Six-figure loan, mountains of angst
September 1, 2018 12:42 AM   Subscribe

A family member contacted me about a month ago to ask me to contribute a six-figure amount to help them qualify for a home loan. This is not their first home, and the family is pretty well-off, but due to loan complications would not be able to do this on their own. There is some history from a past financial deal that wasn't resolved in a way that made me feel good. Having said that, what's the best, most mature way to decide on a path forward, both in terms of this request and the family relationship?

The request:
I have a close cousin, who is practically a sister, who asked me to help her family in a jam with an upcoming house purchase. The ask would be for a six-figure amount of cash, that I have been dutifully saving for over the years for my own future home purchase. She needs this to qualify and would pay me back in a few months once they get through some of the loan hurdles (not entirely clear on how this works, but am taking on faith that there is a financing vehicle that works this way. Please assume this will operate this way, as for anon reasons prefer not to go into more specifics).

The past:
She borrowed a decent chunk of change from me before to purchase her first family house, with no promise of interest payment or repayment schedule. As she is family, I was happy to help, but then felt slighted because she went a few years without even mentioning it and I had to remind her to pay me back. She did so without acknowledging or apologizing for her behavior, and when she paid, she didn't pay me interest, just the cash over several months. This is par for the course for the relationship dynamic, and I felt taken advantage of.

The relationship:
Not the easiest, but we are family. I never ask for anything, certainly never an ask of this magnitude, but I would like to resolve this in a way that allows us to feel that we can lean on each other and trust each other in good faith when the time really calls for it. I have a small family, and there may be a future path when I'm old and infirm that I may need to lean on her and her family. I would like to not have a continuing catalog of bad behavior and resentments color our relationship.

The questions:
1. Taxes & home loan financing: She's assured me this would be paid back in a few months. Are there any tax implications for transferring a large sum of money like this? I read a few articles like this, but they refer to parent-child relationships, for smaller amounts, which this is not. If I go down the path to purchase my own home in the next few months, will the banks look at this change in available cash as a downside for my own loan qualification?

2. Loan repayment: has anyone had experience with using LendingKarma or other services? Is this reliable? I am in favor of using a program like this that has clear legal template and repayment schedule. If this complicates the mortgage process, then at least would set up a promissory note.

2. Family drama: how to constructively bring up my reservations and get resolution on past resentments? How to handle this in a way that - whether yes or no on the loan - paves the way for good boundaries and builds trust for the good of the family? I come from a family background where it's common to help, and would prefer not to DTMFA on this relationship. I could really use a script as the conversation made me uneasy, angry, and disappointed.

Thank you for any wise advice on handling this. I've been wrestling with this request for about a month and need to make a decision soon.
posted by anonymous to Work & Money (65 answers total) 2 users marked this as a favorite
 
"I'm sorry, that won't be possible."

(Personally? No way, no how would I lend this money in your situation.)
posted by pharm at 12:46 AM on September 1, 2018 [141 favorites]


If the bank won't loan, don't. She has other assets and claiming the ability to pay you back quickly, she doesn't need your help if her fiances are actually in order . This isn't someone who needs a few thousand dollars to make a downpayment requirement on a first home. I feel like there is a missing detail about her life (maybe unknown to you) that doesn't make her a good loan candidate even though she has high income and other assets.

She can save the money herself and purchase when ready if she can really pay you back.


Legally, this is very messy IMO. You would definitely need to consult a lawyer if you decide to do this.
posted by AlexiaSky at 1:02 AM on September 1, 2018 [33 favorites]


You don’t seem comfortable with this. I wouldn’t either. Tell her you’ve thought about it but that you need to keep the cash and don’t feel comfortable loaning it right now, so although you can’t help, you wish her the best in finding a solution.
posted by samthemander at 1:07 AM on September 1, 2018 [3 favorites]


Personally I have a one time loan policy. I will loan you my friend/family a sum of money once- but then we are done- no hard feelings, it's just my policy.

These are your savings for your first home. Personally I would not do this, even for my sister.
posted by freethefeet at 1:08 AM on September 1, 2018 [30 favorites]


This is all of the nope IMO. She wants to borrow your house deposit savings to buy a new home and she borrowed money from you to buy her first home? That she didn't pay back for years without being reminded, and from the sounds of it, wasn't particularly appreciative?! Hell no.

If she'll have the money in a few months, she can wait a few months to buy a new house or she can buy a cheaper house. Most people don't have family they can just borrow a 6 figure cash sum from. If you were a millionaire or something it would be different, these are your hard earned savings that she's asking for. I would just tell her that you're sorry to hear about her financial troubles but you just can't afford to lend her that kind of money. I wouldn't bring up any of the past resentments just let her know that it will not be possible to lend her the money.
posted by missmagenta at 1:15 AM on September 1, 2018 [40 favorites]


It sounds to me very much as if your cousin is asking you to participate in mortgage fraud--inflating the family's assets so that they can qualify for a loan they wouldn't otherwise qualify for. Not only is this illegal, but inflating your income by that much suggests a general financial recklessness and an attempt to enter into a mortgage that is beyond their means to sustain.

Additionally. Sometimes a promissory note or the like can be helpfully for informally setting expectations. But, in the end, it is just a piece of paper unless you are willing to go to court to enforce it. It sounds to me as if that is something you would never do. In which case, don't pretend to yourself that such a document will protect you at all if anything goes wrong in the myriad of ways it could.

This magnitude of request for a non-emergency situation is basically unimaginable to me in a family from a Western culture. If you're from a culture that emphasizes financial interdependence beyond the nuclear family, I can't speak to that, but this is truly a terrible idea, speaking from the viewpoint of objective finances.
posted by praemunire at 1:20 AM on September 1, 2018 [135 favorites]


Personally, I only loan money to family or friends if I can easily afford and will not feel bad if it is never repaid. So, the most I ever floated anyone was 1,000USD.

Script? "I'd love to help you (again) but this would prevent me from being able to buy a home if/when the right thing comes on the market. I know you know how that works."
posted by Gotanda at 2:22 AM on September 1, 2018 [6 favorites]


Holy flying shitballs there's no way I would lend 100k+ to someone who:

a) has previously taken advantage of me with regards to money
b) is not in dire financial straits and just wants something
c) cannot show me a contract or even demonstrate that what they are proposing is legal

It sounds like she will pay you back from the proceeds of a property sale or something. There is no guarantee that the property will sell in a timely fashion, for a price she wants.

Losing this sum of money could seriously alter your life. The risk/reward ratio here is way out of wack. Tell your cousin you don't have that much money to loan currently, and leave it at that. I'm gobsmacked someone would even ask for this, tbh.
posted by smoke at 2:28 AM on September 1, 2018 [53 favorites]


No.
posted by Iteki at 3:00 AM on September 1, 2018 [11 favorites]


I cannot stress how much I wouldn’t do this. For all of the very good reasons mentioned above.
posted by Jubey at 3:03 AM on September 1, 2018 [5 favorites]


Wow. This is just an outrageous ask.

My family is VERY close-knit. I am very close with my brother and sister in law and we have at times financially supported one another in some form. I have the keys to his apartment as does he to mine. He has the access to my bank account and, if he wanted, he could technically withdraw all the funds form my account tomorrow [not that he ever would, there is just this level of trust].

I would never, EVER dream of asking my brother for this kind of help. And he would never, ever dream of asking me. Help me out if I were in dire straits, of course. But to buy a fancier house? Nope.

I never ask for anything, certainly never an ask of this magnitude, but I would like to resolve this in a way that allows us to feel that we can lean on each other and trust each other in good faith when the time really calls for it. I have a small family, and there may be a future path when I'm old and infirm that I may need to lean on her and her family.

So... this is not how trust is formed. Your cousin already had the chance to earn your trust when you lent her the money the first time around, right? Yet she didn't act appreciative or grateful. She *already* owes you gratitude for that time and you have *already* earned her hypothetical future help. So...

Has this cousin ever helped you out when it cost her something?
Would you be comfortable asking her for similar help as what she is now asking you?
What are you going to do if she doesn't pay you back?
Are you OK with forfeiting your savings and putting off your own home purchase by several years if this ends badly?

I would like to not have a continuing catalog of bad behavior and resentments color our relationship

So, it means she'll be mad if you say "no"? That's very possible, from your description of her past behavior.
But if you say "yes" there is very likely to be resentment, too. You'll resent her for this ask, and she'll resent you for reminding her to pay it back.

Plus, if she is using the money to qualify for a loan... that's fishy. You can run this by your CPA (or lawyer) and use their "hell no" advice as an excuse. If you need one.

In summary, please DON'T.
posted by M. at 3:10 AM on September 1, 2018 [23 favorites]


Any amount of money beyond what you can happily and comfortably say goodbye to is too much to lend inside a personal relationship.

And any personal relationship where you haven't been treated in a completely upright, forthright, and ethical way is too unbalanced to inject a large request like this.

"I'm so sorry I can't help out. I hope it can all work out for the best anyway."
posted by spindrifter at 3:18 AM on September 1, 2018 [3 favorites]


It's really ok to say no to this request - you have already helped her above and beyond what most families do - if anything she owes you a big favour. Tell her that you've been working really hard to save the money for your own first home, and need to have it available when the right opportunity comes along. Even if you're not about to buy something right away the bank is going to look over years worth of your financial records, and moving that much money in and out of your accounts is definitely going to look weird, and probably affect what kind of mortgage you qualify for. You don't need to bring up your feelings about how the past loan worked out, you have real, concrete reasons for not wanting to loan her money now that have nothing to do with her.
posted by 5_13_23_42_69_666 at 3:22 AM on September 1, 2018 [11 favorites]


On re-reading your question, it seems like you fear it's going to be a relationship-ender if you say no? That is a very bad reason to give in. You cannot control her reaction but you can try to stay neutral and calm when discussing it. As briefly as possible.

As for the script to use, how about

I have looked at this [with my financial advisor] and this is not something I can do. I wish you luck with your home purchase.

And then, if she gives you any grief:

I realize it's a bummer but it's a large sum of money for me and it is just not something I can do. \broken record

If she gets nasty:

Wow, that's uncalled for. [Topic change] or: Have to go. Bye!

I would be tempted to bring up the past but yeah, thats's likely to cause more drama.
posted by M. at 3:43 AM on September 1, 2018 [17 favorites]


not entirely clear on how this works, but am taking on faith that there is a financing vehicle that works this way

Is there anything else in the world that you can see yourself lending $100,000+ for, without understanding how it works, and knowing you will have to demand repayment if you want to see your money again?

Is there any other financial instrument that you could put your $100,000+ in for more than a guaranteed zero interest rate?

Put your own interests first.
posted by dywypi at 4:01 AM on September 1, 2018 [25 favorites]


Another perspective to think about it this would be to play out the scenario of if you, at this moment, decided to you needed her financial assistance because you're currently looking to buy a house this month and don't quite have the amount of money for a down-payment to buy the size house you want.

What would her answer be at this moment? Would you even look to her for the money? Consider all this in your decision to lend her money because I'd imagine "I'm sorry I can't help at this moment because I am currently facing my own financial dilemma in buying a home" is a perfectly reasonable answer that you'd likely get and would be justified in giving.

Anyone who decides they want to try to talk you out of that to serve themselves is not someone trustworthy or someone you'll lean on during your own hard times.
posted by Karaage at 4:02 AM on September 1, 2018 [7 favorites]


Family drama: how to constructively bring up my reservations and get resolution on past resentments? How to handle this in a way that - whether yes or no on the loan - paves the way for good boundaries and builds trust for the good of the family?

I can’t speak to the legalities but I can tell you that good fences make good families. If you decide to do this the conversation should go like this:

You: "Okay, assuming we’re all not going to get arrested, let’s go for it. One stipulation though."

Cousin: "Yes?"

You: "With this much at stake I’m worried that if something happened to you there would be no record of the loan. So let’s write up an IOU that contains the amount and when you think you’ll be paying it back. I’ll put it in my safety deposit box and then I don’t have to worry about it."

Cousin: "But nothing bad could ever happen to me and my husband would still be here and our parents will all know about the loan and..."

You: "Look, this is six figures we’re talking about. I will sleep a lot better with a formal IOU."

So that gets you an IOU (always a good thing) but more importantly a written target date for the money getting paid back.

I personally don’t charge interest on friends and family loans, but I never make them for more than three or four months (as well as thus far maxing out in five figures). If she’s looking for 6+ months I would work some interest into the IOU.

On a more personal note, one of the most loving things you can do with families and money is to make sure there is zero ambiguity about your financial entanglements. A huge proportion of divorces and other family fallouts occur around finances and it is far better to be awkward upfront than to lose an important relationship. 100% of people get weird about money, plan accordingly.
posted by Tell Me No Lies at 4:06 AM on September 1, 2018 [3 favorites]


You don't owe her an explanation or reasons for a No answer, either. This outrageous request has not created any obligation for you, at all.
posted by thelonius at 4:06 AM on September 1, 2018 [3 favorites]


Wait, what? They already have a house.

This is some hot nonsense, reject with extreme prejudice.

I can't believe you are even considering this.
posted by Anticipation Of A New Lover's Arrival, The at 4:27 AM on September 1, 2018 [55 favorites]


Is your cousin planning on reporting as a loan this to the bank who will be providing the mortgage? Because if not this is mortgage fraud.

There's a literally a subplot in The Wire about how this is a common thing that lots of people do, but actually it's a federal crime that's really easy to prove, with a penalty that can include years of prison time and a very long statute of limitations.
posted by firechicago at 4:35 AM on September 1, 2018 [56 favorites]


Nope nope nope all the nopes. There is no good reason to do this, and plenty of reasons not to. If your cousin can’t understand why you won’t loan her this amount, then she’s irrational and it was only a matter of time before you did or didn’t do something else that pisses her off anyway.
posted by amro at 4:38 AM on September 1, 2018 [7 favorites]


Your cousin is going to get mad at you if you say no. I suggest practice anticipating feeling uncomfortable if/when you say no and your cousin gets mad. You are not responsible for your cousin’s feelings, You genuinely need to take care of yourself first, it is OK to say no and you will survive your cousins anger or resentment or whatever. And you will certainly survive that in better shape than potentially losing an enormous amount of money that you will actually need and/or getting into legal trouble over. I know how hard it is to say no to people who have trained me to say yes, but I have learned to do it and my life is better as a result and my relationships with those people have actually improved as a result. Good luck!
posted by Bella Donna at 4:39 AM on September 1, 2018 [11 favorites]



2. Family drama: how to constructively bring up my reservations and get resolution on past resentments? How to handle this in a way that - whether yes or no on the loan - paves the way for good boundaries and builds trust for the good of the family? I come from a family background where it's common to help, and would prefer not to DTMFA on this relationship. I could really use a script as the conversation made me uneasy, angry, and disappointed.


If I'm reading this right, this is a hard situation because she is trying to take advantage of you-- not for the first time, but for the second-- but she doesn't see it that way herself, and other family members may not either. It's intractable because once people think you have money to spare, no amount of reasoning is going to make them see different.

I think you should come up with an explanation whereby you have absolutely no choice. You actually don't. But to her, you came up with a lot of money once and you can again. So go to a financial planner or personal banker or some other authority and get them to tell you what they think of this. When I was looking for a financial planner, one of them actually told me she helps out a lot of her clients by telling them they just can't give their adult kids any more money, and they can point to her when saying no. Find someone who will help you that way. Tell your cousin the money's in investments and your banker says you can't take it out.

What I'd like to tell someone like this is "No, and what is the matter with you anyway?" but if you put it on a personal level, she'll think she can make you come around. And, you know, I don't think you are being resentful; I think you are being reasonable given her track record. But it suits people who do this kind of thing to let you think it's about your (unreasonable) feelings.
posted by BibiRose at 4:40 AM on September 1, 2018 [9 favorites]


It’s really too bad that you can’t afford to help her out right now. At least that would be my story and I’d stick to it. Six figures? Without paper work? “Sorry, but I just can’t afford to. I mean, like I don’t have it. The market zigged when I zagged, I got whacked by taxes cause my accountant screwed up. I could ask my bank, but I can’t promise anything.” And so on.
It’s really too bad. But for your own peace of mind, it sounds like you don’t wanna do it/ can’t do it. And as an acquaintance said when we got tapped by a parent for a (to us) large loan, “you have to not expect to get it back, and if you can’t live with that, or can’t afford it, don’t do it.”
Best of luck!
posted by From Bklyn at 4:42 AM on September 1, 2018 [2 favorites]


.....if you put it on a personal level, she'll think she can make you come around.

This is also part of why I was saying you need provide no explanation. Your cousin will probably take reasons for "no" as an invitation to argue why any reasons provided are actually not good reasons. This will be, at best, tedious; at worst, it will be successful manipulation - they will get you to concede that their side of the argument has some merit, and so come around to the absurd idea that the default answer is "yes I will loan you my life savings".
posted by thelonius at 5:11 AM on September 1, 2018 [6 favorites]


Your cousin is using you for money and not even apologizing for it. The threat hanging over you isn’t that you will lose the six-figure sum of money that will decide whether you own a house in this life or not, but whether your cousin gets mad enough at you to not talk to you again.

This person sounds selfish, predatory and manipulative. They already have a house and by your own statement, they have more than enough income to handle this without involving you. Don’t get involved.
posted by Autumnheart at 5:13 AM on September 1, 2018 [18 favorites]


“I’ve run the numbers, and if I lend you this money I won’t qualify for the mortgage I myself will need. So I’m sorry I can’t do it this time.”
posted by lakeroon at 5:13 AM on September 1, 2018 [7 favorites]


The most likely explanation is that she plans to engage in mortgage fraud. Do not get involved.
posted by grouse at 5:22 AM on September 1, 2018 [7 favorites]


If I go down the path to purchase my own home in the next few months, will the banks look at this change in available cash as a downside for my own loan qualification?

Yes, and this is all the reason you need to say no to your cousin's request.

By the way, I come from a non-Western culture, and while such requests happen among siblings and/or parents, it's unusual for cousins, and definitely a no unless you can afford to give away the loan amount. You are not the one damaging the relationship by saying no to the request - it is your cousin who is damaging the relationship by asking for such a loan from you.
posted by needled at 5:51 AM on September 1, 2018 [14 favorites]


You can't buy someone's support.

I get being scared about what will happen when you're old and infirm. I really do. I'm scared too.

But if your family is going to help you when you need it, it won't be because you loaned them $100,000. It will be because you have a strong relationship built on mutual sense of love, trust, and responsibility.

To be frank: If telling her "no" will damage your relationship, especially given that loaning her this money could have serious consequences for you, then she wasn't going to take care of you anyway. She's only thinking about her own needs and wants - not yours.

You need to tell her no. And if it damages your relationship, well, now you know. And you have $100,000 more to help plan for your future.
posted by Kutsuwamushi at 6:08 AM on September 1, 2018 [29 favorites]


I’m sorry, that won’t be possible.

If you really feel a reason is necessary in order to maintain some sense of family harmony (which is a tall order when family members expect 6 figure loans and are willing to destroy the harmony with a rejection, but here goes):

I’m sorry, but that money is there to finance my dreams/mortgage/whatever.

From cousin: But...

From you: are you trying to tell me you think your dreams are more important than my own?
posted by cgg at 6:24 AM on September 1, 2018 [5 favorites]


I don't know about the USA but in the UK since the 2008 crisis the banks have become much more careful about only lending amounts of money to people who have a reasonable chance of being able to pay it back. They will have done an affordability calculation based on current and predicted future liabilities and spending patterns.
This tells you two things:
1) The bank, who do this as a business and hopefully have some idea what they are doing, don't think it is safe to lend this money.
2) If the bank found about about this informal lending arrangement they would certaintly reduce the amount they are prepared to lend by the same amount. (because: affordability constraints)

A good rule of thumb when lending to family members is to never lend money unless you are prepared for the possibility you may never see it returned. You got lucky once.
posted by Lanark at 6:26 AM on September 1, 2018 [3 favorites]


Please don’t do this. I’m worried about you. And I don’t think you can count on the support of this family as you age. They see you as having resources they want, plenty of resources, and will be outraged if the tables are ever turned. Take care of YOURSELF. Also, this seems shady. “It’s not possible. I don’t want to talk about my finances.” She has already let you down once, without apologies or regret.
posted by Malla at 6:32 AM on September 1, 2018 [23 favorites]


It seems as if you're just as worried about maintaining amicable family ties as you are the perils of the financial transaction. I don't think reconciling the two is possible here. A close family with healthy relationships just doesn't put one another at legal or financial risk without dire need. I doubt it will be repaid in a timely manner, but I'd guess your $100K will secure your cousin's good will - until the next request for cash comes in. And you know there'll be another.
posted by klarck at 6:41 AM on September 1, 2018 [5 favorites]


Here in the US my wife and I just took out a modest mortgage that we can handily afford, and the level of detailed documentation that the lender demanded was amazing, and included letters from everyone we’d had substantial financial interactions with for the last two years.

She wants your money so she can claim to have substantial assets, but if her loan is conforming then her lender will be passing it to Fannie Mae who will ask for statements for the accounts she’s listing, and then asking for the source of all major deposits, and then asking for evidence that those deposits are real income.

And then she’ll come to you explaining that she needs a letter saying that you paid her six figures for your grandmother’s emerald brooch or something. So don’t do this unless you’re prepared to do that!
posted by nicwolff at 6:44 AM on September 1, 2018 [18 favorites]


This is a shocking request and you should absolutely turn it down with the simplest script possible, not indulging any further discussion whatsoever on the matter.

No one asks for a favour like this who isn’t trying something unethical if not criminal. Just... no fucking way.
posted by seanmpuckett at 6:52 AM on September 1, 2018 [10 favorites]


With regard to the context in The Wire: Further writings from David Simon on the Headshot, with the particular point that even though it's an extremely common practice among people who don't wish to do harm, it honest-to-god destroys the lives of those who get caught at it.
posted by jackbishop at 7:01 AM on September 1, 2018 [10 favorites]


Note from jackbishop’s link, this is a Federal crime IF SHE PAYS YOU BACK. And if she gets caught and tries not to pay you back, you’re on the hook for the gift tax.
posted by hwyengr at 7:25 AM on September 1, 2018 [7 favorites]


I just want to add that those who are saying, "your cousin may not be someone you will be able to rely on if you ever need care" are right. If your current relationship is contingent upon you forking over handfuls of money whenever she asks, and possibly being complicit in a crime, then it's not a real relationship. She just wants to use faaaaaaaamily as a pretext to exploit you. And if you have to depend on someone like this for care and/or advocacy when you are old and possibly not mentally with-it anymore, she and her family may well see it as an opportunity to milk you dry. Look up elder abuse by family - it's NOT pretty.

And being able to own a home does give you old-age security in a way that exploitative or tenuous family connections do not. You can't afford to lose your nest egg, especially in the course of committing fraud.

Say "That won't be possible." Rinse and repeat. If Cousin gets angry, it's on her. If it truly breaks off your family relationship, then you never had one in the first place. You cannot buy love and family feeling.
posted by Rosie M. Banks at 7:56 AM on September 1, 2018 [17 favorites]


Don't do this.

Saying 'yes' to her this time to avoid conflict is simply taking one step further along the path to further requests for money. You WILL have to say no to her at some point. Strangely, the more entitled she feels she is to your money, the angrier she will be when you say 'no'. A 'no' now might generate less conflict than your future 'no'.

People respect strength, even if they don't like it. People are contemptuous of 'weakness', especially if they are taking advantage of it. Don't let your kindness be your weakness.
posted by Sauter Vaguely at 7:56 AM on September 1, 2018 [9 favorites]


As others have noted, your cousin is asking you to help her commit a crime. There is no mortgage that works by putting a borrowed six-figure sum temporarily in your bank account. She may not understand how serious a crime this is, but that’s what she’s asking for.

Also, the fact that she “needs” this money means she can’t afford the mortgage she wants. If she’s choosing between paying you and making payments on the mortgage, she’s going to pay the mortgage, probably with the money she borrows from you.

You really need to make plans for your old age that don’t involve her. Protecting your own financial security is essential for that.
posted by FencingGal at 8:42 AM on September 1, 2018 [10 favorites]


I just got a loan of just $8000 for solar panels and we had to provide two months worth of bank statements. Instant money doesn't always impress the bank.
posted by puddledork at 8:58 AM on September 1, 2018 [4 favorites]


it honest-to-god destroys the lives of those who get caught at it.

I didn't want to sound too scoldy before, but I've literally sat in courtrooms watching people involved in these kinds of schemes being sentenced to jail. It's not pretty. Under these particular circumstances, it's unlikely that OP would be charged if matters came to light, but being on the fringes of a prosecution would in no way improve the quality of her life for the next couple of years.
posted by praemunire at 9:42 AM on September 1, 2018 [7 favorites]


This is a frightening ask. Just say no. She has a house. You do not. The best way to guarantee your old age is to have a strong financial foundation, not giving loans to better off family members.

She knows too much about your assets and your plans for your money.

Say NO. Say you bought stocks in your retirement fund and would lose profit as well as pay penalties if you liquidated. Lay it on thick if a simple NO doesn't work.

She will move on. Your delay in telling her NO is keeping her on the hook. She will easily figure something else out, even if it means waiting on the transaction till she has the cash.

You question is how to gin up a whole rubric of relationship and conflict resolution to a request for a loan, because the previous loan you gave made you FEEL BAD and she didn't pay you back for YEARS. You don't need any more words than NO.

I'm freaked out for you. You and your cousin and inhabiting 2 different worlds in terms of communication. She did not have mountains of angst before she asked you. She just asked! You are a bank to her. Therefore, you can act like a bank and can just say NO.

In terms of how this works, you give her cash. She puts it in the bank and inflates her assets. She needs to because the bank says she does not have enough cash/income to qualify for a loan. Or she may even need your cash for the down payment because 2nd homes require larger downpayments than 1st homes.

Realistically, what good does it do you to issue her a legally binding IOU? That's not a magical obligation to pay you. You would have to SUE her if she didn't pay you on time. You would have to place a LIEN on her property. That takes LITIGATION and CONFLICT and if you are too conflict averse to say NO, how are you going to ENFORCE your IOU?

You are too passive for this transaction. Your safest bet is to not enter it. In terms of preserving the relationship, your relationship will be fine. She will adjust.
posted by charlielxxv at 10:19 AM on September 1, 2018 [20 favorites]


The number one reason for not doing this is that it is very likely bank fraud. You know, that thing that Paul Manafort was just convicted and likely going to jail for -- misrepresenting assets in order to qualify for a loan.

Giving a person a cash loan does not help them qualify for another loan. The loan you give is a debt, not an asset, for your relative. It makes their application look worse since it represents more debt they already have. If your relative falsely represents the cash as an asset in their loan application, that is bank fraud. I would not think you would want to be a party to bank fraud.
posted by JackFlash at 10:53 AM on September 1, 2018 [13 favorites]


“I’ve run the numbers, and if I lend you this money I won’t qualify for the mortgage I myself will need. So I’m sorry I can’t do it this time.”

This is exactly what I came here to suggest as a response. It is truthful, succinct, unemotional, and offers little opportunity for debate.

Your choice here is not whether to risk the money and have a great relationship with your cousin or look out for yourself and have a poor relationship with her. When someone is willing to take advantage of you financially and manipulate you emotionally, and even put you at risk of legal troubles, you will never have a great relationship with that person whether you comply or not.

Your only decision is whether to have your own back and protect your own future home or not. The rest is out of your hands no matter what you do.
posted by rpfields at 10:58 AM on September 1, 2018 [4 favorites]


This is a bad idea:

For her, legally: it's bank fraud.
For you, legally: it's making you complicit in bank fraud to some extent.
For you, financially: you're going to be out at best the interest you could have earned, but much more likely some or all of the money you loaned her.
For you, financially: you won't be able to purchase your house.
For you, personally: this is going to screw up your relationship with your cousin because you are going to be, rightfully, mad and upset and feeling taken advantage of.

There are zero good reasons to do this -- you lent her money for a house once! And it already turned out badly! There is no reason to assume this time will turn out BETTER.

Please, use whichever of the scripts here you think will work best in your life and say no.
posted by jeather at 11:02 AM on September 1, 2018 [3 favorites]


If she can't qualify for the loan on her own she doesn't qualify to pay you back in 2 months and is over leveraging herself. Don't do this. If you want to save the relationship just say something a long the lines of "I can't swing this because I am about to use said money for MY OWN house".
posted by jasondigitized at 11:30 AM on September 1, 2018 [2 favorites]


It might be too late for this depending on what you've already disclosed, but you could also tell them that the money is illiquid; you bought bonds or CDs with a maturity date way out on the horizon and there's a huge penalty for withdrawing it. If you're worried about someone caring for you in your old age, remember that having financial assets to pay for the services you need will provide you with a certainty of care. Relying on a relative to honor some years passed obligation only will provide you with the possibility of care. Even if your cousin is honorable (seems like a big assumption given past behavior) there's no way of assuring that your cousin might not predecease you; accidents happen, people get cancer, etc, at which point you're going to be SOL.
posted by Larry David Syndrome at 11:54 AM on September 1, 2018 [4 favorites]


In the US buyers not allowed to borrow for a down payment. The only loan is supposed to be the mortgage, and that's why buyers need to show income and savings to qualify. praenumire above is correct - not declaring this as a loan would be mortgage fraud.

I was helped buy my current home by my parents, who wrote (legally binding) gift letters to me and my husband, which with our contribution allowed us to qualify for an affordable mortgage on a house we would otherwise probably not have been able to purchase. Similarly, we just gifted our son a (nearly six figure) sum to allow him to purchase a home and afford his own mortgage. The bank wanted a notarized gift letter before it would approve his mortgage. Similarly, if he had approached his bank for a mortgage with a recent deposit of $100,000, he would have been questioned about it, and would have had to show explicitly that it was NOT a loan. Banks are skittish these days and don't want people to overreach on their mortgage.

So if you go forward with this, you'll need to "gift" this to them, and I wonder how enforceable a private IOU would be when you later needed the money back. Your cousin has shown in the past that she has taken advantage of you, and I would not count on repayment. Please rethink this and whether you really want to assume this risk.
posted by citygirl at 12:15 PM on September 1, 2018 [5 favorites]


In answer to question 2 - family drama - if you need a buffer, how about consulting with your own financial advisor or attorney? You can allow this person (real or invented) to be the buffer.

If you're worried about hard feelings in the family, you can let your financial advisor/legal counsel be the "bad guy".

Example script:
"I have consulted with my financial advisor/attorney who does not recommend this course of action based on my own financial goals/legal interest."

Should you in any way choose to further consider lending these funds, you should consult with a financial advisor and an attorney who have your interests in mind. The mention of an advisement team and the firm barrier that the loan must be in *your* financial interest may even dissuade further discussion -- but if the conversation continues there should be an understanding that your own goals and you have a team of experts supporting your decision.

I do not think lending the money is a good thing for you and I am not trying to suggest you should consider it.
posted by countrymod at 12:45 PM on September 1, 2018


I'm concerned by the dynamics that have lead you to even consider this. That's a life-changing amount of money. That is the difference between YOU buying a home or not. You've saved for YEARS! There's not even a guarantee you could save that much again as life is unpredictable.

And the fact that you're considering giving all that up - for something that is likely fraud - based on not wanting a family member to be.. mad? Honestly, this makes me worry for you.

You do not owe this cousin anything. This is not an emergency, and even if it was, it's not a requirement to give up all your savings. This is also, as noted above, likely very illegal. Do not do this.

"I cannot afford to loan you this money. I'm sorry." The end. And I would also consider therapy and having a better grasp on your boundaries around family.
posted by Crystalinne at 12:59 PM on September 1, 2018 [24 favorites]


I would like to resolve this in a way that allows us to feel that we can lean on each other and trust each other in good faith when the time really calls for it.

So, here's the core problem: You can't. You can't trust her like that. She's trying to use you to commit fraud for the sake of owning a nicer house than she would otherwise, and she has probably already done so in the past if she didn't declare your assistance the last time. You can't trust her. She is not trustworthy. You can't fix that with a script. That doesn't mean you have to DTMFA because you aren't in a romantic relationship--you can still have familial relationships with people who aren't trustworthy with your money, you just have to set boundaries around the things you can't trust them with. But if she makes it a dealbreaker, you have to remember that this isn't something you're doing wrong and that you can't hold up both sides of a relationship of trust.

If this request is normal and reasonable within the scope of expectations of your family, then she will have other people she can ask. If you're her only way to do this, it doesn't matter if your family has an expectation of "helping", "helping" doesn't mean infinite resources available for any possible reason.
posted by Sequence at 1:34 PM on September 1, 2018 [8 favorites]


No lie, as I was scrolling through AskMe I literally did a double-take when I passed this question. "Six figures? Did I read that right?"

Like some of the other answers, it seriously worries me that you would even consider this. Their request is so incredibly out of line, but you sound as if you feel guilty about rejecting it. IMO not only should you not feel guilty, it's okay to be absolutely furious with your cousin for expecting you to do something so outrageous (and illegal!).

As for the practicalities of how to reject the request--I think you may just have to bite the bullet and expect that your cousin is going to be mad at you for a while. She got away with taking advantage of you once, she's going to be upset when it doesn't work a second time. But you've got to draw a boundary or she'll keep doing it forever. Remember, she's the one who's doing something wrong, not you.

I wouldn't lie. I would straight-up say, A. I won't participate in anything illegal, B. you didn't pay me back promptly last time and I don't want to risk that again. If you lie (about the liquidity of your assets or whatever) she'll immediately see through it, she'll call it out, make you feel guilty for lying, and play on that. Or she'll propose new schemes (why don't you do X Y and Z with your money to make it available) and you'll keep having to refute those with more lies. Better to just be straight from the start.
posted by equalpants at 2:26 PM on September 1, 2018 [10 favorites]


I agree with the consensus, please do follow the general advice here. If for some unfathomable reason you feel it's necessary to go ahead with the loan(?), then please do the following:

1) Tell her that you will need a few days for you to get a lawyer and draw up the appropriate agreement and ask her if she'd be willing to cover the lawyer fee.
2) Get a lawyer and draw up the appropriate agreement (and be sure to ask their legal opinion about the circumstances of the loan).

Now you'll have a general understanding of your legal risk and documentation outlining the details of the financial transaction.

But like everyone else has said, if you can't afford to lose the money, please do not do this. It's not a fair request and your relationship will be better if you enforce boundaries on things like this.
posted by forforf at 2:51 PM on September 1, 2018 [3 favorites]


I have used this before, and it seems to fit here, especially after reading your detailed question:

A lot of times, in my experience, when people ask questions like this, they already know the right thing to do, and all they need to hear is that they are not bad people for doing it.

I think the overall consensus here is that you already know the right thing to do, and you are not a bad person for doing it.

Good luck.
posted by 4ster at 3:07 PM on September 1, 2018 [9 favorites]


Holy crap, no. If you're worried about this being a relationship-ender, consider: if she's not willing to understand why you would quite reasonably decline this request, is this actually a beneficial relationship for you to maintain in the first place? It sounds like it's already kinda strained and one-sided. If you're even considering this in order to not make waves or avoid drama, I can nearly guarantee you that both will still come to you if you go through with this.
posted by Aleyn at 3:39 PM on September 1, 2018 [2 favorites]


I personally don’t charge interest on friends and family loans

As a note, you're not allowed to do this in the US because of money laundering laws. If you're doing it with a few thousand dollars, you're probably going to get away with it with at most a slap in the wrist, but be aware that you're taking a risk. When you're talking six figures, then you're taking a much more substantial risk, as the algorithms that detect this kind of thing don't distinguish between well meaning family members and organized crime.
posted by Candleman at 5:34 PM on September 1, 2018


The relationship:
Not the easiest, but we are family.


Don't succumb to the fallacy that the mere fact of being related to someone requires you to assume risks or make sacrifices for them. This person is not your child and they are a grown-ass adult. This calculus might be fuzzier if this were life or death, but it's not and you are not responsible for their finances or their happiness.

but I would like to resolve this in a way that allows us to feel that we can lean on each other and trust each other in good faith when the time really calls for it.

I'm sorry to say it, but your cousin is not acting in good faith now. For me, "good faith" means that generosity is always appreciated but never expected, and it is always reciprocated. Please understand that I'm distinguishing here between doing a favor to create a reciprocal obligation and doing a favor because you care and are in a position to help.

Many years ago, my uncle was on the verge of finishing his house when my aunt needed emergency surgery. My mom stepped in with a sum of money that was in the thousands but nowhere near what your cousin wants. My aunt got the care she needed, my uncle got to finish his house on time, and when he got back on his feet financially he paid my mom back. I consider this a good faith transaction all around, because
1) my mom and her brother had a history of mutual emotional and moral support;
2) she volunteered to help, because she could afford to and she wanted to;
3) my uncle did not expect to receive these funds; and
4) either of them would have done it for the other, even without a previous act obliging a subsequent one.

In other words, good faith presumes a pre-existing mutual willingness to provide assistance. Anything else is entitled, manipulative, and potentially toxic. Someone acting in good faith would not imply (as your cousin seems to be doing) that non-compliance with this truly wild ask could (or should!) cost you the family relationship. From the sound of it she cannot be trusted to be there for you or your family whether or not you make this "loan." What you're describing sounds less like good faith than a network of manufactured reciprocal obligations, and that is a terrible model to use to decide what to do with such a large sum of money. It's definitely a terrible model to use to decide whether to become potentially complicit in an illegal act.

I have a small family, and there may be a future path when I'm old and infirm that I may need to lean on her and her family. I would like to not have a continuing catalog of bad behavior and resentments color our relationship.

At the risk of sounding heartless, reserving funds to pay for the future services of caregivers or support services would be a much sounder investment than gambling on this cousin reciprocating your sense of duty.

I am truly sorry that your family has put you in this position, and I wish you the strength to commit to the course of action you find best for yourself and your own family.
posted by Fish, fish, are you doing your duty? at 7:38 PM on September 1, 2018 [8 favorites]


Sure, as long as you trade me for one of your kidneys. What, you mean you might need a kidney one of these days, even thought you have some to spare? Well. Now you know how I feel...
posted by Jubey at 12:09 AM on September 2, 2018 [1 favorite]


The request:
I have a close cousin, who is practically a sister, who asked me to help her family in a jam with an upcoming house purchase. The ask would be for a six-figure amount of cash, that I have been dutifully saving for over the years for my own future home purchase. She needs this to qualify and would pay me back in a few months once they get through some of the loan hurdles (not entirely clear on how this works, but am taking on faith that there is a financing vehicle that works this way. Please assume this will operate this way, as for anon reasons prefer not to go into more specifics).

The past:
She borrowed a decent chunk of change from me before to purchase her first family house, with no promise of interest payment or repayment schedule. As she is family, I was happy to help, but then felt slighted because she went a few years without even mentioning it and I had to remind her to pay me back. She did so without acknowledging or apologizing for her behavior, and when she paid, she didn't pay me interest, just the cash over several months. This is par for the course for the relationship dynamic, and I felt taken advantage of.


The response:
No.
posted by flabdablet at 7:17 AM on September 2, 2018 [2 favorites]


A family member who has taken advantage of you financially in the past is proposing a significant unsecured loan. So I'm joining the Hell No chorus.

How do you say no?
I really want to help. My financial adviser recommended that I have a mortgage on the house.
It's an awfully large sum for me, and if anything went wrong, I just can't afford to lose even part of that money.
I had to talk with my retirement account adviser when I inquired about the possibility of withdrawing funds, and they had some concerns about an IRS situation.
Cousin, I just can't.

Repeat some form of these phrases until she understands that you will not do this. I have bad feeling, and I think you do, too, that she may get angry and mean, but if those are her true colors, there's not a darn thing you can do. I suspect your family will end up respecting you more for saying No.

I have sisters, both better off than I am; they stiffed me when I was in a bind, and I am awesome at repaying loans. Being a relative is not a good enough reason to ask such a huge favor unless it it structured extremely well, and this is not. My irresponsible deadbeat ex- borrowed money from someone in my family. I may have suggested to family member that the loan be well-documented. That's the only reason it was paid back.

Why aren't you house-hunting?
posted by theora55 at 3:40 PM on September 2, 2018 [1 favorite]


I have bad feeling, and I think you do, too, that she may get angry and mean

Let her. Way easier to say No to an angry, mean person.
posted by flabdablet at 7:12 PM on September 2, 2018 [3 favorites]


not entirely clear on how this works, but am taking on faith that there is a financing vehicle that works this way.

Good lord you've been sitting on this issue for a month and the details are still fuzzy to you for an incredibly large amount of money. Neither party is acting responsibly enough for this to be a good idea. Just nope do not even. There's a reason why the bank is not giving them a loan. Do not override the bank's decision when you sound financially naive and are being emotionally manipulated by this family member.
posted by like_neon at 7:10 AM on September 3, 2018 [4 favorites]


Please take some time and reflect on the fact you are strongly considering paying $100,000+ just to keep your cousin from being mad at you.

That level of conflict avoidance is not a sign of a healthy family relationship.
posted by amicamentis at 12:55 PM on September 4, 2018 [12 favorites]


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