Deferred repayment loan to friend

Tom_T

Gaz83 wrote: »

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

I'm not totally sure what you mean by this.
Do you think that I could be the one wanting to buy the house.
Or is this much more cynical, suggesting perhaps because of the poll that I'm really a bank or mortgage broker wanting to checkout opinion?
I am very much a fan of Dr Who and since real life not so happy at the mo would quite enjoy a detour into the sureal.
Actually I'm an antique lampshade with grave concerns about my future since I'm likely to be sold to realise more dosh for deposit and/or roughly treated as I am removed.
Not quite sure why exactly who I am is that important.
You won't believe it but the situation is as stated.
The poll partly cos I was interested to see what that would look like. I've never actually posted into a forum like this before.
Mostly because it seemed likely that there are double standards being applied related to deferred loans that are based on probable increase in income.

Tom_T

Update

It seems quite possible that the difficulty was caused by a faulty interface between the housing estate developers sales team and the Mortgage providers that the developer uses.
So rather like you might get with buying a car from a garage the sales person will be all smiles and selling you the car without really considering the impact of the hire purchase agreements that they are also encouraging you into.
It possible that in this case whoever looked at the capability of the potential buyers did not sufficiently interogate the deposit and appreciate its reality.
Only when the buyers had committed past a point of comfort and fair return did the mortgage providers twig it and their solution is to pressure the buyers and me.
I still think there is quite a anomaly in the deferred loan area that should be looked into but I appreciate all the comments about the possible implications of that.
Similarly all the other comments that have been made and the time people have taken.
Currently the situation has been very upsetting.
I hope that pathways will be created and the right solutions arrived at.
I'm very grateful for the comments to avoid blame and recognise the role of coincidence.
And the suggestions about alternative mortgage etc.
I am still annoyed with the people who could/should have recognised the naivety of First Time Buyers and guided them much better.
Thank you so far.

Nebulous2

There are a lot of interfaces where it could have gone wrong. It is possible for instance that someone said to your friend: "This is doable, but your friend will need to sign to say the deposit is a gift. Do you think he will do that?" The pressure to get the house in that instance might lead to giving the adviser the answer they want / need.

100% and over mortgages were seen as being a major contributor to the economy overheating in the run-up to the credit crunch. The whole point of a deposit is that you are invested in the house and have a stake in maintaining the mortgage above pretty much everything else. A borrowed deposit reduces that investment, or at least makes it more opaque.

Lots of people cannot save for / afford the deposit. Signing to say it is a gifted deposit and not a loan is a bit of back-covering on the part of the mortgage lender. It also takes some pressure off the borrower if family members or friends begin to push for their money back.

There are many people who get a 'gifted' deposit who pay it back. There are also many others, possibly even more, who intend to, but never quite get round to it.

The signature effectively moves some of the risk from the lender, who is prohibited now from taking too big a risk, onto you. It's your call, but it is a big one. You need even more faith in your friend, knowing you have no legal recourse, no timescale and are dependent on life not throwing him a curveball like a job loss / illness / wife's failure to pass final exams etc.

AnotherJoe

Tom_T wrote: »

True share investment is share investment.
Also true that for many people in that company the immediate effect of Brexit was and the subsequent effect still is quite a shock. Nobody saw it coming.
As far as I can tell Martin's advice is buy now if you poss can???

No, it isn't !!!!

Its take advantage of lower interest rates now if you are in a position to remortgage or were thinking of doing so. eg you already have a mortgage.

It is not "buy a house now"

Your friend was somewhat reckless with his savings, putting them in investments instead of cash. It may be he didn't actually lose out financially, just that the amount he had accumulated fell, but given the huge number of uncertainties here, and the fact you need this money repaid, you simply have no alternative to pull out, and maybe this is all for the best with your friend.

For the best because, perhaps Brexit turns out to be a damp squib, in which case his shares rise again surpassing house price inflation and he'll be able to buy in a year or two, or it affects his firm again, worst case he's out of a job, and the place he bought bought with your "gift" loses money as well, double whammy.

AnotherJoe

Tom_T wrote: »

Mostly because it seemed likely that there are double standards being applied related to deferred loans that are based on probable increase in income.

No double standards, You are comparing apples with fruitbats. Different Ts&Cs, a government lender vs a private one.

Unless you are happy that student loan conditions apply to your loan to your friend?

So, if his income isn't high enough, no repayments to you necessary and whatever is not paid back after 30 years, the remaining loan is written off.

Tom_T

Nebulous2 wrote: »

There are a lot of interfaces where it could have gone wrong. It is possible for instance that someone said to your friend: "This is doable, but your friend will need to sign to say the deposit is a gift. Do you think he will do that?" The pressure to get the house in that instance might lead to giving the adviser the answer they want / need.

100% and over mortgages were seen as being a major contributor to the economy overheating in the run-up to the credit crunch. The whole point of a deposit is that you are invested in the house and have a stake in maintaining the mortgage above pretty much everything else. A borrowed deposit reduces that investment, or at least makes it more opaque.

Lots of people cannot save for / afford the deposit. Signing to say it is a gifted deposit and not a loan is a bit of back-covering on the part of the mortgage lender. It also takes some pressure off the borrower if family members or friends begin to push for their money back.

There are many people who get a 'gifted' deposit who pay it back. There are also many others, possibly even more, who intend to, but never quite get round to it.

The signature effectively moves some of the risk from the lender, who is prohibited now from taking too big a risk, onto you. It's your call, but it is a big one. You need even more faith in your friend, knowing you have no legal recourse, no timescale and are dependent on life not throwing him a curveball like a job loss / illness / wife's failure to pass final exams etc.

Quite a number of posts have been very helpful and enlightening. Not always what I hoped for if I knew what that was even, but good clear assessments.
I didn't know how to do the include quote thing to respond directly to them all.
This post is Very interesting to dwell on too.
My middle name has too often been ' gulible' tho I know how to recognise the nibblers who enjoy getting a rise etc. This isn't one of those.
I kind of mentioned a sort of classic stereotype of a used car salesman as a not great illustration before.
Having read this post and tried to take it in, I can now see how deliberately delaying dropping the bombshell that a loan won't do and must be a gift could easily be a rather sly tool in the bag of tricks of a canny sales team of different commodities.
Hmmm makes you wonder how many others suddenly, naively, found them selves in the same situation when it was that little bit too late.
[It's late and there maybe imaginary things under the bed again .]
But that sort of manipulation has not been that uncommon.
I hadn't realised that there could be that kind of devious-ness affecting us?????

AnotherJoe

Tom_T wrote: »

Quite a number of posts have been very helpful and enlightening. Not always what I hoped for if I knew what that was even, but good clear assessments.
I didn't know how to do the include quote thing to respond directly to them all.
This post is Very interesting to dwell on too.
My middle name has too often been ' gulible' tho I know how to recognise the nibblers who enjoy getting a rise etc. This isn't one of those.
I kind of mentioned a sort of classic stereotype of a used car salesman as a not great illustration before.
Having read this post and tried to take it in, I can now see how deliberately delaying dropping the bombshell that a loan won't do and must be a gift could easily be a rather sly tool in the bag of tricks of a canny sales team of different commodities.
Hmmm makes you wonder how many others suddenly, naively, found them selves in the same situation when it was that little bit too late.
[It's late and there maybe imaginary things under the bed again .]
But that sort of manipulation has not been that uncommon.
I hadn't realised that there could be that kind of devious-ness affecting us?????

I think this is "deflection", you are moving the blame away from you and your friend to Machiavellan sales people. (Who are not selling you anything at the end of the day , precisely the opposite!)

Loans are in the main* not allowed as deposits, because if they were then we'd be back at 100% mortgages for everyone, and you may recall what happened the last few times everyone piled on that bandwagon. (Or maybe you are young enough you don't.,)

This is essentually enforced by government regulation rather than the lenders imposing this although it's done in a more indirect fashion than a simple rule.

Some people may not realise that loans aren't allowed, but there are numerous things about house buying that people new to the process may not know, their lack of knowledge doesn't mean there is a grand conspiracy !! After all it's a peculiar conspiracy where the lender goes through all that time and trouble just to tell you you can't have a mortgage. What would the point of that be?

You could have just been annoyed that you and your friend didn't realise this restriction, instead you have built it up to be this big conspiracy, though it's a strange one whereby they end up not selling you something.

Attitudes like this are why we have to suffer the "terms and conditions apply blah blah blah" small print at the bottom of adverts and the end of every radio advert, because people insist on being spoon fed the obvious and want to blame someone else when they cant get what they want rather than just taking it as a learning experience.

* As it happens deferred loans are doable, just not in the manner you'd like it to be. You could for example provide the deposit with an agreement that it does not need to be repaid until the house is sold There are a couple of lenders who may allow that. But that means you have an indefinite loan that may literally never be repaid, and one that would be vulnerable to events such as negative equity where your whole loan would be lost. . I don't think that fits the loan type you want, but that doesn't mean there's a conspiracy out there against you.

leespot

OP I think you should forget about this and move on. It appears to be bothering you far more than it should! Your friend and his wife are responsible for their own lives.

Pixie5740

Tom_T wrote: »

I am still annoyed with the people who could/should have recognised the naivety of First Time Buyers and guided them much better.

As I rule I would never use a mortgage broker who was part of an estate agency. If that's the only mortgage broker your friend has seen perhaps he should try finding an independent mortgage broker through https://www.unbiased.co.uk

robatwork

Tom_T wrote: »

As far as I can tell Martin's advice is buy now if you poss can???
People's ages can make a difference too.

I see Joe has already replied to this point but I am putting my oar in too. That isn't Martin's advice, not that I have heard on any forum/radio/TV show. In fact he always makes a point of saying he never gives investment advice, and he has no idea about:
House prices
Currencies - when to buy foreign currency
Shares

You've got the wrong end of the wrong stick there.

Martin's comment about mortgages that I have actually heard with my own 2 ears was that it's unwise for your mortgage to be more than 33% of your household income.

As to your original post - don't lend money to friends, as you will lose one or the other, most likely both.