Taking out a Personal Loan to bump up LTV

Lizzylou_2

We am nearing the end of a 5 year fixed rate and are now considering moving house into a better schools catchment area.

We have sought Mortgage advice today and once fees are taken from the equity within our house we only have £12,000 to put down as a deposit.

This would mean we could only buy a property for £120,000 which is less than what our current property is worth. There would be no way we could find a property for our requirements for that money.

It was suggested that we could take out a personal loan (around £20,000) to run alongside a mortagae which would give us more deposit to hopefully secure a better fixed rate deal.

Has anyone ever done this, or do people feel this is a good idea. I am just concerned about how applying for a personal loan might impact on our mortgage application.

Hope this makes some sense.

Liz

Kavanne

no high street lender should be giving a loan to fund a house deposit. similarly the monthly loan repayments will be taken into account for affordability on the mortgage.

Lizzylou_2

I was very suprised that the adviser was even suggesting us taking out a Personal Loan to pay for the deposit. They were not suggesting taking the loan with the mortgage provider, but another lender where the money would be said to be sought for other reasons ie. car loan.

We are well within budget in relation to afforability so I don't think a loan would impact on us being offered a mortgage.

I just thought it all sounded a bit dodgy.

opinions4u

Lizzylou wrote: »

I was very suprised that the adviser was even suggesting us taking out a Personal Loan to pay for the deposit.

But then they'll be able to sort you out with a mortgage and earn their commission.

They were not suggesting taking the loan with the mortgage provider, but another lender where the money would be said to be sought for other reasons ie. car loan.

You mean lie on the application form? I think there are laws against obtaining money by deception.

We are well within budget in relation to afforability so I don't think a loan would impact on us being offered a mortgage.

Perhaps not. But then do you really want to be stuffed with repayments on the loan? I'd suggest a word with parents and see if they can help.

no high street lender should be giving a loan to fund a house deposit. similarly the monthly loan repayments will be taken into account for affordability on the mortgage.

Agreed. But they do can if they want to (although most lending policies won't want to). Or will if they don't know and it passes credit score. Or they do know, and enter willingly in to the deception in order to hit their branch targets.

paulfaz

You can't afford to move. You could sell and rent in the desired catchment area?

JayneG

This happened to us. We put our house on the market 12 months ago, and at the asking price we would have had a 10% deposit to put down on the next house, after fees etc.

Six months later we sold the house for just a few thousand more than we paid for it in 2005, so I'd say we got an early 2006 price for it, leaving us with just a 5% deposit. Unfortunately, around that time our lender had just stopped offering 95% ltv mortgages to existing borrowers, and no other lenders were offering them to new borrowers.

We made the decsision to go ahead with the sale and rent, whilst saving hard to boost our deposit. Six months in we are closer to our target, and in another 6 months we should have the funds we need (inc fees) to make the move at 90% ltv. Whether we can get a decent mortgage at 90% ltv remains to be seen, but if not we will just continue to wait it out until the time is right to buy again.

Renting is not as pleasant as owning your own home, but given the choice I would rather be here than trapped in a mortgaged house that is now worth less than we paid for it (I'm sure it's value will have dropped below the 2005 price by now).

We have considered borrowing the delta, either from parents or a bank, but decided that we didn't want the extra commitment of paying back a loan over 5 years in addition to our mortgage for the sake of waiting an extra 12 months to make the move. A £20k loan would be approx £400pm over 5 years, not an insignificant amount. Over 10 years it would be c. £200pm, a more manageable amount, but 10 years is a long time.

_Andy_

Lizzylou wrote: »

I was very suprised that the adviser was even suggesting us taking out a Personal Loan to pay for the deposit. They were not suggesting taking the loan with the mortgage provider, but another lender where the money would be said to be sought for other reasons ie. car loan.

I just thought it all sounded a bit dodgy.

Your adviser is suggesting fraud. Ditch them.

sharpe106

I would ditch the advisor too as they are not being honest.

You can get a loan to add to your deposit but you need to declare it when applying for your mortage and they will decide if you can afford both when offering you a mortage

Gordon_Gekko

Robbing Peter to pay Paul.

Might be worth reporting the advisor to the FSA? Difficult to prove, but sometimes it's worth making the authorities aware. I'd hate to think that someone more naive might take him up on his suggestion.

Lizzylou_2

Thanks everyone for the advice. I will talk with my husband about reporting the adviser as someone else may decide to take up this option.

We have now decided to save a bit more money and look at what 10% LTV mortgages are available. Not suprising on reflect the adviser also told us that they had not secured a 90% mortgage recently. Whats that all about.

herbiesjp

Definitely forget this adviser

The only interest they have here is in getting you a mortgage agreed at all cost without caring about the consequences it would have for you.

The only problem in this "great" plan is that lenders are credit checking at various stages, and if a loan shows up that was not initially declared it will throw a spanner in the works anyway!

Save up, and then discuss with an adviser who cares about the quality of their advice and the impact it has on the client in question:T