of the bank which is better than 5%.
He wouldn't really be getting any advantage as he's still paying the same interest but if they were both happy to come to some written agreement where she received the interest by direct deposit at regular intervals, and the money was not used for any other purpose and could be provided on request, then surely this would be a better option for her?
I can't immediately see any tax implications for him and as long as she paid any required tax on the interest she received, then what would be the problem?
Any thoughts?