Lending money to family...

[TecHNooB]

my mom just lent her brother pretty much our entire savings so they could buy a house, sell theirs, and pay us back with what they make off their old house. no, I was not happy.

 

[Golgatha]

What is their combined income? 280k house seems like a lot for a starter home.

Also, don't do it since you're strapped for cash. In fact, don't do it period because they're likely making a huge financial mistake by buying a house that's outside their means.

 

[Apple Of Sodom]

Lots of good advice here. Thank you. I'd rather be somewhat of a stingy asshole now than have no relationship in the future.

Let's talk about how fucked up this part is. I received a text message from her saying "I have a favor to ask you about the house. Don't worry, it has nothing to do with money." I figured they wanted to live with us for a few months, or maybe wanted us to check it out and negotiate. They buy us dinner and then "We need $16k..." WHAT THE FUCK?! How does that NOT have to do with money?!

 

[Golgatha]

Everything that's been said, if you give it don't expect it back.

But more prominently if they can't even make up the down payment they have no business buying a house yet.

Only $16k in a 401k when the husband is age 31 is a bit worrying too. Either his salary is low enough they can't afford a $280k house, or he's a poorly managing his finances; quite likely it's both.

 

[sixone]

I've known her since she was 12 and we are very close. I feel like either way I go damage will be done. Why the fuck do people need to ask others for money? I guess my question is, how do I go about letting them down?

She has never once asked me for money and knows how I feel about it. I'm thinking this is her fiance. The bitch of it is, they know my wife and I are backing a new business venture and currently have a lot of cash tied up.

Does the bank look for these types of things when lending? Aren't they going to pull a bank statement and see that their account went from $4K to $20K overnight and wonder how that happened?

Then tell her you wish you could, but you simply don't have the cash available to help them out. Full stop, end of discussion.

 

[Apple Of Sodom]

What is their combined income? 280k house seems like a lot for a starter home.

Also, don't do it since you're strapped for cash. In fact, don't do it period because they're likely making a huge financial mistake by buying a house that's outside their means.

He is a nurse with a $1K/month child support payment. I am guessing he grosses around $5k/month, which would be about $3,500 net, minus CS would be $2500/month. She is a part time worker going to school. She is done in May. I'm guessing right now her net is no more than $1500/month. When done with school she should be making decent money as an x-ray tech...maybe net $3000/month.

 

[iroast]

Lots of good advice here. Thank you. I'd rather be somewhat of a stingy asshole now than have no relationship in the future.

Let's talk about how fucked up this part is. I received a text message from her saying "I have a favor to ask you about the house. Don't worry, it has nothing to do with money." I figured they wanted to live with us for a few months, or maybe wanted us to check it out and negotiate. They buy us dinner and then "We need $16k..." WHAT THE FUCK?! How does that NOT have to do with money?!

Don't let them pay for you. It'll only add to more bad feelings once you turn them down.

 

[SlitheryDee]

Nope. They need to look for a house they can afford. Enabling them to bite off more than they can chew is not doing them a favor.

 

[edro]

And when they get divorced in 3 years, you are screwed.

Do not loan large amount of money to family! Especially newlyweds.

He is a nurse with a $1K/month child support payment. I am guessing he grosses around $5k/month, which would be about $3,500 net, minus CS would be $2500/month. She is a part time worker going to school. She is done in May. I'm guessing right now her net is no more than $1500/month. When done with school she should be making decent money as an x-ray tech...maybe net $3000/month.

WTF! Tell her to wait until she has a stable career for at least a year before they buy a house.
She is immature and greedy.

DO NOT SUPPORT HER.

BTW, their marriage will fail. The age differential and him having a kid = failure.

 

[SearchMaster]

Lots of good advice here. Thank you. I'd rather be somewhat of a stingy asshole now than have no relationship in the future.

Let's talk about how fucked up this part is. I received a text message from her saying "I have a favor to ask you about the house. Don't worry, it has nothing to do with money." I figured they wanted to live with us for a few months, or maybe wanted us to check it out and negotiate. They buy us dinner and then "We need $16k..." WHAT THE FUCK?! How does that NOT have to do with money?!

Sounds like they had one agenda in mind then decided to flat out ask you for the money instead. I don't envy your position - you certainly don't want to contribute to putting them in a bad financial position but it's hard to communicate that without sounding like a selfish asshole.

 

[Apple Of Sodom]

Only $16k in a 401k when the husband is age 31 is a bit worrying too. Either his salary is low enough they can't afford a $280k house, or he's a poorly managing his finances; quite likely it's both.

I think he got taken to the cleaners in his divorce. They can't qualify for a first time home buyer loan because he did have a home that was sold. I think he has 2 more years before he can qualify again.

 

[Elbryn]

Part of the problem is that she is young and he is in his 30s with a kid. He is only a few years older than me and I think they look at me and think that they should be where I'm at... In my opinion, 21 and married should be looking for a small starter home or condo, not a nearly $300K house.

i think they see you as moneybags and should be willing to help them out and subsidize their living. you know that you're going to be last place on the repayment list.. 16k in a 401k and the guy's in his 30's? run away. as fast as you can.
i wouldnt make up an excuse about this.. if they cant handle the fact that you dont want to hand them 20k then that's on them.. not you. give them 1k free out of pocket for their wedding. let them do as they wish and leave you out of it..

 

[Apple Of Sodom]

BTW, their marriage will fail. The age differential and him having a kid = failure.

Why do you say that? I mean, they dated for nearly 3 months before getting engaged and they will have been together for over a year by the time they are married...

 

[D1gger]

In some jurisdictions this would be considered fraud.

Your wife's sister and husband would have to disclose to the bank that the down-payment is in fact a loan from you. If they don't do that it can be considered fraud.

 

[Golgatha]

He is a nurse with a $1K/month child support payment. I am guessing he grosses around $5k/month, which would be about $3,500 net, minus CS would be $2500/month. She is a part time worker going to school. She is done in May. I'm guessing right now her net is no more than $1500/month. When done with school she should be making decent money as an x-ray tech...maybe net $3000/month.

Sounds like they could afford it in a couple of years with the right planning on their own. I'd go the "I don't have the cash right now" route and possibly in 2 years you'd have enough cash to give them additional money on their own down payment, which could possibly help them to avoid PMI. Either way, I wouldn't loan money to family personally, I would only give gifts (gift can be explicitly stated or internally known).

Edit: Based on what you said below, this would also allow for some time for you to see how their marriage goes, and whether or not there is a risk of 1/2 of your money going to a future stupid SOB.

 

[iroast]

i think they see you as moneybags and should be willing to help them out and subsidize their living. you know that you're going to be last place on the repayment list.. 16k in a 401k and the guy's in his 30's? run away. as fast as you can.
i wouldnt make up an excuse about this.. if they cant handle the fact that you dont want to hand them 20k then that's on them.. not you. give them 1k free out of pocket for their wedding. let them do as they wish and leave you out of it..

1k would be throwing $ out. They won't be grateful for it. They'll just be annoyed that OP didn't give them more.

 

[Apple Of Sodom]

Sounds like they had one agenda in mind then decided to flat out ask you for the money instead. I don't envy your position - you certainly don't want to contribute to putting them in a bad financial position but it's hard to communicate that without sounding like a selfish asshole.

That didn't occur to me... I think they may have lied to themselves though. "If we ask him to buy our car we aren't really asking for money - we are just trading equity for cash..."

Unfortunately they do know we are pretty financially stable and can certainly afford to loan them the money... oh well... I guess if they didn't want to make our relationship awkward then they shouldn't have asked for money.

 

[SunnyD]

He is a nurse with a $1K/month child support payment. I am guessing he grosses around $5k/month, which would be about $3,500 net, minus CS would be $2500/month. She is a part time worker going to school. She is done in May. I'm guessing right now her net is no more than $1500/month. When done with school she should be making decent money as an x-ray tech...maybe net $3000/month.

Yeah, um no. Already a history of financial doom here. They have no business buying a house.

If you want to be extra super-duper nice to them and help them put a house over their heads and can afford it, buy a "reasonable" house all on your own as a rental property and lease it to them at cost (PTI) with a "lease to own" option. That way you get rental income on a house that is affordable, and they get a roof over their heads they can afford.

Otherwise bluntly say "no". It'll sting for a while, but that way when they finally do go about their financial mismanagement, they won't drag you with them.

 

[AstroManLuca]

Don't do it.

It will end badly.

No family with only $4k should be looking at buying a $280k home.

Yeah. My wife and I are looking at houses and condos. We don't have any money saved up yet (still paying off one last credit card, and then we'll be able to start saving), but we're hoping to get a few thousand saved up over the next couple years. Everything we're looking at is $160k or less, meaning we'd only need $8000 or less for a down payment.

If we were just one or two grand shy of a down payment on an affordable house, and we found the perfect house for the perfect price and wanted to make sure we could get it, I guess I'd consider taking a small loan from family members to get the last little bit. But I wouldn't even think of asking for more than 50% of the down payment from someone else, much less 75%. It seems like too much of a gamble; if you can't save up 5% for the down payment you're not going to be able to keep up with a constant mortgage payment.

 

[Golgatha]

Unfortunately they do know we are pretty financially stable and can certainly afford to loan them the money... oh well... I guess if they didn't want to make our relationship awkward then they shouldn't have asked for money.

Unfortunately you do have to ask why risking your relationship was worth asking for money now from you, instead of just sacrificing for a year or two maximum.

 

[Elbryn]

Yeah, um no. Already a history of financial doom here. They have no business buying a house.

If you want to be extra super-duper nice to them and help them put a house over their heads and can afford it, buy a "reasonable" house all on your own as a rental property and lease it to them at cost (PTI) with a "lease to own" option. That way you get rental income on a house that is affordable, and they get a roof over their heads they can afford.

Otherwise bluntly say "no". It'll sting for a while, but that way when they finally do go about their financial mismanagement, they won't drag you with them.

I wouldnt do the first. if they had no problems asking you for 16k, what makes you think that when they dont have money they wont ask you for mortgage help/delay/etc.. what if they have a kid? you gonna be 10x worse feelings if you have to evict them.. or can you bring yourself to do that? besides, they want the 280k house, not a "reasonable" one for their income.

 

[JTsyo]

Bring up the fact that they shouldn't be buying a house without some solid savings. Tell them to hold off a year or get a smaller place for now. What does your SO think of all this?

 

[Apple Of Sodom]

Unfortunately you do have to ask why risking your relationship was worth asking for money now from you, instead of just sacrificing for a year or two maximum.

I honestly think they rationalized it in their own minds. They are viewing it as selling me a car then buying it back, which may be fraudulent as someone pointed out.

I hope that is what it is at least. I know they are in love with this house, etc etc. I think they are too emotionally invested in it and can't see the objectivity of it and are far too optimistic about their future, meaning they think CS payments will decrease and income will increase.

 

[Golgatha]

I wouldnt do the first. if they had no problems asking you for 16k, what makes you think that when they dont have money they wont ask you for mortgage help/delay/etc.. what if they have a kid? you gonna be 10x worse feelings if you have to evict them.. or can you bring yourself to do that? besides, they want the 280k house, not a "reasonable" one for their income.

Good point. I think this thread falls under why you don't mix money with family (or any personal relationship really).

 

[paperfist]

If a 33 year old can only come up with $4k for a house down payment then he doesn't sound to financially stable. Do not loan.