One year, my parents showed me a hand written letter from my brother which started “Dear mum and dad, you know how much you love your grandchildren and you know how much I want a Porsche…”. He was asking them to invest in a shop in London with a flat above it - he would run a business from the shop while they would live in the flat. We discussed it as a family and agreed that he should not risk our parents financial security in retirement with a business venture. They had very little in the way of retirement planning, other than the excess from the sale of the family home when they downsized.
A couple of years later, my mum called to explain that they had lent my brother over £120k as a “bridging loan” to help him buy his dream home. His accountant was on holiday for three weeks and he was worried he wouldn’t get a mortgage in time to buy the house. Sadly, there was no formal agreement of what was expected as it was all done at speed.
At first, (re)payments were made monthly by my brother, but they soon became more and more sporadic. Meanwhile, my brother enjoyed the trappings of living mortgage free from the age of 37, which included holidays abroad, restaurants, cars, and fun. I found my mum crying one day because she hadn’t received any money from my brother for some months yet they could see his wife posting on FB asking for holiday destination recommendations.
I could only appeal to my brother’s sense of duty to make sure our parents didn’t suffer, but his reaction was always the same - “I would have lost my house if it wasn’t for mum and dad”. By lost, he means he wouldn’t been able to pay the mortgage and the property would have been repossessed.
After my mum passed away at the age of 64, I dealt with the estate and needed to document the loan balance for probate. We could not find her little book in which she wrote all her finances, and it transpired my brother wasn’t even keeping track of what he owed them. My dad passed away about 6 years later, skint, and overdrawn at the bank. He used to stay up after midnight on the days his credits were due in at the bank so he could go to bed knowing he could buy food and pay his bills.
My parents regretted giving my brother the loan as it impacted their financial security and caused my mum huge amounts of stress. She always worried about money. I still have access to her email account and it pains me to read emails she sent to her friends explaining their financial insecurities and the impact it was having on their life. The most painful email is one she wrote but didn’t send before she died - she wanted to ask my brother to get a mortgage and repay the loan to my parents so they could have more money to live on and buy a nicer house nearer their grandchildren.
Moral of this story….
If you are in a position to help your kids get on the property ladder, it’s a wonderful thing to do. They will appreciate it and it will set them up for life. Kids - if your parents, or grandparents, are kind enough to help you, please make sure you honour any commitments you have made to them. They only have one retirement and it’s important that they enjoy it after all the years spent working hard.