We have a mortgage of ~£65k. We will soon be moving to our lenders SVR, which is ~5.5%. We have non-standard circumstances, so I'm not yet sure whether we will be able to get ourselves another deal.
My mum has that sort of money in cash, on which she is earning more like 1.5%.
It seems an obvious solution for her to lend us the money, and we pay her at 3 or 4%. We save, she gains. We wouldn't be doing this out of charity in either direction, but as a mutually beneficial arrangement. She would have less security than with a bank, but realistically, in the sort of circumstances where we couldn't afford to pay her back, she would probably bail us out with the cash anyway. We'd have to agree notice periods for terminating the agreement on either side, but that's doable.
What do we need to know? If we sign an agreement and swap copies, will that make the arrangement clear in the future? And what interest rate should we choose? Is there an obvious rate to track? It all works as long as we split the difference (roughly) between her savings rate and our mortgage rate, so how do we formalise that?