Should I take out loan to get achieve higher LTV?

LeserattePD

Dear all,

We are considering to take out a loan for around 14k to achieve a 75% LTV on a new built flat in order to be eligible for a 3.05% Tracker deal instead of a 6.84% 2 year fix. We expect to pay back the loan within 6-9 months.

Is this a feasable strategy?

Thank you all in advance for your help.

LeserattePD

LeeSouthEast

You'll probably be refused a mortgage having such a large loan outstanding. Catch 22.

Mrs_Bumble

The loan repayments will just be deducted from affordability and the repayments on that size of loan would be substantial, and so the amount that you could borrow would reduce significantly.

Lenders would also wonder why you had taken a loan for such a large amount and then mortgage.

New build flat and a tracker + 3.05% is that a good combo?

LeserattePD

Mrs_Bumble wrote: »

The loan repayments will just be deducted from affordability and the repayments on that size of loan would be substantial, and so the amount that you could borrow would reduce significantly.

Lenders would also wonder why you had taken a loan for such a large amount and then mortgage.

New build flat and a tracker + 3.05% is that a good combo?

14000 isn't a large loan for us, as I said, we'll probably repay that within 6-9 months on top of the mortgage commitment (which would actually be cheaper than what we are paying in rent now, and we saved 25k within a year on top of that). I guess people will ask why we're not waiting another 6 months to buy, but I am starting a new job and we need to move because of it. No point in renting for 6 months and moving again!

IMHO fixing at the current rates (at least for 2-5 year fixes) is not a financially wise move, as interest rates will stay low for the next two years and will only rise after that. If they put the interest rates up too quickly they'll just crash the housing market again and stiffle any economic recovery.

Mrs_Bumble

You will have to see how the monthly payments affect the affordability of a mortgage then.

The new job is it a permanent contract or will you be on probation?

How have new build flat values been affected in the particular area that you are moving too?

Trackers are fine if you can afford the potential increases and take into account the potential value of the new build flat in 2-5 years and LTV's etc.

_Andy_

No mortgage lender will accept a loan as a source of deposit.

Additionally I doubt you'll find any loan providers willing to lend for that purpose.
So no it's not feasible.

house123

LeserattePD wrote: »

14000 isn't a large loan for us, as I said, we'll probably repay that within 6-9 months on top of the mortgage commitment (which would actually be cheaper than what we are paying in rent now, and we saved 25k within a year on top of that). I guess people will ask why we're not waiting another 6 months to buy, but I am starting a new job and we need to move because of it. No point in renting for 6 months and moving again!

IMHO fixing at the current rates (at least for 2-5 year fixes) is not a financially wise move, as interest rates will stay low for the next two years and will only rise after that. If they put the interest rates up too quickly they'll just crash the housing market again and stiffle any economic recovery.

Just wait then. You never know whats around the corner.

opinions4u

LeserattePD wrote: »

We are considering to take out a loan for around 14k to achieve a 75% LTV on a new built flat in order to be eligible for a 3.05% Tracker deal instead of a 6.84% 2 year fix. We expect to pay back the loan within 6-9 months.

Is this a feasable strategy?

My stategy would be to save up the deposit and then buy. The same flat will probably still be on the market in 6-9 months!

I'm not aware of any loan providers offering loans for house deposit.

Most mortgage lenders will ask where your deposit came from anyway. Most don't like people borrowing to fund deposit.

I think it's a flawed strategy.

emma2009_2

just a thought but why dont you try Natwest, they offer an 80% LTV on a new build, with a 2 year tracker at 2.99% (tracking at 2.49%), £799 fee. Then you havent got as much money to find and a lower rate.

Another possible thought, some developers, if you ask them, will offer to lend you the shortfall on an interest free loan over say 5 years. that would be better then getting a loan. anyway, just an idea, hope you get sorted

LeserattePD

emma2009 wrote: »

just a thought but why dont you try Natwest, they offer an 80% LTV on a new build, with a 2 year tracker at 2.99% (tracking at 2.49%), £799 fee. Then you havent got as much money to find and a lower rate.

Another possible thought, some developers, if you ask them, will offer to lend you the shortfall on an interest free loan over say 5 years. that would be better then getting a loan. anyway, just an idea, hope you get sorted

I tried NatWest, the 80% LTV is only for newbuild houses, they'll do up to 75% LTV on new build flats.

Anyway, problem solved, as my partner's parents will give us the money. No need for a loan after all!

Thanks to everyone for their thoughts aand suggestions.

emma2009_2

LeserattePD wrote: »

I tried NatWest, the 80% LTV is only for newbuild houses, they'll do up to 75% LTV on new build flats.

Anyway, problem solved, as my partner's parents will give us the money. No need for a loan after all!

Thanks to everyone for their thoughts aand suggestions.

thats great!!! wish mine would give me some haha...best of luck