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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

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Original poster

To feel worried about lending money?

113 replies

redwiner · 09/08/2010 12:56

I have a very close friend whome I know and trust well, I said I would lend them the money for a deposit to buy a house, as, like many people today they cannot raise the money themselves. However they have just told me that they may be losing their job soon, and whilst they may well get another one straight away-they also may not in the current employment climate.
My dilema is do I go ahead with my promise and lend them the money (about £15,000) and take the chance that if they don't get another job soon I may lose it if they get repossesed, or do I devastate my friend and say I am not going to lend it to them now-knowing full well that without my help they will lose the house and all the fees etc they have already paid out?
I am really having sleepless nights over this. The original plan was that about 6 months after moving in they were going to take out a loan to repay me.

OP posts:

RumourOfAHurricane · 09/08/2010 20:34

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Spacehopper5 · 09/08/2010 20:39

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traceybath · 09/08/2010 20:43

If they've exchanged then they'll have paid the deposit won't they? I thought that was how it worked.

So they probably haven't exchanged as yet.

But do think you were mad to offer the money and although I can see why you want to not lend the money now - I do think your friend will be entitled to feel very sad.

Tricksy situation all round.

LittleMissHissyFit · 09/08/2010 20:43

I've said this before on other threads, and I'll say it again on this one

"Friends and Money are like Oil and Water, They just don't Mix.." to quote Warren Buffett... and he ought to know..

I'd rather that you take a bit of an earbashing for a while, and it can't go on for long to be honest, but you will never see that £15k again, I promise you.

DON'T LEND THE MONEY, you will regret it for the rest of your life if you do.

expatinscotland · 09/08/2010 20:46

Why on Earth did you make a promise like this?

If they may lose their jobs, why are they considering buying at all just now?

Nope, I wouldn't do this. But I also wouldn't have made a promise like this.

If I can't give it as a gift, then I keep my mouth shut.

IsItMeOr · 09/08/2010 20:48

Yes shineon, I do agree that I would not have offered to lend an amount of money that I could not afford to lose.

I'm not sure there's any elegant way out of this other than to explain to friend that she has got cold feet, apologise and hope she gets over it.

LittleMissHissyFit · 09/08/2010 20:52

OK, let's theoretically say that the friend pitches up here on MN and says, AIBU to be pissed off? my friend said she'd lend me the money and now has backed out.

We ask the questions and it comes out that her job is looking dicey, that she may have lied to get the mortgage, that she is over-stretching herself, and there is a real risk that she can't pay this girl back...

What would we all, to a woman, say to her?

It's her money, she can lend it to whomever she pleases, if she changes her mind, that is her prerogative.

Also, we'd no doubt give the girl a bit of a hard time for over stretching and being less than transparent with the bank...

flip the situation and look at it from the other side.

We are all right to say keep you money where you know it's safe.

NonnoMum · 09/08/2010 21:05

Redwine - I feel sorry for you, I really do.

I think you are REASONABLE to be worried about lending the money, but I think you would be HONOURABLE to continue with your promise.

IF your friend cannot continue with the house purchase, and she has already exchanged contracts, I believe she could be in dire financial straights (i.e could be sued) if she drops out now.

YOU suggested the loan, you are helping your friend out at a v needy time in her life, and there is only the suggestion that she might lose her job - that is not definite.

Yes, if she runs into difficulties she could get a lodger, 2nd job, whatever...

Yes, you might lose the money, but you might be changing someone's life for the better.

Good luck, whatever you decide.

mumtoabeautifulbabyboy · 09/08/2010 21:14

Nonnomum, I think you have hit the nail on the head. It is about doing the honourable thing in this very difficult situation that Redwine has put herself in.
lesson to everyone here not to make rash promises to friends!

theyoungvisiter · 09/08/2010 21:20

I think if they have already exchanged that changes matters. As Nonnomum says, they could lose their deposit and be sued if you back out now - which is a pretty harsh blow to deal someone, friend or no friend.

But if they haven't exchanged, and if circs have changed since you made the offer then you have to make up your mind whether you could ultimately afford to lose the money, because that's the bottom line.

Whatever you do though, do it QUICK. And it might be a nice (and possibly friendship-saving) gesture if you offer to pay at least some of the fees they will lose by backing out now.

NonnoMum · 09/08/2010 21:48

Please come back, OP. We want to support you... (and possibly want you to be our friend..!)

Morloth · 09/08/2010 21:57

Get a contract.

expatinscotland · 09/08/2010 22:02

It's an expensive lesson to learn, not to make rash promises.

It reminds me of a saying Ernest Hemingway once uttered: Always do sober what you said you'd do drunk. That will teach you to keep your mouth shut.

SurreyDad · 10/08/2010 07:11

Don't do it. You have none of the protection that a bank would have. Unless you are a millionaire, or you've paid off your mortgage or wouldn't suffer without it should you need the money in an emergency or lost your job. It will probably ruin your friendship too.

Xenia · 10/08/2010 07:43

If you do go ahead:

First of all get a lawyer and draw up a contract.

Secondly get the lawyer to draft and register a second charge over the property in case prices rise and there is equity in the property you could realise after the other lender is satisfied.

Thirdly if they have any other assets - cars, computers etc you could extend yourt agreement and the charge over them.

Fourthly put in the agreement that if they renege they provide services to you to the value of £15k such as they clean the house 4 nights a week for 4 years and babysit every Sunday for 5 years or whatever will pay back the £15k...

or don't do it.

MilaMae · 10/08/2010 07:54

My wealthy sil lent £40 000 to her sister(dp's),she'll never see it again. Said sister's company went tits up and she is refusing to pay it back as she'll loose her house. It's been a total nightmare. We're stuck between the two but obviously sympathise with the lender and are very angry on her behalf.

Anyway don't do it,if you're stuck on doing it have it drawn up legally in a cast iron way but even so that guarantees nothing is she has no income.

Sil says she'll never ever lend money to anybody again. She also realises that one should only lend money one could handle never seeing again. If you're ok with maybe never getting it back then go ahead.

Personally I wouldn't ever dream of borrowing money off a friend or putting them in this position. If she's a real friend she'll understand,you're not a bank.

You sound very kind,explain how upset you are.

FakePlasticTrees · 10/08/2010 07:55

I don't understand how they have exchanged without the money in the solicitor's bank. Can you check they've actually signed anything?

Only give them the money if you can afford not to get it back - as it's unlikely you will. Or at best, not in the time frame agreed.

Chandon · 10/08/2010 08:05

please please please listen to the people who say that before going ahead, get it drawn up by a solicitor.

I imagine that you would like to say that this is not necessary with friends, and that they migh feel that you do not trust them.

But just make sure you are clear about doing the whole thing legally, otherwise it may be seen as a gift, and you`ll never get it back.

TBH, I don`t think you can get it back anyway, as they simply will not be able to afford to pay you back. That is why the bank would not lend them the money.

But if you are in too deep to pull out, please do it properly (through a solicitor, you must you must you must!

skidoodly · 10/08/2010 08:21

I don't feel at all sorry for the people who accepted this offer.

Taking that kind of money from a friend, even if offered willingly, is not on.

pagwatch · 10/08/2010 08:25

TBH I posted before saying Noooo! But actually I am inclined to agree with those who say that OP should not have offered but, having done so , it is not terribly decent to pull out.

So can I revise my answer and say

Op should not have offered but, having done so, she needs to follow through.
She should do so but with a legal agreement including a charge on the property in question.

If friend borrowing money expresses any opposition to loan being legally binding then OP has good reason to withdraw the offer and can do so without scruple.

theyoungvisiter · 10/08/2010 08:41

But isn't the point that they can't draw up paperwork stating it's a loan, because the bank requires them to state that the money is theirs/a gift?

Also the bank are likely to be highly unkeen on someone else having a charge on the house - the whole point of having 10% equity in the house is that it's a cushion for the bank should property prices fall, not an additional liability they have to compete with.

WRT to whether they could have exchanged without the OP's money, I suppose that depends whether they have savings of their own.

It's quite common to exchange on a 5% deposit for eg, but require 10% to obtain a mortgage, so it's possible they've exchanged using their own £15k, but still require the OP's £15k to complete.

Whatever the situation, I think the OP urgently needs to clarify it. It's definitely not a good idea to be handing over such big sums on a wing and a prayer.

Xenia · 10/08/2010 08:44

No, the second charge takes priority after the first so the bank will not be at risk at all if there is a second charge. Second charges are very common although as soona s you're in negative equity the second charge holder gets nothing.

Some banks don't mind if your mother or anyone lends the deposit. I don't think they need it to be your cash.

Kathyjelly · 10/08/2010 08:46

Redwiner, I'd ask for documentary proof that they've exchanged contracts. If it's a new house, I can't believe there are any developers who would do so without receiving a deposit. I think they may be misleading you to add to the guilt a little.

If so, I'd say that's not something a good friend would do. Don't be fooled.

warthog · 10/08/2010 08:51

well i'll go against the grain.

you've given her your word. so i'd go and have a talk with her. ask her how she will manage to pay back your loan if she has no job. just talk this through. come up with a payment plan. draw up a contract and make her sign it.

maybe she doesn't want the money anymore.

you don't necessarily have to renege on your deal but you still have to protect yourself.

and learn a big lesson from this. don't do it again!

Megatron · 10/08/2010 08:55

No no no no no no. Do NOT do this. I VERY stupidly loaned my savings (£8K) to my best friend of 20 years as I trusted her implicitly. She was in such a state about her situation and I was happy to help at the time because I 'knew' I'd get the money back. I got £100 back and our friendship was over within a couple of months. It was devastating. My mum always said 'never a borrower or a lender be' and she was dead right.

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