Lending Money to add to deposit

corporate_slave

Hi Guys,
A bit of advice needed. A friend of mine is the process of purchasing a house that cost £180k, she has £21k as her deposit and another friend is prepared to lend £6K to her. She has however been asked for a contract to reflect this transaction. With interest being based on the rate of increase of the value of the house when she decides to sell or remortgage. Can anyone point me in the direction of such an agreement. Thanks

PasturesNew

That would be difficult and would need a solicitor
What if the person buying the house didn't pay the mortgage, if the market dropped in value and the house were repossessed?
Would the £6k friend take a reduced amount?

Only a solicitor would stand any chance of getting it set up right.

irnbru_2

corporate_slave wrote: »

A friend of mine is the process of purchasing a house that cost £180k, she has £21k as her deposit and another friend is prepared to lend £6K to her.

What does the extra £6K get her: a lower interest rate?

What if the friend wants the £6K back before she sells/remortgages?

diddlydum

Be aware that if you don't let the mortgage lender know about the loan then you could be committing mortgage fraud.

A solicitor would be able to set up an agreement like that fairly easily, but you would need to pay for it, probably about £300 + Vat. To be honest, your friend might just be better off securing the money against the house as a charge- easier, quicker, cheaper and more secure.

devils_advocate

And if house prices fall, is the friend prepared to accept a negative rate of interest?

corporate_slave

Thanks for your advice everyone. It shows its good to talk as some important points have been raised. I was of the opinion that the loan could take the form of a personal loan between two individuals.

Diddlydum - u said "your friend might just be better off securing the money against the house as a charge- easier, quicker, cheaper and more secure." Would this charge be the £6 loaned to her?