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minimum apr?

  • Thread starter Thread starter jamesb1
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jamesb1

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What is the name of your state?What is the name of your state?What is the name of your state? California. My grandfather is selling me some acrage and will carry the loan, my question is what is the minimum APR he can charge without it becoming a gift?
 


I

I AM ALWAYS LIABLE

Senior Member
jamesb1 said:
What is the name of your state?What is the name of your state?What is the name of your state? California. My grandfather is selling me some acrage and will carry the loan, my question is what is the minimum APR he can charge without it becoming a gift?
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My response:

He doesn't have to charge you ANY interest. The distinguishing factor between a loan and a gift is that a loan is written with terms and conditions, and there's a schedule of payments. Also, the payments must be provable; e.g., cashed checks.

Interest is merely a way for your GF to earn money on his investment; however, if he doesn't want to earn interest, that's his business.

IAAL
 
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BriantheBanker

Member
Cya

1%.
If the money is NOT a gift, pay some interest. Who knows who may get a wild hair and want interest for G-Pa.
If the money is a gift, get a gift letter. If not a gift, prepare paperwork detailing the loan amount, rate of interest, term and any other applicable items.
For your sake, get a Land Contract (if legal in CA) or some other form showing you having ownership/title vesting. (record the document- make sure you are using an allowable form.)
Pay each month with check. This will improve your ability to obtain financing down the road and reduce your exposure should anyone question the transaction.
Money makes people crazy. Cover your tail.

BriantheBanker
Lending more than money!
:D
 
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jamesb1

Guest
I just talked to a lawyer who said i had to be charged 5-6% by my GF or he could be in trouble with the IRS for not claiming enough interest income :eek: . Then i called my tax guy and he found this in family to family land transfer,code section 483e. Basically he said as long as the interest stays ubove prime rate were o.k. Does anyone have any experiance with this as i am getting alot of conflicting info and dont want to get grandpa in any trouble :(
 
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