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Lending relative 25K and adding it to my mortgage. Advice please!

(16 Posts)
NoonarAgain Fri 15-Jul-16 15:30:04

My DBs and i have some inheritance and we are both in the process of moving (separately).

He had agreed to to borrow 25K from one of our brothers to do up his new place. Due to unforeseen circs, the other DB can no longer lend the money. However, db who needs the money has exchanged contracts and can borrow no more.

I am able to lend my brother 25 from my share of the inheritance, and add it to my mortgage as we have excellent loan to vale ratio anyway.

I am buying a house for 900+K so its a relatively small amount to add.

Other than the obvious fact that he would need to pay the extra interest, is there anything else that i'm missing or would this be a straightforward scenario?

i guess i'd need some kind of agreement that when he sells up, i get my 25k back.

Any advice?
TIA!

babyiwantabump Fri 15-Jul-16 15:33:19

I think you need a deed of trust ? To say that on the sale of his property you get your 25k. I don't think it makes you entitled to any interest on it though just the 25k

NoonarAgain Fri 15-Jul-16 15:38:32

thanks baby, i don't want interest, just not to have to pay the interest on the extra money i would need to borrow for my own home, given that i would have 25k less to put down if i give him a lump sum.

in other words, he is unable to add to his mortgage but would if he could. so i am sort of borrowing on his behalf.

NoonarAgain Fri 15-Jul-16 15:40:14

soo...i wouldn't be getting the interest, my mortgage company would. does that make sense?

WordGetsAround Fri 15-Jul-16 15:40:17

Something sorted so if he died, you got your money back.

MyKingdomForBrie Fri 15-Jul-16 15:42:07

I would recommend a deed of trust relating to his property, you could express the amount as a bare sum or as a percentage of his house value (you might get more than you put in that way but seems a tad ott for your brother). As for the extra interest, would you trust him to pay that without a formal agreement? All you could do off the back of a written contract would be to sue him if he didn't pay so not sure there's much to gain .

NoonarAgain Fri 15-Jul-16 15:42:47

yep, i got that straight in my head. thanks, word.

anything mortgage wise that I've not thought of?

NoonarAgain Fri 15-Jul-16 15:44:24

i trust him 100% but he is self employed and i guess noone has a crystal ball...

cozietoesie Fri 15-Jul-16 15:46:29

What arrangements would he be proposing to get the money back to you? He might not sell the place for umpty years after all.

NoonarAgain Fri 15-Jul-16 16:03:08

cozie, i guess thats the only problem. i would want to have a deadline by which he would need to repay it e.g. 5 or 10 years max. he intends to sell within 5 years.

cozietoesie Fri 15-Jul-16 16:05:00

'intends'.

specialsubject Fri 15-Jul-16 16:05:11

does the place need the money spent on it now to make it habitable? If not, can it wait?

NoonarAgain Fri 15-Jul-16 16:48:46

Hi special, it's not urgent but he only wanted to buy it as a project and now he's had the rug pulled from under him. He wouldn't be buying it if he hadn't exchanged. I feel sorry for him and want to help as we are further up the property ladder.

specialsubject Fri 15-Jul-16 17:57:10

you are a kind sister. smile

do protect yourself as discussed - anything can happen and frequently does. Set a deadline and remember that house price inflation is not guaranteed!

cozietoesie Fri 15-Jul-16 19:20:58

A very kind sister.

But as you said - things do happen and I think it's best to keep this matter on a formal footing. I'd make certain to protect yourself as above; and I'd be wanting to know what his plans might be to pay you back if he doesn't sell the house in 5 years. (And none of that 'Oh Sis - you know you can trust me! wink)

There is one person in my family that I'd lend serious money to - and this is serious money - but I would fully expect him to have all of this prepared and ready to explain to me. (And he would.) If he's not even thought about it, I'd lend him much less. (Although I can see that in real life, you're pretty well caught on lending him something.)

PotteringAlong Fri 15-Jul-16 19:22:58

Advice? Don't. If you cannot afford to lose it don't lend it.

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