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Lending to a friend

Hi, I am hoping for some advice please.  I have offered to try and help a friend by loaning them a not inconsiderable sum of money to put towards buying their ex partner out of their jointly owned home.  He will be getting a mortgage but cannot get the amount he needs so I have said I will see if I can 'top it up' for him.  

What can I do to protect my money that I'm putting into his house? We have verbally agreed monthly payment terms and his plan is to pay it back in full when he remortgages. 
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Comments

  • jocat1504 said:
    Hi, I am hoping for some advice please.  I have offered to try and help a friend by loaning them a not inconsiderable sum of money to put towards buying their ex partner out of their jointly owned home.  He will be getting a mortgage but cannot get the amount he needs so I have said I will see if I can 'top it up' for him.  

    What can I do to protect my money that I'm putting into his house? We have verbally agreed monthly payment terms and his plan is to pay it back in full when he remortgages. 
    One problem.  As this is a loan he will have to declare it on his mortgage application.

    I suspect that if he couldn't get a mortgage for the whole amount, they won't lend to him what is required with this other loan being in play.

    And what powerful_Rogue says.
  • DrEskimo
    DrEskimo Posts: 2,383 Forumite
    Seventh Anniversary 1,000 Posts Name Dropper
    The mortgage company probably won't accept the application if part of the deposit also comes from a loan.

    That aside, don't do it anyway....either give it to them as a gift or not at all.
  • DCFC79
    DCFC79 Posts: 40,611 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 24 June 2021 pm30 7:32PM
    If you value the friendship then dont do it just don't. 

    If you value the friendship and your prepared to lose the money then yes go ahead and lend it.

    What if say your friend stops paying for whatever reason or he decides to just disappear, woukd be prepared to take action to get the money back and potentially lose the friendship ?


    OP we dont know the friend, you do, is he likely to not pay when he plans to ?
    How long have you known him ?
  • Sncjw
    Sncjw Posts: 3,541 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    The mortgage lender probably will reject the application as theres no source for the deposit. They usually need bank statements to show the person. Has been saving and got the money from genuine sources
    Mortgage free wannabe 

    Actual mortgage stating amount £75,150

    Overpayment paused to pay off cc 

    Starting balance £66,565.45

    Current balance £58,108

    Cc around 8k. 

  • Sncjw said:
    The mortgage lender probably will reject the application as theres no source for the deposit. They usually need bank statements to show the person. Has been saving and got the money from genuine sources
    Not quite true.  A gift is a perfectly acceptable source for a deposit.  But if it isn't a gift, you'd be committing fraud if you said it was.
  • Nebulous2
    Nebulous2 Posts: 5,501 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    I'm sure some lenders will accept a borrowed deposit - more likely if there is equity in the property. One for a mortgage broker to work out the fine details though. 

    I'd agree that loaning to friends often ends badly. You should have a formal agreement, and possibly a second charge over the property, though that could cost a bit to set up. 
  • mcpitman
    mcpitman Posts: 1,267 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Another one for "don't do it".

    Banks spend lots of money assessing risk to ensure they will get a return on their lending.

    If the banks won't lend him the full mortgage amount, then he probably can't afford it and when push comes to shove they will pay the mortgage lender over you.
    Life isn't about the number of breaths we take, but the moments that take our breath away. Like choking....
  • MEM62
    MEM62 Posts: 5,116 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 25 June 2021 am30 8:45AM
    jocat1504 said:
    I have offered to try and help a friend by loaning them a not inconsiderable sum of money to put towards buying their ex partner out of their jointly owned home.   
    If you had read any of the many posts on these forums relating to similar situations you would not even be considering this.  Fortunately for you, the mortgage lender will find this unacceptable and thereby save you from your own folly. 

    Other than standing him a pint if he is short, friends and money do not mix.    
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