Personal Loan for deposit ?

andyslinz

Hi all sorry for the really long post but would really appreciate some advice :rolleyes:

We currently rent privately at £500 per month and will be getting kicked out due to landlord selling 1 December 2009. We are wanting to buy a house rather than private rent again due to the unstable feel about not having a permanent home.Me and my long term boyfriend are both employed and have lived comfortably within our means for the last year while private renting.

We can get a mortgage apparently for up to £110k but the kind of property we want to buy is a terrace near my work for around £35,000. So this seems well within our affordability. We don't want to live beyond our means in more expensive house, we can go for that in the future. At the moment we would just be happy to get on the property ladder with this home in walking distance to my work.

However as of yet we have no deposit saved up so have looked at maybe financing via a loan. After looking at Money Supermarket this will cost around £150 per month for a loan of £7500 over 5 years (5k deposit 2.5k fees etc). A typical mortgage over 25 years for the £30k ( put in money supermarket the £150pm loan payment) would cost £180 pm fixed until 31/01/2013.

So in total loan & mortgage is £330 saving £170 per month than our current situation and saving around another £70 per month on petrol being closer to work. Total saving £240 per month.


So basically we would be better off money wise and have more stability.

However is it even possible to use a loan for the deposit? Does the property we want being so cheap help us with this ?

Is there maybe anything else we could do to get on the ladder ?

Any help and advice is much appreciated.

Thanks for your time
Lynsey

Edit: Forgot to say we have no other o/s loans, no bad credit history or anything like that. Both clean. Also will be getting £500 back from landlord in december from our deposit.

_Andy_

Not going to happen

1) No mortgage lender will accept a personal loan as a deposit and
2) I doubt you'll find a loan provider willing to lend for that purpose anyway.

LeeSouthEast

Pointless. If by some miracle you find a lender who will permit it, they'll take off the loan against the max mortgage they'll give you.. so you end up back at square one.

Save up from your income. More credit is not the answer to life, the universe and everything.

lellow_lorry

The key to this one is to plan ahead. A loan for perhaps a car and holiday.....lenders quite happily give money. If you change mind or shift money about a bit and not take mortgage with same lender you might manage it, although this is a gamble and lenders take a dim view on this if caught.

andyslinz

lellow_lorry wrote: »

The key to this one is to plan ahead. A loan for perhaps a car and holiday.....lenders quite happily give money. If you change mind or shift money about a bit and not take mortgage with same lender you might manage it, although this is a gamble and lenders take a dim view on this if caught.

Yeah I thought this is the way it had to be done, doesnt sound like a great plan though !

I have found out that the mortgages i am looking at are 95% LTV meaning I would only need a deposit of £1750.

Would it be possible to finance this with my overdraft ? I am not sure how the mortgage application process exactly works.

I mean we can deffinately afford the place judging by the monthly payments its just we dont have enough time to save up that money in just 2 and a half months.

Snuggles

Have to say, I can't see why this wouldn't be possible. If it were me, I wouldn't be telling the mortgage provider that the deposit came from a loan - they will obviously see that you have a loan when they do the credit check, but given the amount of mortgage you will require compared to the mortgage you say you think you could get, I would be surprised if this was a problem.

Similarly, I wouldn't be telling the loan company I wanted a loan for a deposit - they don't come and check what you spent the money on, and it's not part of the agreement you sign, that you have to spend the money on x, y or z. All they care about is that you make the repayments each month.

I wouldn't usually think it was a good idea to fund a deposit with a loan, but in this case you are talking about relatively small amounts. However, what you should be asking yourself OP, is why you have not managed to save for this, given you say you have no other debts, and are you therefore being realistic about what you can afford?

andyslinz

Just had another thought.

Could for example one of us take the loan out to buy a car ( then change our mind )

And the other take out the mortgage and then the deposit would be from a relative and not a loan.

Obviously only one of us would have our name on the house but we would be fine with that and could change it in the future.

What do you think?

Thanks
Lynsey

andyslinz

Snuggles wrote: »

Have to say, I can't see why this wouldn't be possible. If it were me, I wouldn't be telling the mortgage provider that the deposit came from a loan - they will obviously see that you have a loan when they do the credit check, but given the amount of mortgage you will require compared to the mortgage you say you think you could get, I would be surprised if this was a problem.

Similarly, I wouldn't be telling the loan company I wanted a loan for a deposit - they don't come and check what you spent the money on, and it's not part of the agreement you sign, that you have to spend the money on x, y or z. All they care about is that you make the repayments each month.

I wouldn't usually think it was a good idea to fund a deposit with a loan, but in this case you are talking about relatively small amounts. However, what you should be asking yourself OP, is why you have not managed to save for this, given you say you have no other debts, and are you therefore being realistic about what you can afford?

Hi snuggles,
Thanks for your reply ! Youve said exactly what we were thinking. With it being such a smaller amount compared to a usual situation we thought a loan for the deposit might just work.

As regards to having no savings, we just booked and paid for a holiday last month then found out that we wouldnt be able to renew our tennancy. Still we should have planned ahead. We also found out this week will both recieve another £100 a month pay rise in octobers pay so monthly budget wise we should be fine. Just didnt plan ahead well enough to have the deposit already.

Thanks again for your input, much apprecated.

Lynsey

poppysarah

andyslinz wrote: »

Me and my long term boyfriend are both employed and have lived comfortably within our means for the last year while private renting.


However as of yet we have no deposit saved up

Without wanting to bang on about credit crunch, 100% loans being a no-no and the state of the economy, I'd suggest you reassess your living within your means to include saving.

Seriously save some money and put a healthy deposit down. Make a challenge of it for a year to see how much you can save if you try.

If you can't save then you shouldn't be buying a house.

poppysarah

andyslinz wrote: »

Just had another thought.

Could for example one of us take the loan out to buy a car ( then change our mind )

And the other take out the mortgage and then the deposit would be from a relative and not a loan.

Obviously only one of us would have our name on the house but we would be fine with that and could change it in the future.

What do you think?

Thanks
Lynsey

Have you heard the expression liar loans?

blunt_crayon

given that you need to leave your current accommodation by 1st december, it's quite unlikely that you'd be able to go through the whole housefinding and buying process and be ready to move into the new place by then (approx 11 weeks). you'd probably have to sort out some alternative accommodation which would be a pain as it would be over xmas too. if i were you i would take out a short lease (normally 6 months ast) on the cheapest rented accom you can find (or a house share) and save like mad until you have enough to put down a deposit. even if you don't have all the deposit after 6 months you would only need to take out a smaller loan or could use your overdraft, etc. or move in with family/friends for a short time if this is an option? if you're paying £500/m plus utilities etc, you could probably save £2k in 3 months without any difficulty. you don't say how much you have in savings but you'll need a couple of grand to cover legal and moving costs as well as a deposit. good luck.