Need some advice please - loan against house

Snooze

Hello all,

Can anyone advise on this situation please, particularly the 'loan' aspect. Sorry it's a bit long.

A close friend of mine who I've known for 15 years recently packed up his FT job (18k/year) to look after his new baby and his elderly mother. His partner is not working either, as she's currently on maternity leave til around October and she's not decided whether she's returning to work afterwards (her current job is also FT, around £12k/year).

They've worked out that they should receive approx £1200-1300 per month in benefit income, the bulk of that being the benefits for his mother (in her 80s) and her care.

They're currently looking for a bigger house to house them all and found a suitable place a month ago which ticked every box possible and more, but was really pushing them to their limit financially. They decided it was worth it and they could scrimp and save to make it work. The place was on the market for £250k and because they are cash buyers (having recently sold his mother and father's old place) the seller accepted £234k for a quick completion. With the stamp duty on top, it was costing them around £238k.

However, there were a whole bunch of problems with my friend's solicitor (which my friend was not aware of until it was too late) and the seller pulled out in the end because the agreed completion date came and went and she got sick of all the problems. My friend went to see her to try and resolve it but she claimed to have had other offers (one of which was above the asking price and she'd accepted) and that was the end of it.

Fast forward a month and after a load of time spent looking at other properties in very selective areas, they've decided they don't like any of them because they don't meet whatever criteria and are still fixated on somehow scraping the monies together to buy this other place which is now SSTC. Their desperation reached a peak last weekend and having recently come into some money myself from a new contract, I stupidly said that I'd lend them some money if it meant that they could secure it (that implied I was willing to lend up to £10k). They thanked me but turned down my offer - which was what I expected anyway, tbh.

Since then I've learned that their current financial position is pretty dire - a lot more dire than the impression I originally got, and I was kinda thankful that they hadn't taken me up on my offer of the money as it would be an eating-out-of-baked-bean-tins situation to even begin to pay it back.

Today I gets a call from my mate telling me that he's been to see the seller, offered her full asking price (£250k) and she's accepted it on the proviso that they complete this coming Friday, oh and "can I take you up on that offer? We need £10k but don't worry, I am going to take out a secured loan on the property once I've bought it and you'll have your money back as soon as that's in place". :eek:

The lending of the money is not an issue as it's currently sitting in an account not doing a right lot, but I do have some plans in the pipes where it will be needed in max 12 months time to complete a project.

Whilst there are no shortage of companies that offer for loans for people on benefits, my fear is that they will get turned down for the loan and I'm not going to see my money back for a very long time. I also have serious concerns how the hell they are going to survive on their income when he is going to be maxing out his credit cards (which have considerable balances on already) to get it up to £245k from the £238k he could only just afford before, and then my £10k covers the balance of the sale plus the stamp duty.

I've tried in vain to get them to lower their sights and look for something more suited to their budget, but they refuse to compromise on area/space/garden and it's got seriously close to us having a huge fall-out over it. I fear for our friendship if I don't lend them the money they need, but on the other hand I also fear for our friendship if they can't pay back my money as agreed, which I think is a serious threat. And that's without even mentioning the incredible strain their own relationship will be put under by going from a fairly lavish lifestyle they have now to a very frugal one.

Thoughts and advice much appreciated...

Thanks.

kaych

If you don't want to lose a friend, i think the best way would be to keep money out of your friendship.

If i were you, i would offer to help them in ways you could, like moving, packing etc etc. but not money... if you are worried about your money already (before it is lend to him) than you will worry yourself to death once you part with the money!

just my opinion, others may find me cold, but no i would not lend them the money.

beside with the new budget report coming up with major cuts including benefits, who knows whether they will still receive the £1200-1300 benefit a month. i would be very worried if i was them if they are all to survive only on benefits...

goldengirl28

can i ask a couple of questions

1. Are they getting a mortgage? if yes how when neither is working
2. do they need to get complete etc done or is it all done, feels a little ambitious to get exchanged by friday
3. is he sure he can get benefits if he chose to leave his job?

I think you need to somehow get assurances that you'll get it back within your required timescales - i lent someone 1000k at the agreement they would pay me back 100 per month, that was 2 years ago, i'm yet to see 300quid back

its difficult when your know or think friend/relatives are in debt and digging themselves and even bigger hole.

I know my sister and her husband are really struggling and have debt all over the place, doesn't stop them buying iphones and the new ipad..........i am at the point, where if they ask for our help/advise i will give it.

good luck

lincroft1710

It is better to have £10K and no friendship rather than no money and no friendship.

Wee_Willy_Harris

I agree with Kaych. But it is a judgement call for you to make. However, my 2ps worth........

They give up the highest paying job (18k) to look after newborn baby.
They plan to rely on benefits (which may or may not be due for a shake up) to make ends meet.
They appear to be financially maxed out to a frightening level.
They plan to address their debt to you with further debt.
They have planned no contingency at all for any unplanned financial needs.

If you lend them the money then regardless of it ever being returned, you will be held responsible for their future financial woes, even those that are self imposed.

sp1987

You offered the money and they rejected it, correct? A week ago?

I would say, as soon as possible, that you are no longer in a position to lend the money as since their decline you put it into fixed savings and can't access it for 12 months. You had it when you offered but no longer do now, sorry. It is a lie....but if you feel you need to tell the truth, stick it in one :rotfl:

Offer to help them with moving, packing, decorating etc.

They won't pay you back. Few people ever do, even if they can afford it.

At best they will be on 12k if he has given up his job.

I can't see how they'll get a mortgage.

Real friends will not disown you for refusing to lend them money that isn't required for their very survival (and probably still won't then!). They just want a better house than they can afford and fancy using your 10k to buy it.

gnimia

goldengirl28 wrote: »

can i ask a couple of questions

i lent someone 1000k at the agreement they would pay me back 100 per month, that was 2 years ago, i'm yet to see 300quid back


good luck

1000k :eek::eek::eek:

Catblue

Eek, not a great position for you to be in. They do sound very unrealistic.

Unlikely that they'd be able to get a survey done in time in order to allow them to complete on Friday this week. And they'd be bonkers to buy without one.

Also, if the bulk of the benefits that they are relying on come from the elderly mother then obviously those stop as soon as she goes into care or passes away. So that's most of the household income gone.

Snooze

Hi all,

Thanks a lot for your comments and advice so far. I do appreciate them and please keep them coming as they all help.

I'll reply to each of your posts later as I'm pushed for time at the moment, but just to clear up a couple of questions/points raised - they are not getting a mortgage, they have £240k in an account from the sale of his folks house so they are buying cash (technically for his mother, but he has PoA). They're about to start eating into the house money as he packed up working in Jan (when his father became ill and couldn't look after his mother; his father has since passed away) and she went on maternity leave in April, so their own money is just about gone. After buying the place they're planning on getting a £10k secured from one of these companies that lend to people on benefits with no job income.

The survey on the house they want is already done from a month ago before the vendor pulled out. All the paperwork is complete except for a few odds and ends but their solicitor has said they can exchange by the end of the week.

goldengirl28

gnimia wrote: »

1000k :eek::eek::eek:

HA HA........see what you mean, silly me 1,000:o

ericonabike

You have my sympathy, for what that's worth. Suggest you treat it like any other risky investment, be it stockmarket or horses - only do it if you can afford to lose it. If you can't then don't. If you lose the friend over it, then that calls the friendship into question anyway. They really have placed you in an invidious position - let me have £10k by Friday.....?