WWYD? Request to loan in-laws money

IWasHereBefote

DH and I have been together for 20+ years and do well for ourselves. We have a fully offset mortgage which is close to being paid off, but we haven’t as it gives us the flexibility to withdraw against it until DH turns 70 (deadline to pay off). We will need to do some renovation in the next couple of years so will borrow probably £20k for that unless interest rates go crazy again. (I’m late 40s, DH is early 50s and no issues covering repayments.)

DH is the eldest and most stable of 4 siblings, but moved away from home and his parents are very hands off with him. His siblings have all had (including very recently) significant financial support from them, childcare etc. Nothing has flowed this way but this hasn’t been an issue as we haven’t needed it. I have very little to do with them but DH stays in touch and visits a few times a year.

Last year they decided to downsize and move to a house near one of DH’s siblings. They would sell an inherited house to do this and exchanged contracts with a 1 year completion date later this year. Weird arrangement, but hey.

However, because the inherited house has been occupied by one of DH’s siblings, and they aren’t selling their main residence, they’ve just realised they will have to pay CGT on the sale and stamp duty on the new place. They’re £30-40k short and have asked DH to loan them this money and they will pay it back over 3-4 years.

DH has asked what I think. (I think it was stupid to have exchanged without understanding the financial commitment, but that’s not what DH wants to hear.)

My main concerns are:

The size of the request

The clear lack of a contingency fund to cover any repairs to the house and potential impact on their ability to repay (eg new boiler is needed in a year and they have to stop repaying us to afford it)

They won’t use online banking so anticipate DH having to collect cash from them irregularly

If anything happens to father in law (as his pension is their main income) we will be unable to recover the money, or if house needs to be sold for care costs

The mental impact of our mortgage being payable for another 4 years due to something we won’t benefit from. We have a teenager whose options I would not want impacted by having to pay a mortgage when we had planned not to be by the time they turn 18.

That DH would not actually be able to say no if we (I) decide it isn’t doable (I don’t care about being bad cop)

Either of us can afford our mortgage on one income, but DH is self employed and who knows what might impact his work in that time (eg another pandemic/economic downturn = less security for him). We have other reserves, investments and savings but for various reasons would not want to liquidate them, hence keeping the mortgage increase option, but I would also be significantly impacted if I ended up paying the mortgage to cover what in-laws had borrowed

The cheek of being actively disengaged from us until the time they need help

I’m expecting the main advice would be to get an interest registered against the house if we did loan them money, but this all feels a bit uncomfortable anyway and even more so as DH can have FOG towards his family despite their evident lack of interest.

Thoughts and advice welcomed!

dermino939

This request is a huge risk because you have no way to get that money back if their situation changes. Since they are already £40k short for a move they committed to, they clearly don't have a handle on their finances. Don't put your own mortgage at risk for their lack of planning.

IWasHereBefote

They’ve needed to do a lot of work to the house they are selling and I think they have probably overestimated its likely value. They were originally going to sell their own house which is worth more, but is a nicer house in a better area but have obviously decided to do it the other way, leading to the CGT issue. I’m not sure whether stamp duty has changed since they signed.

I always thought they were quite astute (tight) as they have been able to give other siblings bigger sums for house deposits etc. So this is quite a surprise.

born_again

I would say that at this time you are not in a position to help them, due to your funds being tied up with work for your house. But they could look to the others in the family who they have helped in the past.

If you do lend then make sure that you get a charge on the house to cover the loan. As being paid back via cash could cause issues with paying into bank.

IWasHereBefote

None of the other siblings would be able to help financially for various reasons.

sheramber

Only lend what you can afford to lose.

Woodstok2000

What about suggesting a split with the other siblings - if cash has been flowing one way, maybe it's time some of it went back...

That may be totally unfeasible. It sounds like you are leaning against this, so it probably comes down to how much your husband wants to do it.

I think you need to have an very honest discussion with him, laying out all your concerns, and you need to come to a decision together that you can both live with.

Once you've made that decision, whichever way you go, you should stand united behind it.

Ultimately if you do go ahead, I would absolutely have the loan legally documented with an interest on the property and other coverage in case things go wrong. Definitely make it a condition that they use online banking so you can easily get the transfers done.

It may feel uncomfortable, but that's only because youre putting your concerns out in the open where they should be.

ladruid

So the parents have two houses? one of these inherited, and is lived in by DH sibling. They plan to sell the inherited one, so what about the house they are living in now?

That aside, the sums don't add up… to repay £40k over 4 years they need to have £10k disposable income over their usual expenses. Are their pensions so good that they have £10k a year spare income?

If they have this sort of disposable income then they would easily be able to get a normal loan. If they could get a normal loan, then they are in essence using you for an interest free loan with zero risk.

Add to this DH sibling currently in the house, where will DH sibling move too? Has DH sibling been paying rent? Has this been declared? Will the tax man come knocking for a big wad of cash the parents can't afford?

This situation sounds fraught with possible issues, mention of siblings living in property, cash money, year to complete on a property, poor financial decisions, all warning signs…

Ask yourself this question, would a bank loan money in these circumstances? that should be your answer unless you have the money spare to gamble and can afford to lose it.

There is significant risk, and if you lend the money the risk is all yours. If this was my family, my answer would be no, unless they are prepared to put a legal charge against their house (in essence a private mortgage).

IWasHereBefote

One sibling is unemployed and bankrupt, another was made redundant and has plowed the settlement into a house which they are and renovating a house to “flip” and the third has no savings and wouldn’t be able to increase mortgage/borrow a significant sum. They all have multiple younger children as well. As I say, DH is the “stable” one.

The sibling that lives in the inherited house (rent free) currently will move to the “family home” (rent free) instead, hence not selling that. The original plan was to sell the family home and leave the sibling where they were, but at some point that changed.

Their income is pretty good - no mortgage or debt, and their proposed repayment would be around 1/4 of their monthly net income.

I think I may have worked out an easy reason to say no, linked to my job and the impact this would have (I’m in an industry where I get credit checked regularly and have to declare significant financial events so this could have repercussions for my job if I take on such a financial risk……..). I don’t know where this would leave them in terms of being able to complete.

IWasHereBefote

The property they are buying is a probate property and they are buying from someone they know. They agreed the long completion date due to needing to commit to the purchase but not being ready to sell either house to pay for it. It suited the seller to do this and to have someone they know buy it rather than a stranger that might mess them around. (It’s that sort of place.)

IWasHereBefote

You can probably see why I stay out of it!!