Is it possible to give a secured loan to a family member

Beverley

I have been asked to lend £10k to a family member who owns his house outright but needs to do some work on it prior to selling it. I have been promised the money back when he sells as he has no no other disposable income.

Is it possible, as an individual to create a loan agreement that states that the full £10k must be repaid on sale of the house (I think this is called a secured loan) or within 2 years whichever comes first? 

And would that agreement stand in a court?

I have loaned to other family members and have never had an issue with repayments but this is a substantial amount of money for me. 

Thanks

Beverley

TheSpectator

Beverley said:

I have been asked to lend £10k to a family member who owns his house outright but needs to do some work on it prior to selling it. I have been promised the money back when he sells as he has no no other disposable income.

Is it possible, as an individual to create a loan agreement that states that the full £10k must be repaid on sale of the house (I think this is called a secured loan) or within 2 years whichever comes first? 

And would that agreement stand in a court?

I have loaned to other family members and have never had an issue with repayments but this is a substantial amount of money for me. 

Thanks

Beverley

It is possible but will incur not insubstantial legal fees to make it 'watertight'.

My advice would be stay well clear, family and loans don't mix.

prettyandfluffy

If he owns the house outright, can he not borrow against that? Rule about lending to friends and family: only do it if you can afford to lose the money.

sonofmerton

Would the 10k work increase the house price by 10k. Personally I wouldn't lend it to them. No reason they cannot get 10k from elsewhere secured against the house if they own it outright. 

Someone I know lent money to a close family member. That was 16k. Usual story, 'they are honest, reliable, blah, blah, blah'. Then the excuses after a couple of payments made that the monies they had hoped for were delayed, then another reason....That is just one example I've personally seen over the years.

Sure some do pay back, but lenders are surrounded by legal protections for them and you. For you to get similar protection, it is going to cost you. 

Don't go down the guarantor route either. Their loan is ultimately yours too if they do not keep up repayments. 

There is a story on here of someone who 'lent' a friend thousands. Years later still trying to get it back. 

If they cannot get a loan anywhere else from people used to lending money....there is a reason.  

david29dpo

You could put a charge on the title deeds. 
This means you are paid first when the house is sold but NOT if its not sold

silvercar

david29dpo said:

You could put a charge on the title deeds. 
This means you are paid first when the house is sold but NOT if its not sold

i would do this. Then you both know the loan is legally binding. 

MEM62

Beverley said:

I have been asked to lend £10k to a family member 

Decline.  Do not mix money and family.  Worms and cans.