Deferred repayment loan to friend

PeacefulWaters

Tom_T wrote: »

A friend lost 50% of his savings overnight due to Brexit. That is true and easy to verify as I know the company.
He had been encouraged to put his savings into shares in the company he works for.
That seems a lot more common than I thought. I think M&S do it??
The shares have come up about halfway but there is no sign that they will regain their previous worth. They are connected with building materials.

While it's a mistake I've made in the past I knew the risk I was taking. Employee share schemes are a great opportunity for ordinary employees but it's common sense to crystallise the benefits and diversify into cash savings or broader based investments,

Now is the best time for him to get on the property ladder if he's ever going to manage it.

You may well be right, but you're guessing.

I said I could loan him the missing 25% on a delayed repayment 0% plan to help with the deposit because in 18 months his wife will qualify in a medical job and her earnings will increase substantially.

Thats kind of you, but lending to friends is a mugs game. Lending to people who are about to significantly increase their outgoings is a mugs game. You are risking a friendship.

Now his mortgage advisers are telling him that I must gift him the money and he can repay me IF he wants.
I can't afford to give him it. I was prepared to stretch to help him out until she was earning more and that's as certain as most things can be.

In other words, the lender doesn't think they are in a position to repay both the mortgage and your loan. Their business is lending money.

I don't understand why if most of our University Education system can acknowledge deferred loans the mortgage deposit arrangements cannot.

Because student loans operate on a loss making basis. Mortgage lenders prefer not to.

The other alternative could maybe be where I gained a tiny percentage 3% share in his property becoming a creditor rather than a joint owner incase of his insolvency. That would mean he could buy me out as soon as he could afford it but that it would means he has some small legal fee to pay.

Messy and probably not entertained by the lender.

Truly I think the mortgage company which is effectively Royal Bank of Scotland could be a lot more helpful and imaginative to assist people.

Or maybe your friends are borrowing too much for their circumstances.

After all the have had tons of our public money and are supposed to be helping people get on the ladder.

RBS needed a bailout because they bought mortgage securities that included rather imaginative and over-helpful loans to people who couldn't afford to repay. I for one don't want to see reckless lending from what is effectively a taxpayer owned lender.

Your friend works for a firm severely impacted by Brexit. I'd suggest that increases a lender's risk somewhat.

Any helpful information or advice gratefully appreciated.
This is getting urgent to straighten out now.
Thanks.

It isn't your problem. Back away.

leespot

Tom_T wrote: »

Thanks for the suggestions, I'll try to investigate and passing on.
Increasingly it seems likely that the bank didn't properly assess the deposit before making my friend an offer that he then acted on.
The result is that the bank limitations have been applied after the event and I am being asked to make a commitment with much more serious implications for both me and my friend because of that lack of care. Or something like that.
It is curious how this kind of exchange can be helpful, if not as helpful as a conversation, my eyes are going now. Gonna have to leave it for a bit but thanks to those who make helpful comments.
Somehow I'm going to have to have a conversation with my friend today.
At the moment I'm only too aware that his family's future could be affected very much by whether I can stretch beyond what is sensible for me.
It's quite easy to say harsh things about him and me from a distance.
It's another thing to consider his kids and their future.

As much as you want to help your friend, this really isn't your responsibility. I have a 6 month old niece who I adore completely, but her future is not for me to worry for, that is for her parents. For you to stretch beyond what you consider sensible is a contradiction - you wouldn't be sensible if you had to stretch yourself.

The bank have not shown a lack of care - quite the opposite. They have shown that they do care about lending to people who cannot afford it without being dependant on others - you are taking the banks policies very personally, but you really don't need to. Their response isn't specific to you, it's a generic one where money is being gifted or loaned, and part of their process.

You should explain to your friend that the bank are insisting on an unconditional gift which is not what you agreed - and for that reason you cannot help them. Why he is in this situation is also nobody's 'fault' - it is purely circumstance.

Gambler101

Tom_T wrote: »

A friend lost 50% of his savings overnight due to Brexit. That is true and easy to verify as I know the company.
He had been encouraged to put his savings into shares in the company he works for.
That seems a lot more common than I thought. I think M&S do it??
The shares have come up about halfway but there is no sign that they will regain their previous worth. They are connected with building materials.
Now is the best time for him to get on the property ladder if he's ever going to manage it.
He has 2 kids a girl & a boy so needs min 3 beds.
I said I could loan him the missing 25% on a delayed repayment 0% plan to help with the deposit because in 18 months his wife will qualify in a medical job and her earnings will increase substantially.
Now his mortgage advisers are telling him that I must gift him the money and he can repay me IF he wants.
I can't afford to give him it. I was prepared to stretch to help him out until she was earning more and that's as certain as most things can be.
I don't understand why if most of our University Education system can acknowledge deferred loans the mortgage deposit arrangements cannot.
The other alternative could maybe be where I gained a tiny percentage 3% share in his property becoming a creditor rather than a joint owner incase of his insolvency. That would mean he could buy me out as soon as he could afford it but that it would means he has some small legal fee to pay.
Truly I think the mortgage company which is effectively Royal Bank of Scotland could be a lot more helpful and imaginative to assist people. After all the have had tons of our public money and are supposed to be helping people get on the ladder.
Any helpful information or advice gratefully appreciated.
This is getting urgent to straighten out now.
Thanks.

Dont assume this or anything regarding peoples future finances. Things dont always go as planned believe me.

Unless you are prepared to lose the money, or can arrange a proper guarantee secured on the property (Which could take years to recover if things go wrong), then I would advise not to try and help.

Also friends can quickly become Ex friends where loans get in the way, see the sticky thread

https://forums.moneysavingexpert.com/discussion/76953

regarding lending money to friends and family. If some of the horror stories in there dont put you off nothing will.

27cool

Pixie5740 wrote: »

Your friend hasn't lost his savings because they weren't savings they are an investment. Investments go up and down so they might recover, you never know. Furthermore, when companies have share schemes for their employees they often offer matching shares so your friend might not have lost all the money he put in. For example, my company offers 2 free shares for every share I buy so if I invest £1,000 I end up with £3,000 of shares. So even if the share price drops to 50p, I'm still better off than if I had invested nothing.

Very sensible and considered post Pixie.
Money that you have invested in shares is not "locked in" in any way.
Unless of course you sell some of the shares while their price is at a high level.

Gaz83

Maybe I'm just being a cynic, but is anyone else getting the vibe that the roles in the OP should be reversed?

ViolaLass

How old are the kids? They could share a room for a while if young.

Herzlos

The risk with the deferred income is that it hasn't happened yet; his wife is set to graduate and get a good job, BUT she hasn't yet graduated, been offered or accepted a job. She may change or mind or have something go wrong, and then they've got a mortgage they can't afford.

The only real option if you want some way to get money back, is to buy some asset from them that they'd need to buy back later - whether that's part of the house or their cars or something. Or you can just gift them the money and hope you get it back.

Why must they buy a house now and not in 18 months when the wife has started work? They'll be in a better position and it's possible house prices will have stalled out by then.

Alderbank

I've taken part in, and benefitted from, employee share option schemes over the years. They don't work in the way your friend has told you. The company put aside a block of shares in the employee's name. The employee pays agreed regular salary deductions into a saving scheme. At the maturity date he decides either to buy those reserved shares at their original price or simply withdraw his savings. I chose the shares because they had appreciated significantly, but there is always the option to withdraw the savings either at the end or at any earlier time. Indeed if the employee leaves the company part way through they lose the option to buy the shares.

Also, I can't see why the best time for anyone to get on the mortgage ladder is any time when they do not even have enough savings for the deposit. That must be the worst time!

PeacefulWaters

Alderbank wrote: »

I've taken part in, and benefitted from, employee share option schemes over the years. They don't work in the way your friend has told you. The company put aside a block of shares in the employee's name. The employee pays agreed regular salary deductions into a saving scheme. At the maturity date he decides either to buy those reserved shares at their original price or simply withdraw his savings. I chose the shares because they had appreciated significantly, but there is always the option to withdraw the savings either at the end or at any earlier time. Indeed if the employee leaves the company part way through they lose the option to buy the shares.

Also, I can't see why the best time for anyone to get on the mortgage ladder is any time when they do not even have enough savings for the deposit. That must be the worst time!

There are a number of different share schemes employers can offer.

lynz68

Unfortunately none of us can predict the future. Imagine what would happen if the bank agreed with your loan, your friends got a lovely home and everything looks rosy. Then something happens be it job loss or ill health and they can no longer afford the mortgage never mind the loan to you. They could lose there house and you your money.

Would you then blame the bank?