Getting a loan to use as a deposit for a mortgage

davieboy84

Hi guys,

Just wanted to gauge people's opinion on this. I've recently finished uni, got a good job, and moved back home to start saving up for a deposit for a mortgage. However, a few people have mentioned the possibility of using a loan as a deposit, and thus taking advantage of the relatively cheap house prices in my area at the moment (also living at home with my parents is becoming a nightmare!).

As I'm quite inexperienced in financial matters, I was wondering if anyone has done this, or has any opinions on whether this is a good idea or a bad idea?

Thanks,

Davie

leveller2911

OMG :eek: don't do it. I'm not even sure any bank or BS will even entertain you.House prices won't be going up hardly at all in the next 3-5 yrs, my opinion is they will in fact drop as the first time buyers will struggle to get the decent deposits needed to get a decent rate.Don't be fooled by the estate agent ramping up the market telling you to "hurry or you,ll miss out"....If FTB,s can no longer get 125% mortgages then the whole housing ladder is stuck, until that problem is addressed nothing will move much...

Save,save, save and again save.

pavlovs_dog

the fact that you have a debt (the loan) would reduce the amount you would be able to borrow on the mortgage.

i've been where you are - the figures in my sig is the student loan that i've saved over the 5 years of my degree whilst living with my in laws. I've just qualified, but until i have at least 3 months proof of earning, we still cant get a mortgage. it's a big lesson in delayed gratification.

you need to save 10% for a deposit (at least) and up to £3k for the costs associated with moving. Based on current market conditions the smaller your deposit the less competitive your mortgage rate will be.

~Brock~

pavlovs_dog wrote: »

the fact that you have a debt (the loan) would reduce the amount you would be able to borrow on the mortgage.

i've been where you are - the figures in my sig is the student loan that i've saved over the 5 years of my degree whilst living with my in laws. I've just qualified, but until i have at least 3 months proof of earning, we still cant get a mortgage. it's a big lesson in delayed gratification.

you need to save 10% for a deposit (at least) and up to £3k for the costs associated with moving. Based on current market conditions the smaller your deposit the less competitive your mortgage rate will be.

I would just like to mention my admiration for what you have acheived there - you are pointing the way that many more will have to follow in the future - just like we had to do ourselves many years ago!

melorablack

pavlovs_dog wrote: »

the fact that you have a debt (the loan) would reduce the amount you would be able to borrow on the mortgage.

i've been where you are - the figures in my sig is the student loan that i've saved over the 5 years of my degree whilst living with my in laws. I've just qualified, but until i have at least 3 months proof of earning, we still cant get a mortgage. it's a big lesson in delayed gratification.

you need to save 10% for a deposit (at least) and up to £3k for the costs associated with moving. Based on current market conditions the smaller your deposit the less competitive your mortgage rate will be.

If you don't mind me asking, how long have you been saving for and how much each month?

_Andy_

I don't know of any mortgage company that will accept a loan as a suitable deposit source.
Additionally I don't know of any loan company that will lend for that purpose.

Quite simply you can't afford to buy at the moment and need to save, no shame in that.

pavlovs_dog

melorablack wrote: »

If you don't mind me asking, how long have you been saving for and how much each month?

i worked all weekend, every weekend (14 hours a week) throught the 4 years of my undergrad degree and have worked 4 hours a weekend, every weekend throughout my teaching training. the money i earned from that provided us with enough to live on (paying nominal rent to in laws, buying our food, running our small car, fun and frolics etc). any surplus was saved along with my student loan in the best accounts we could get our hands on (both filling our isas, locking money away for a fixed period to get the better interest rates etc)

the figures in my sig dont actually tell the full story as we also have money saved for fees, 6 months of our combined income as an emergency fund (on my new salary level) and money to replace our car saved. i'm a bit anal when it comes to financial planning, with all major regular outgoings (including savings) budgeted for.

whilst we're not out on the razz each weekend (through choice) we've by no means gone without. we've holidayed abroad once a year for four out of the past 5 years and have a trip to mexico booked for the end of the month. its all about the lifestyle choices you make. we could have afforded to buy a posher car, go on holiday more often and eat out several times a week but we knew that doing so reduces the amount we can put by for our long term future. we don't deny ourselves the occasional treat, but they are budgeted for accordingly and we shop around for the best deals.

what does the future have in store? depending on the market and whats available when our time comes we either hope to buy a old wreck that we can slowly do up over time (thereby adding some value - not that we plan to move again for many, many years). if we get something that needs little work then we plan to become MFWs (mortgage free wannabes) as soon as possible. as a result of our deposit we have the choice of buying a larger house or in a 'better' postcode than the options currently facing friends with much smaller deposits. we're also likely to be able to get a more competitive mortgage rate and have a smaller monthly outgoing on the mortgage each month.

for anyone readin who is currently (or thinking about) saving for a house deposit there is a nice thread HERE to document your progress and chat with others in the same boat. not everyone is in the same fortunate position that we've been in where we could live at home. even so, commiting to save a % of your income each month, however small (think of it as a kind of tax ) really does add up over time.

Robert_Sterling

davieboy84 wrote: »

Hi guys,
living at home with my parents is becoming a nightmare!

For them I guess?

StuTheDon

leveller2911 wrote: »

If FTB,s can no longer get 125% mortgages then the whole housing ladder is stuck, until that problem is addressed nothing will move much...

I thought the problem has been solved - i.e. they have stopped giving out silly LTVs?

anotherpaul_2

StuTheDon wrote: »

I thought the problem has been solved - i.e. they have stopped giving out silly LTVs?

That would depend on your definition of "solved".

If you mean, "no longer lending people more money then then value of the asset it's secured against, so they aren't instantly in negetive equity", then it's solved the problem. This is (I think, despite not being able to afford to buy a house myself) a good thing.

But if the problem is "being able to borrow to buy a house", the FTB now needs a substantial deposit plus fees and other costs, where previously they could borrow everything. So most of the FTBs who could buy a house 12 months ago, can't now. And that isn't likely to change any time soon.

bo_drinker

First time in this section, just noticed the thread heading. Isn't this part of the problem this country is in the !!!!!! it is in due to this sort of nonsense going on.