Loan to close family member who is up the proverbial creek

fimonkey

A close family member has been made redundant for the second time in 6 months. They are not entitled to any redundancy pay, they have no savings, she is a single parent with a mortgage and 2 teenagers and a suspended repossession order on her house. She is also in debt with her electric and gas and has had a pre-payment meter fitted recently.

She has begged me for help to cover her mortgage in the short term given the suspended repossession order. This is £805 per month. I am in a position to help as I have £20K in my cash ISA currently paying 3%. This is for my intended house deposit but I am willing to sacrifice this in order to keep a roof over their heads.

How do I go about drawing up an agreement? Do I need to see a solicitor? I'm also aware that the family needs money to live day to day, for gas, electricity etc etc. Whilst I want to help I also want to protect myself. She has offered me equity in her house but I don't want to gain from her bad situation (and house prices are still likely to drop anyhow).

I don't want to lend her the full 20K (I need enough to look after myself should my own job get the chop). The uncertainty is when she is likely to get a job again -its dire in the industry she works in and as re-training is an expensive option.

What do you recommend in my situation? How much should I lend? On what terms? She obviously can't begin to pay me back until she gets a job again. How should I draw up this agreement? Do I need a solicitor and if so one who specialises in what? (and what are their charges likely to be)?

Also what can she do to get help with money etc? She has always worked and neither her nor I know anything about JSA, mortgage tax releif (does that even exist?) or anything like that. Where do we start in terms of getting info? (CAB no use, the wait to get an appointment with someone who knows a little about everything but not a lot about specific situations is no help at the moment)

I look forward to you help and replies. Thanks in advance.

mel12

http://www.turn2us.org.uk/benefits_search.aspx
is good. Many local councils also have a benefit advice line number- try your local council website. Also the benefits section of this forum too.

Shelter could advise on the mortgage side of it 0808 800 4444

Also see http://england.shelter.org.uk/get_advice/paying_for_a_home/support_for_mortgage_interest

barbarawright

Ask her to read this about JSA andHomeowners Mortgage Support
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Employedorlookingforwork/DG_10018757

http://www.direct.gov.uk/en/HomeAndCommunity/BuyingAndSellingYourHome/Mortgagesandrepossessions/DG_177639

chalkie99

Frankly, read the sticky at the head of this forum section about lending to friends and family.

You could draw up all the agreements you like but, from the information given, this person looks to be in such a predicament that you will just be pouring money into a bottomless pit and you will never see it again.

Sounds like your money would not last long at the figures quoted anyway so what would happen then?

Get your friend to consult the free professional agencies such as CAB.

I know, from experience, that it is hard to say no in these circumstances but helping with the best intentions inevitably ends in tears I am sorry to say.

paddyrg

Loan to close family member --> loan to family member --> outstanding debt by family member --> trouble in family, internal court case, much resentment all round --> family divided.

Seriously, nothing will screw up your close relationship like lending money. If you can afford to gift it, that's fine, or if you can take equity in the property that's probably better too (yes property may depreciate a few % but it won't become a loan default).

Sorry to hear she's not had a lot of luck with jobs recently, send the kids out on paper rounds, and work out other ways of helping, but lending money is likely to be less help than you imagine. If it takes her 6 months to find something paying enough for the mortgage, that's nearly half your savings gone (after arrears are settled), but at that point she will be unlikely to be in a position to pay 10k back, probably for years and years. The sad truth may be that she can't afford the house.

Apples2

From what you say, there is absolutely no way on Gods Green Earth that you will EVER see ANY of your money back at all.

If you give her the full £20k it will just give a little breathing space until she is back in exactly the same position again later.

If you do want to help, persuade this woman she has to sell up and downsize, she simply CANNOT afford the house she is in. Rent if she has to.
Use your money to help her restructure her life and control her spending. Help with the moving costs etc

It is unlikely she will find herself in a position to have so much spare cash left at the end of the Month she could meet loan repayments (including yours) so anything you lend, will be gone forever. Either accept that or turn your back on her.

HappyMJ

fimonkey wrote: »

What do you recommend in my situation? Letting her house be reposessed and then housed by council. How much should I lend? Nothing. On what terms? n/a She obviously can't begin to pay me back until she gets a job again. This is not guaranteed How should I draw up this agreement? Do I need a solicitor and if so one who specialises in what? (and what are their charges likely to be)? Lots.

Also what can she do to get help with money etc? Budgets and spends less benefits pay quite well even paying the interest on the mortgage she has to live within that amount. She has always worked and neither her nor I know anything about JSA, mortgage tax releif (does that even exist?) Yes it does after 13 weeks on IBJSA or anything like that. Where do we start in terms of getting info? (CAB no use, the wait to get an appointment with someone who knows a little about everything but not a lot about specific situations is no help at the moment) Ask here, apply for JSA, tax credits, council tax benefit, ask personal advisor at the jobcentre when signing on.

I look forward to you help and replies. Thanks in advance.

If you lend money you won't see it back. Gift it or not.

BackOnTrack

Don't give her the cash. As others have pointed out this isn't a short term difficulty due to redundancy she is facing but rather she is living beyond her means. When this is the case 20k is going to give her breathing space but she will be back in the same situation at some point in the near future. If it was a case of paying her mortgage for a couple of months till she found a new job I would think fair enough loan her the cash but even when she gets a job she still won't be able to afford to live how she is at the moment. It is that which needs to be tackled and 20k ultimatley won't make any difference.

andy.m_2

The kindest thing would be supportinve to her, guide her to this very forum and the DFW section.
If you give her money then it has to be money you can afford to never see again, she may well pay it back but you have to be prepared to never see it again.

She clearly has previous issues as is on a suspended repo.
Is there equity in the house?
Can she downsize or sell outright?
Can you buy the house from her as your foot on the ladder?

Get her help,but dont give her money, no good will come of it and while you will think you have done good, you will infact be allowing her to divide the family and cause massive rifts and resentment.

ILW

If your friend cannot afford to pay her mortgage or utility bills, how the hell does she expect to pay you back?

smartpicture

I have lent money to family & friends before, sometimes they've paid it back, sometimes they haven't. But in the circumstances you've described, I'm sorry, I definitely wouldn't lend money because the others are right. Her circumstances with the suspended repossession order, the money owed in various directions already and the high mortgage payments mean that all you will do is postpone is the evil day, and lose your own money in the process.

If you can afford to give her money (which it doesn't sound like), then give her the money for a couple of months mortgage payments. Sign an agreement if you like, but in your head you need to regard it as a gift and the money as gone, because that's the reality. I'm not saying that she will try and cheat you, I'm saying she won't be able to pay it back once the house is repossessed and she owes tens of thousands to the mortgage company and others.

The best help you can give her is to get her to go onto the deb-free board and ask for help there, then give her emotional and practical support - but not financial.