This is a truly bad idea on many levels. For example, while there are many programs to help people buy homes, especially if this is a first-time homeowner-to-be, you cannot borrow money for your retirement needs. In addition, there is a potential threat to the relationship if the grandchild cannot repay the money, even if the grandparent is willing to let it go, simply because the grandchild may start feeling guilty, and then as a result, resentful.

The only time this could potentially be a good idea is if all the following apply:

1. The grandmother does not need the money to ever be repaid for her to be able to continue with her chosen retirement life-style and/or medical needs.
2. There is an agreement in place to provide for any other children and/or grandchildren in the grandmother's will, such that if the loan is not repaid, it is counted as money left to that granddaughter.
3. The granddaughter is financially trustworthy, and a written agreement is made whereby the repayment is made on terms that provide lower interest to the granddaughter than she would be able to secure from a bank, and provides more income for the grandmother than she would be able to get from her investments.

Disclaimer: the above is intended for informational purposes only. A financial professional should be consulted before making significant financial decisions.