AIBU to object to my husband taking a large loan for a friend?

This is how investing works though. I’ll give you £x for x% of the ownership. DH needs to factor in the risk and up his % offer to mitigate the risk. The friend can take it or leave it. (Or better yet, not invest at all in this sinking shop).

Didn't even need to read the explanation. You don't take out a loan for other people. Literally the dumbest shit you could do.

Agree that this sounds crazy and in my experience a lot of banks wouldn't be prepared to lend for this purpose.

They’re married so financially linked, if payments aren’t made that effects her credit file.

I understand why, emotionally, your DH wants to do this, but it is just not reasonable. He needs to analyse his finances as if he was making a business decision, based purely on the data. Ask him to write down a detailed, comprehensive analysis of his (just his) monthly income and current outgoings. Surely it will show that he doesn’t have the amount spare to finance a new loan. If it would involve any extra input into family finances from your (personal) income it would need your agreement, which you’re not giving.

He needs to tell his friend that much as he wishes he could lend this money, he has now looked more closely into it and just can’t manage to do it because of the commitments he already has.

Yes you would impacted by this, if not actually liable for the debt itself. You are married. If it is defaulted on, it affects your credit rating (in fact I think it impacts your credit rating anyway as you reside at the same address - not sure though). It would also, in any proceedings to recoup the monies, lead to a charge against your home as the largest asset your DH owns, and therefore in a divorce for example it reduces the size of assets in the pot to share between you in the financial settlement.

This is financial idiocy, frankly. And under no circumstances should you accept it without a parallel legal document stating that in the event of default and a charge, it would be settled out of his 50% share of your home (not that that is much good if they want the money back and enforce a sale of your home). I would take legal advice to ascertain whether you would be better owning your home as tenants in kind or in common to protect your stake, too, and amend the title deeds accordingly.

@SunnyRedSnail "This shouldn't be a mates loan. It needs to be a business arrangement e.g. your DH is investing in a building project and his loan will be as a percentage of the build cost and therefore a percentage of the profit.
E.g. build cost £400k. Your DH is loaning £40k so he now owns 10% of the build. If the build then sells for £600k, your DH gets £60k back."

And if the build sells for just £400k? After the contractors and builders have been paid the £400k that it cost to build the property, the DH gets 10% of nothing and has lost his £40k. If it sells for less than £400k, the DH not only loses the £40k, but might still be liable for 10% of any shortfall.

Even if the property sells for £500k, the DH would only get £50k back, and although he has put £40k into the property, the costs of borrowing the £40k over 18-24 months will eat up most of the £10k "profit" in interest and fees.

In the meantime, the OP's family suffer two years of uncertainty, of financial cutbacks, all for potentially very little reward - and with a high risk of things going very badly.

There are commercial lenders who will lend money to this type of project - at a price - but if the friend cannot find anyone to lend him the money it will be because the whole project has been deemed unviable.

Apologies if this has been mentioned before, but the 40-year friendship indicates you and your DH aren't spring chickens with the luxury of time to pay off your own debts and build savings, in which case your priorities should be securing your own financial futures, not someone else's.

What if the building work doesn't get completed? What if it doesn't get sold? What if it doesn't make a profit?
All perfectly possible things

And meanwhile dh has to continue paying it back monthly. Presumably friend will have no money towards that.

The worst that can happen is after handing over the money - your dh sees neither the money nor the friend ever again in his life. Is he prepared for this outcome?

Me and my husband both earn very well, but we do not have any savings and have loans and debts ourselves.

I don't understand why you have debts if he can take out 50k in unsecured loans based on his salary alone.

What on earth are you spending it all on.

Please please tell me that at the very least, he is thinking of having a proper contract with his friend re repayment, stating the amount borrowed, the interest (following the interest of the loan hed take), repayment period etc…
Because if his friend is on tge cups of bankruptcy, he absolutely need a watertight contract showing tge friend owes him those then of thousands pounds.

And also, if he is always going in about saving more, being more frugal, has HE made a budget and looked at your expenses now?
Has he made a budget looking at how what it would look like after the loan and where the money is coming from?

Honestly, I think he is reacting on emotions (or dare I say it, he is being too emotional). He sees a brother struggling and desperately wants to help. Fair enough.
The only way out imo is very unemotional, down to Earth approach - here are the numbers. Are we happy to cut out xyz (incl some of tge stuff HE is spenfing money on. Not just activities for the dcs or a haircut for you iyswim. No reason why he wouldn’t feel the pinch too)

This basically because once he has this debt and the friend can't pay it back it wil impact your life.

He’ll never get that money back. Have you raised this with his parents/family and also your own family. You need a family conference as he is putting your and your children’s (if you have any) financial security at risk. If he doesn’t listen I’d see a divorce solicitor.

Consider buying equity rather than granting a loan.
Though both may be ill-advised.

My husband making this decision against my wishes would be marriage ending for me. It’s not a few quid.

This friend might need some where to sleep if this project doesn’t work out so you’re best to keep a roof over your own heads so you can offer him that.

It sounds like the friend's project is doomed financially. Your dh understandably finds the thought if his mate going bankrupt really really hard - it will be.

But even if your dh had the capital , I 'd guess it probably wouldn't save the project..Add the extra borrowing costs and that becomes more of a certainty.

If your dh really wants to help his friend he should support him to work out the least catastrophic way to minimise the losses so the friend can extricate himself and move on.

Not riding in like the white knight he actually isn't. And just throwing himself (and you) into the same money pit that's dragging down the friend.

That's a bit of a leap!

I think it far more likely that OP's DH liked the idea of being his mate's saviour in difficult times, tbh; and that the friend has bigged up the profits likely to be made and made it all sound like a breeze once the money is there to finish the build.

My husband and I have always agreed to ask each other if we want to loan outsiders money, over £20. I’d be angry with him too. I certainly wouldn’t be frugal anymore and I’d tell him that, and start spending more. I hope he doesn’t go through with it.

If your husband takes out this loan while you're married, if you subsequently get a divorce the loan will be counted as marital debt. Ie you will be considered jointly responsible for it and it will be taken off the marital assets before any sharing out is done. It won't matter if you knew about it, or agreed to it, as my sister discovered when her ex-husband turned out to have a loan and several maxed out credit cards that she had no idea about. I would suggest getting legal advice.

This is madness. if your husband feels duty bound to loan him money, could he not just offer him what he could afford. Personally I don’t think this is a great idea either, but if your DH feels obliged to reciprocate his friend’s financial assistance from the past, then actually this is most fair. Whatever happens, he needs a formal agreement in place, and if there are costs associated with drawing that up, it needs to be added to the loan.

One the project is finished, is it likely to sell immediately? The market is pretty flat at the moment. Also if it does sell, do you just get the money back, or any profit? It doesn’t sound like he’s thought anything through at all, for some weird sense of obligation to a friend. I would find it very difficult to forgive my husband for entertaining some hairbrained idea like this (although on a different note, I always wondered where people on grand designs find friends with so much money to help them out at the end of a project, and I guess I know the answer now!)

His friend’s business is about to collapse. He needs to sell the site at a loss, allowing someone else finish and sell.
A investor would cover the shortfall if it was profitable.

What if the building doesn't sell high enough to cover his costs? Who will take the loss? Him or you? Do you trust that he knows what he's doing and not spending money on things that won't add value?

I wouldn't. I would lend him a couple of K, however much he's lent in the past. But not tens of thousands.

Another voice going ‘this is madness’. High paying jobs are not that easy to come by at the moment. If one of you lose your job, you’re absolutely fucked. In some senses he wasn’t wrong that you need to crack down and build up savings. To then go back on that and take out a loan for a friend who has exhausted all their other options is just a terrible idea on so many fronts.

I wouldn't lend my brother that kind of money - certainly not someone 'who is like a brother'. You and your husband already have loans - you are lending to someone who has other creditors. If it all goes tits up then you won't be first on the list for repayment. It's a ridiculous idea.

You need to find a calm space to talk to him about it. Get out of the house just the two of you and discuss it calmly.