Best Friend Loan for Mortgage

dazedconfused01

I have recently been paid a significant life changing amount of money and now planning how to invest for the future. In doing this I feel like I would like those around me to benefit and one idea is to help a friend reduce his monthly mortgage payments by gifting him the remaining amount on his mortgage circa £150k and him paying me back interest free over the next 20 years.

Does this sound like a good idea? I'd appreciate any advice as this is an idea but I have very little experience of lending money.

I've know the person for over 30 years and he is very trustworthy and responsible. I can afford to gift this amount comfortably so in the worst case scenario of him or his family being unable to pay me back I wouldn't feel aggrieved. 

Grumpy_chap

dazedconfused01 said:

I have recently been paid a significant life changing amount of money and now planning how to invest for the future. In doing this I feel like I would like those around me to benefit and one idea is to help a friend reduce his monthly mortgage payments by gifting him the remaining amount on his mortgage circa £150k and him paying me back interest free over the next 20 years.

Does this sound like a good idea? I'd appreciate any advice as this is an idea but I have very little experience of lending money.

I've know the person for over 30 years and he is very trustworthy and responsible. I can afford to gift this amount comfortably so in the worst case scenario of him or his family being unable to pay me back I wouldn't feel aggrieved. 

You are not gifting him the money if he will then pay you back over 20 years.

A frequently repeated comment on these forums is that you should only lend to a friend if you are willing to lose the money, the friend, or both.  You have only indicated a tolerance to lose the money.

Spies

I would need some legal document created for loaning that amount of money to feel comfortable

Alderbank

That's a very generous thing to do.

As @Grumpy_chap says, gifting the money does not involve paying you back so that's not something to worry about. 

Tell him, as you have told us, that you can comfortably afford it and you won't feel aggrieved if he does not offer to pay anything back.

On the other hand, making this a loan would be a bad idea and will almost certainly destroy your friendship.

I think your choice is clear.

HampshireH

As nice as that may be for the friend to have no mortgage I would hate to be indebted to a friend like that.

It's also not a gift if you're asking for it back. It's quite a burden owing a friend that amount of money. If may also cause conflict with how partner if he/she isn't on board yet the friend feels they should accept.

If you want to gift it then talk to them about actually gifting it no conditions attached 

FlorayG

Lending it is not a good idea. However trustworthy he is, there will be times when he will probably need that monthly payment elsewhere and you aren't able to evict him for non-payment as his mortgage company can. if you're that good a friend, he can't help but think you 'won't mind' if he misses a payment as he clearly intends to pay it back next time...then something happens and he can't... YES, I have a friend who got in EXACTLY this situation when she 'lent' some of her inheritance to a friend of hers. They are no longer on speaking terms.
If you really don't need that money, just gift it to your friend but then remember what he DOES with it is up to him. He may decide to buy a Lambourghini rather than pay off his mortgage and you mustn't mind if he does

Grumpy_chap

I am fairly certain I don't have any friends that would gift me £150k even if they could easily do so.

The OP needs to consider that even making the offer might change the dynamic of the relationship irreversibly and not necessarily for the better.

Would the friend feel indebted to the OP in some way?
Would the friend feel the OP saw the relationship as more than it is?  Or think they can take more (emotionally) from the OP?

The OP mentions "him or his family".  If he is married with children, will the offer change that dynamic in the family group?  Will his wife think that there is more to the relationship between the OP and the friend than just friends?

Would the friend subsequently think they can return to the OP for more money?

EDIT to add - would the friend be insulted by the offer?

MEM62

dazedconfused01 said:

Does this sound like a good idea? 

It is just about the worst idea you can have.  I doubt that you have read any of the stories on here involving lending money to friends and family.  If you had, you would have dismissed the notion.    

Jami74

dazedconfused01 said:

In doing this I feel like I would like those around me to benefit and one idea is to help a friend reduce his monthly mortgage payments by gifting him the remaining amount on his mortgage circa £150k and him paying me back interest free over the next 20 years.

That is such a lovely idea.

What if your friend dies? Will his NOK/family be happy to continue paying you back or will they assume that the house he owns outright is now theirs? If he's married, or gets married and then gets divorced, will the other half put a bid in for half the house? What if he/they remortgage it to get at the cash, would that bother you?

Maybe just gift an amount unconditionally, and if he chooses to buy a new car or have a fabulous holiday or make an overpayment on his mortgage then be pleased that you did a nice thing. It might be that paying off his mortgage would be the last thing he'd do if he came into such a lump sum. Maybe he has friends or relatives that he'd like to help out if he had a spare few thousand.

If someone gifted me a large amount I would not pay off the mortgage (early repayment charges, favourable interest rates etc), I might make an overpayment but I would also get new windows, replace my car, put a chunk into my pension to help with an earlier retirement, put some aside to help my kids if they need it, gift some to my brother and have a really nice family holiday. All those things would benefit me but might not be what the giver thinks is best for me.

DCFC79

If your going to do it you ring up the mortgage company and send them the money yourself, be prepared to lose the money, everyone says the person your helping is a friend and are trustworthy.

dazedconfused01

Wow! I’m genuinely surprised with most responses being so negative….surely there must be instances where this has worked out due to trust and goodwill winning over negative thinking?