100% Mortgage vs 95% Mortgage+Loan advice

stanmoresaver

HelpWhereIcan wrote:

Apologies for the length of the post (I really need to get a social life!!)

But you're a Mortgage Broker!!!!

SS

Boomdocker

Gopes wrote:

Anyway, thank you very much.
Boomdocker - if I find any other useful hints, I will drop you an email - perhaps you can do the same - if our circumstances are similar, what each of us finds out may help the other.
Gopes

No problem, I'll PM you with anything that thats too personal otherwise I'll post on here. Best of luck to you.

Gopes

Another question - a mate of mine pointed out that although a mortgage offer will take any existing debt into account, there is nothing to stop me applying for a 95% mortgage, and then once that has been accepted get say a £10k unsecured loan - giving the extra 5%. That way, there is no risk of non-disclosure when applying for the mortgage - and that way it works out significantly cheaper as demonstrated above.

Thoughts? I realise that when mortgage lenders assess how much they are willing to lend, they factor in living costs, and the additional burden of a non-declared loan would be significant. However, despite this, having looked at my living costs, I am confident that I would be able to live as I do now, cope with mortgage repayments, loan repayments on a 10k loan over 5 years, and still have a couple of hundred quid left over as a safety buffer. This also doesn't take into account my annual bonus, which whilst not guaranteed, usually comes to somewhere between £1k-£3k.

Would the above method (only applying for a loan after having a mortgage accepted) work in reality, or am I (or rather my mate) missing something.

Thanks again for all your help on this matter.
Gopes

Wickedkitten

Gopes wrote:

Another question - a mate of mine pointed out that although a mortgage offer will take any existing debt into account, there is nothing to stop me applying for a 95% mortgage, and then once that has been accepted get say a £10k unsecured loan - giving the extra 5%. That way, there is no risk of non-disclosure when applying for the mortgage - and that way it works out significantly cheaper as demonstrated above.

Thoughts? I realise that when mortgage lenders assess how much they are willing to lend, they factor in living costs, and the additional burden of a non-declared loan would be significant. However, despite this, having looked at my living costs, I am confident that I would be able to live as I do now, cope with mortgage repayments, loan repayments on a 10k loan over 5 years, and still have a couple of hundred quid left over as a safety buffer. This also doesn't take into account my annual bonus, which whilst not guaranteed, usually comes to somewhere between £1k-£3k.

Would the above method (only applying for a loan after having a mortgage accepted) work in reality, or am I (or rather my mate) missing something.

Thanks again for all your help on this matter.
Gopes

Have you looked into something like the northern rock together mortgages?

Gopes

Not sure how that would work in that I would be borrowing from the mortgage lender to pay the 5% deposit, which would be patently obvious, so would be paying higher rates for the privelege. As calculated above, to take out a loan for 10k payable over 7 years, and borrow 95% of £205k, would save several 10s of thousands of pounds over the duration of the mortgage (taking the simplistic view that we never remortgage, and never overpay).

Hence, my question is the best way to get that 5% without the mortgage lender being aware - obviously, on thin ice here as this surmounts to undisclosure - hence the mooted idea of say parents taking out the loan in my name. Having looked at my monthly expenditure, I am confident that I could repay e.g. £150 per month on top of a mortgage of £1300 (divided by two people) and my monthly living expenses.

However, if I can get away with applying for a 95% mortgage on the strength of 'savings' or 'money from parents' - and then take out a £5k unsecured loan (my flatmate doing the same) as soon as the mortgage is approved, and hopefully the lender will be none the wiser.

Gopes

HelpWhereIcan

Gopes wrote:

Another question - a mate of mine pointed out that although a mortgage offer will take any existing debt into account, there is nothing to stop me applying for a 95% mortgage, and then once that has been accepted get say a £10k unsecured loan - giving the extra 5%. That way, there is no risk of non-disclosure when applying for the mortgage - and that way it works out significantly cheaper as demonstrated above.

A lender underwrites your application based on your circumstances at the time of application. If you were to take out a loan nearer to completion to pay for furniture for example, they may not neccesarily identify it.

They may also ask for proof of the deposit, so you would need to either show the money in an account in your name, or your parents would need to be able to confirm that they are providing the deposit as a gift that you are not obliged to repay.

Your offer will be valid for a specific period of time (generally 3-6 months) and once that period is over, the lender has the right to re-underwrite everything and may identify any change in the level of your credit commitments.

Again, I would reccomend that you do not mislead a lender when making an application.

Joe_Bloggs

@Gopes and Flatmate
With all this money comming in why do you have zero savings that you can contribute towards a property ?
J_B.

Gopes

We both graduated 2.5 years ago, and both were inelligible for student loans - hence worked through university but still had to use credit cards/overdrafts/moneys borrowed from family to get though. I also went travelling for 7 months.
Just finishing paying off those student related debts - and have been paying off over the last 12 months at a rate or £300-£500 per month. As such, I am confident that with those liabilities gone, I can easily afford to pay £250+ my existing rent of £425 towards my mortgage and still have a safety margin.
Flatmates situation very similar.
Gopes

Joe_Bloggs

@Gopes
I should have said 'you need not respond to my inquisition'. Some lenders don't count student debt from 'official' student loans as this has a special repayment schedule and it is at rates close to inflation. Clearly your student debts are at higher/credit card rates. It is probably wise to view your Experian and Equifax files just to make sure they have the correct facts that prospective lenders will make use of.
You really need savings to pay a conveyancing solicitor/surveyor/costs and stamp duty. You may even have to still pay rent, for a period, given the nature of the rental agreement and the interpretation of this agreement by the landlord.

The budget statement is due tomorrow (March 22, 2006) . Don't buy a property before then.
J_B.

Gopes

It's not an inquisition - and a very good question IMHO. I checked my equifax files about a year ago, and they were fine (I missed a couple of credit card payments whilst at uni - in both case the lender refunded the charge, as I explained that it was a lapse rather than not having the money).

I realise that reading this thread it must seem like my flatmate and I are 'trying to cheat the system'.

In reality, we have assessed our situation, and can easily afford £1400 a month (between us) after normal living costs and leaving a generous allowance for extraordinary expenses. Hence, it is a case of trying to sort out the deposit for a 95% mortgage. Obviously, if we have to save, it is a case of renting for another year, however if we can 'dodge' the system and get on the property ladder in the next few months, we will.

Gopes