Foreclosure/helping friend refinance
A good family friend who is retired and her working daughter have a fairly high interest mortgage and want to refinance the house they live in. My wife and I are fortunate to have enough savings to potentially pay off their mortgage and offer them a below market rate for whatever term they want, as this would still be higher than any interest we could earn and we have plenty invested in stocks already. Furthermore, their mortgage payments would allow us to retire early. We have lent them money in the past -- up to 5 figure sums -- and they have always paid.
Obviously this is a bigger deal with some risk. We would have an attorney do the paperwork but are there any pitfalls you can think of that we need to be aware of should we proceed? We are in California if that matters.
I always recommend people to loan money to friends with good returns on investments where they are secured. In other words buy a rental property or be a lender for someone else to buy a rental property. I however would never recommend lending money to someone for personal use such as a car loan or home loan. The rules change on you getting your money back especially in California with the Homeowners bill of rights that was signed into law.
There are much better vehicles to put your money into that will give you the return that you are looking for without the risk. I don't know how much money you have to lend, but you can get great returns working with experienced home flippers that need capital and you will always be in a secure position if the deal goes south. You can also work with investors that buy distressed notes and get a great return contractually. These are 2 different things that I do that are very secure and don't have the emotional attachment of lending to a friend for personal use.
Hope that this helps.