Should I lend them 10k?

[SupineSlumber]

My parents, in their 60s, are planning on moving house. They’ve found somewhere that they like, and they want to buy it outright with cash, without having to wait to sell their own house first (although they said they hope to sell as soon as possible). However, they don’t have the necessary amount: they have 100k in savings, and are looking to borrow another 100k from selected family members/close friends (not exactly sure as they haven’t told me but I can hazard a guess). They’re very stubborn and are adamant that this is the only way they can secure the house that they love, without being part of a chain etc. Selling their own house would effectively cover the cost of one they’re moving to so they have that as an option but they don’t want it.

They asked me how much I could lend them, and it’s comfortably about 10K. But now I’m thinking this whole thing might be a bad idea. I don’t know who they’ll be borrowing the rest of the 90k from and I don’t want to audited as part of that process (not that there’s anything to hide, but it just seems very messy). Also it just feels extremely indulgent to me, to try to be in the position of a cash buyer whilst roping in lots of people to fund that through loans. What if their house doesn’t sell as easily as they think it will?

Am thinking of withdrawing the offer on the basis that it might not be financially prudent, but I know they’ll be hugely hurt. WWYD?

(NC just in case)

Why on Earth have your parents rejected the idea of being in a chain, which is a perfectly normal and expected process and one which I’m sure any seller is prepared to deal with...

In favour of some sketchy, cobbled together coalition of loans from multiple people, any one of which pulling out could cause the whole thing to collapse???

If I was selling and my prospective buyers were relying on this method, I’d avoid them like the plague, even if I had to accept a lower offer.

Just checked - money has a 12 month notice period on it...

@NewlyGranny

You need to consider where you would be in the queue if their property sold for less than they expected. As immediate family, you might well come last!

Very good point. Yes it seems likely that I won’t be first on the repayment list.

Hmmm...how to retract. Because I’ll have to - talking up drawing up agreements would offend them even more! ‘You don’t trust your own parents?’ No

Might just say sorry, but I’ve been warned against it by my ‘financial advisor’... (our crusty old finance officer at my workplace will have to step into this pretend role)

They love the house and they are your parents. They will return the money when they sell their old house. I don’t understand where the risk comes from?

Depends on your parents. I understand their reasoning and if their current house is saleable then what's the risk? I'd help them out without batting an eyelid........it's only short term. Just gives them a lot less stress and comfort that they can offer for the house they want without worrying about a chain.

I'd lend to my mum if I had it spare

Yes, I would lend my parents money. They've helped me out in the past so I would see it as returning the favour.

@Anusername

They love the house and they are your parents. They will return the money when they sell their old house. I don’t understand where the risk comes from?

What if they decide not to sell the other house for a while, or the other house doesn't sell at all?

I'm saying no too, just too risky for me. I don't like the fact that they're so stubborn they won't think of what's most practical.

I find it a little bit odd that parents would ask their children to lend them money..

If house prices fall slightly in a month or two they will have overpaid for new house and won't get as much for the old one. It's a daft plan anyway but even more so right now.

Could you tell a white lie that there’s cuts being made at work and now just isn’t the right time to lend out £10k and you’re sorry but you know they understand - not much they can really say back to that you’d hope!

For how long to they plan to borrow the money? Will they try and sell their house now?

I'm guessing they have seen a dream house and as the market is fast moving at the moment they don't want to lose it. Presumably they have at least £200k in equity on the current house, so even if they have to sell for less they will still have to £100k to pay you both back. If they are in their 60s, are they still working? They must have more than £100k in their pension that they could draw on at a later date if paying you back becomes tricky. Do they have any other assets ie a caravan or car worth over £0k that if they get stuck you could ask them to sell.

Is this £10k all your savings or just some you can access readily? If it's all you've got then no, if you have it in a savings account it is not making much interest so perhaps you could agree that it is an investment and they pay you some interest?

Let them get a bridging loan if necessary.

This sounds an awfully complicated arrangement if they are borrowing 10,000 here, 5,000 there etc.

There will be tears whatever you do.

Say you've re-checked your finances and you've realised that it will be too much of a push.

Also it just feels extremely indulgent to me, to try to be in the position of a cash buyer whilst roping in lots of people to fund that through loans. What if their house doesn’t sell as easily as they think it will?

This. They are not cash buyers and what they are doing is very selfish, indulgent and puts others in an awkward position.

Just tell them that you have worked out your finances and you haven’t got the money to lend them. Say sorry but you cannot help out. No excuses or reasons needed.

How embarrassing to have such entitled parents, I really feel for you. Tell them to get a bridging loan and stop putting their family under totally unnecessary stress.

They are being g absurd and I dont think their selected friends would be very happy about this. Id never borrow fro. Anyone if I could just sell my house. Its asking for trouble.
My mind boggles at the thought of asking for money from any of my friends.

If they were £10K short, and I had money I didn't need for 8 - 10 years, then I probably would but this is nothing like that situation.
The whole borrowing lump sums from different people is bonkers.
They are not in a position to be 'cash buyers' and need to accept that.

Yes, I get how lovely it would be to be able to buy the next house before you sell the first, but that isn't a realistic option for most people.
Plus - for many - it means you pay extra stamp duty I believe.

I'm no expert, but won't this raise alarms to do with money laundering ?
Then you get into all the questions about what happens if they don't get the amount they are hoping for when they sell. Or it doesn't sell. Or any one of the people who lend them some of the money need their cash back.
It really is a 'don't touch with a bargepole' situation from me.

Won't they have to pay a massive whack in stamp duty if it's technically their second home? Are they trying to borrow enough to cover this too? If they only needed to borrow £10k to secure the house and if I could afford it, I'd lend it - but they fact that so many other people are going to be involved sounds like a recipe for disaster for all concerned!

Well, bluntly speaking, we’d all like to live in homes we can’t afford but very very few of us would try to put that into action by asking for £100k in loans from multiple people. Not a chance I’d agree to this.

This is what a bridging loan was designed for! Point them in the direction of the bank and step away

Gosh - that is hard. I am on the other end of a similar situation.

My OH died in February and I have made the decision that I want to move back to the village where we spent the largest chunk of our life as I have so many friends there, and need that to get me through my new situation of living alone. I cannot afford to buy without selling and have been in the unfortunate situation of losing 4 buyers in a row during this difficult summer.

But at no point did it even enter my head that I might borrow money from my family and friends to fund the move. It is something that I am choosing to do and it is my responsibility to deal with it, not to go begging to others.

In fact several friends and family offered to lend me small amounts for a deposit to secure the house (it is a new-build) but the builder did not want to accept that. So far he is hanging on for me as he knows I am a genuine buyer but it could be sold to someone else tomorrow. If that happens I just have to bite the bullet and bash on; but I would never be asking my children to lend me money like that.

No. They need to do what most people do and sell then buy. Then lending money of all and sundry is cheeky and ridiculous. Do they normally want to do such bonkers things, that are all about them?

They have other much more sensible options, a bridging loan is one such option, equity release is another and can is some instances be the cheaper option. Equity release will allow them release the cash sum they need to secure the new house, whilst allowing them the time to see their original house, which in turn then settles the equity release amount, essentially treating it as a secured loan. Equity release will stipulate though that their house must be their residence until the release/loan amount is settled.

I only know of these options because I looked at them all myself when we lost our buyer and didn’t want to lose out on the home we were buying. We didn’t need to use either option in the end though as our buyer found another buyer for their property and our sale went ahead.

Are they cuckooed.... Under pressure from a criminal or blackmailer... Very odd!