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The only times I lent money to relatives, I assumed I would never see it again (so far, has been true in every case).
The problem for you is that they asked....which makes life complicated for everyone -- both if you do and if you don't.
If this genuinely removes a cushion that you should have for unexpected events, consider lending them a portion of what they want.
If you do and want to think of it as a real loan (not a gift that's unlikely to be paid back), consider getting proper generic loan papers that would put you as someone with a financial interest on the property. The last time I got a loan, the bank wanted to know where the down payment came from. I had to prove that I had the money and that it didn't represent an additional loan from another source -- even family.
One thing to note is that if you do this, it will change your relationship with them, permanently.
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James
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