A Surrey investment director is being pressured by his wife to lend £400,000 to her sister so she can buy out her ex-husband and keep the family home. He thinks it's a terrible idea — and consumer champion Sarah Davidson says his reluctance is reasonable.
Richard, 49, explained his dilemma to Metro's consumer champion. His wife's sister is divorcing and wants to keep the family home so her two children can stay near their school and friends. She needs around £400,000 to buy her ex-husband out and cannot borrow enough herself.
His wife has asked whether they can lend the money or go on the mortgage with her. Richard says they could afford it on paper — he earns well, they own a large home and have savings — but they also have private-school fees, a sizeable mortgage and a lifestyle they have worked hard for.
The heartless banker accusation
Richard does not want to give up holidays or pension contributions because his sister-in-law bought a house she can no longer afford. His wife says he is behaving like a heartless banker rather than family. He thinks she is ignoring the risk.
Her sister has always been terrible with money, he says, and if she missed payments, he worries they would be drawn into years of arguments or have their own ability to borrow affected.
Sarah Davidson's response begins with a blunt question: "Let me get this straight — your wife wants you to give her sister almost half a million pounds so she can stay in her house?" She notes that the sister has probably got the standard half of the family assets and income from the divorce, particularly given there are two children still of school age involved. If she needs £400,000 to buy out her husband, the house must be worth considerably more than that.
Why the maths doesn't work
Davidson says Richard is not heartless. His wife is asking him to make a significant financial decision at the height of a highly emotional and messy time. While the sister-in-law's wish to keep her children close to familiar routines is understandable, the practical reality cannot be ignored.
They live in an expensive home bought by two parents, with two salaries paying the mortgage, council tax and bills. The maths does not work when one of those salaries is taken out of the equation.
The 'solution' is for Richard to provide the missing £400,000 — presumably to bring the size of the mortgage down to a level she can afford to repay by herself. Davidson breaks down why this is not simple.
- Being able to afford it on paper does not make it a comfortable commitment. School fees, mortgage and pension provision are valid responsibilities too.
- Going on the mortgage with her most likely means becoming a guarantor — if she fails to make repayments, Richard is on the hook. It could restrict how much he can borrow in future, tie him to her payment record and raise questions about whether he has any legal interest in the property.
- The lender does not have to release an existing borrower just because a separating couple have agreed it between themselves.
- Even loaning the money separately is unlikely to help with the mortgage situation. Financial Conduct Authority rules require lenders to assess affordability, looking at income, committed spending, essential household costs and likely future interest-rate rises. Even interest-free, £400,000 repaid over 15 years is over £2,200 a month — on top of her existing mortgage, bills and childcare.
A reasonable boundary
Davidson advises that the sister-in-law needs proper legal advice about the divorce settlement before anyone transfers money. Her family solicitor and a regulated mortgage adviser should explore whether she can remortgage alone, whether a nearby lower-cost home is realistic or whether a deferred sale arrangement is suitable.
She acknowledges a move feels harsh when children are involved, but years of anxiety over a home that swallows every spare pound can be worse than a carefully managed move.
Richard refusing to become a joint borrower or guarantor is a reasonable boundary, she says. He should tell his wife he wants to help her sister find a stable solution but cannot make his own household the insurer of a mortgage she cannot sustain.
"It might seem like compassion today, but it will only be a matter of time before it combusts and makes life a lot worse for everyone," Davidson concludes.
