Loan to get a 95% mortgage?

Badger666

Hi,
First time buyer here....we've found a house, and various mortgages. Looking at the prices, we've been advised that it might be worth getting a loan to cover 5% of the price (£5450), rather than going for a 100% mortgage? That way the loan amount will be paid off sooner, and obviously the mortgage amount will be lower and we get a wider choice of mortgages....

Obviously there is a risk if we can't meet the mortgage and the loan repayments, but what are the risks if, for example, the mortgage company knew the deposit was coming from a loan etc? Is there anything we need to be aware of?

nrsql

You will be asked how you are going to finance the deposit.
The loan repayments will be taken into account by the mortgage company in deciding whether to offer the mortgage.
The loan presumably will be unsecured so they probably won't worry about it apart from that.

Their concern is whether you can meet the repayments and whether there is equity in the property to cover their risk.

Badger666

One mortgage broker advised getting the mortgage and credit checks completed, then applying for the loan.... Sounds a little dodgy, but what do i know!

Repayments shouldn't be a problem...but I must admit I am a little wary about taking out a loan to meet the deposit due to a lack of savings if something does go wrong....

MortgageMamma

get someone to calculate the difference in between the loan repayment and 95% mortgage, and a 100% mortgage, assuming loan taken over five years. you will then see what the best option is.