Family loan question

Undecided12

My son and fiance want to buy a house.

They cannot afford the mortgage repayments on a normal commercial mortgage.

So I have suggested that I lend the money to buy a house with the loan being repayable monthly over 30 years. I would take a charge over the house.

I want to help them and in order to keep the repayments down so that they can afford them I will not be charging interest

I am worried about what happens if they split up

I don't want to be financing them with a free of interest loan in this situation

My question is

Can I include a clause in the loan agreement saying that at any time I can give notice after which time the outstanding loan must be repaid to me in full?

Would this stand up in court?

Or would it be deemed an unreasonable clause?

Any other comments or observations?

Thanks

DCFC79

Undecided12 wrote: »

My son and fiance want to buy a house.

They cannot afford the mortgage repayments so I have suggested that I lend the money repayable monthly over 30 years. I would take a charge over the house.

I want to help them and in order to keep the repayments down so that they can afford them I will not be charging interest

I am worried if they split up

I don't want to be financing free of interest in this situation

My question is

Can I include a clause in the loan agreement saying at any time I can give a period of notice after which time the outstanding loan must be repaid in full?

Would this stand up in court or would it be deemed an unreasonable clause?

Any other comments or observations?

Thanks

So they cant afford the mortgage repayments, How short are they ?
Maybe a property that's cheaper would be suitable.

hollie.weimeraner

You may find you have difficulty getting them a mortgage. I have just helped my son and his wife get on the housing ladder by loaning them the deposit but the mortgage lenders wanted a letter from me stating that the loan was actually a gift and we would have no interest in the property.
I can see plenty of other pitfalls if you go down this route and I am sure others on this board will advise you better than I can.
You may also be better speaking with a mortgage adviser as I am sure others will be in the same situation as yourself.

DCFC appears to be a glass half empty type looking at the signature :rotfl: But definitely agree that if you're not prepared to take a loss if things go pear shaped, don't do it.

[Deleted User]

The OP appears to lending the full amount, not just the deposit.

hollie.weimeraner

Deleted_User wrote: »

The OP appears to lending the full amount, not just the deposit.

Probably not from this statement within the post

"I want to help them and in order to keep the repayments down so that they can afford them"

Just decided to post my own circumstances

DCFC79

hollie.weimeraner wrote: »

DCFC appears to be a glass half empty type looking at the signature :rotfl: But definitely agree that if you're not prepared to take a loss if things go pear shaped, don't do it.

Lol yes there is that but that's not what I was thinking.

System

I doubt very much such an arrangement would last out a couple of years let alone 30 so I'd not be willing to do that. If a bank who employ teams of risk assessors and have centuries of experience of assessing the risk involved in lending money won't lend them it then why should you?

Buy the house yourself, rent it to them. That way if they split up or anything else happens the property is in your ownership so you're not out of pocket. You'll also hopefully benefit from the rise in value.

Making up financial agreements for loans between family has to be done extremely carefully especially when you're talking of amounts that are way above what can be dealt with through county courts.

Can I include a clause in the loan agreement saying at any time I can give a period of notice after which time the outstanding loan must be repaid in full?

Usually such things can only be done as a term covering breach of contract so can only be triggered by not making repayments for example, not by you deciding one day you want all your money back.

lopsyfa

I second buying the house and renting it to them. If they split up latter, the partner won!!!8217;t have any claim to the house. If they end up getting married and after some years you still want to help them out, you can then sell the house at the original purchase price less the amount of rent they have paid until that moment. This will achieve the same purpose as what you intends to do but much more simpler and with less risks to you.

bigisi

hollie.weimeraner wrote: »

I have just helped my son and his wife get on the housing ladder by loaning them the deposit but the mortgage lenders wanted a letter from me stating that the loan was actually a gift and we would have no interest in the property

You do realise you, your son and his wife just committed mortgage fraud?

hollie.weimeraner

bigisi wrote: »

You do realise you, your son and his wife just committed mortgage fraud?

For all intents and purpose it is a gift. I understand legally I have no claim on it therefore it's not fraud as such a time they want to repay my gift then it's up to them.

There is no way they have committed mortgage fraud as the only signed documents are the ones I signed gifting them the money.

And yes I fully understand the risks involved but then it's family and will also be doing the same for my other son when he's in a position to purchase

McKneff

In your original post you say you are lending them the money

In post 10 you say

'the only signed documents are the ones I signed gifting them the money.'

That is fraud,

And if you are complicit, you have also committed fraud.

I would back pedal a lot if i was you.