Personal Loan for House Deposit

syd433

Hi there,

Me and my wife are looking to move house to a bigger house as we have a baby on the way. :-)

We currently live in a house worth around £125k and would move to a house worth circa £225k - £230k. In order to move we would need a minimum 10% deposit but don't have enough equity in our house to go for that - due to our house value dropping. We have been overpaying on our mortgage to build up equity but would need a loan of around £15k to make the move. Staying in our current house is not an option for various reasons.

I'd be interested to hear views on this; particularly from people that have done this. Some pros and cons.

Cheers

BadgerFace_2

Hey,

You'd be better off posting this in the house buying forum I think.

As far as I'm aware, most lenders, will not let you do this as it's akin to a 100% mortgage. That said, I have heard of it being done, so long as it is factored into the affordability calculations, i.e. you have a large surplus after paying the new mortgage.

euronorris

I'm not sure that you could make this work for you. If you got a loan for the deposit, then the amount they would be willing to give you as a mortgage would drop.

As I understand it, that would be based on affordability, not how much debt you have outstanding as such. So, if the loan repayments were 200pm for example, then they may decide you can only afford a mortgage repayment of 500pm which may be too small a repayment for the mortgage value you want. I hope that makes sense.

That's all if's and maybe's though. Can't be sure.

However, what I would suggest is that you go through your finances thoroughly and ensure that you could afford to repay both the mortgage and the loan at the same time, as well as all other bills. Don't forget that with a bigger house and a new baby, your costs will increase and I assume that your income will decrease for a while if your wife is on maternity leave.

Please be very careful.

_Andy_

No mortgage lender will accept a personal loan as a suitable source of deposit.
Also in any case I don't think you'd find a personal loan provider willing to lend for that purpose.

Idiophreak

People do it. They'll take out a loan (you want to make your old home nice for sale, afterall) then one way or another use this cash for a deposit.

Of course, this is then declared as "savings" rather than a loan...As BF says, people won't let you finance a deposit through a loan, so you basically have to lie (fraud) on your mortgage application - so it's fairly inadvisable.

As I say, though, people do it all the time and there are some fairly grey areas...(for instance, you spend everything you normally spend on CC's for a few months...you rack up £15k of debt on the cards, whilst saving your actual wages. You then take out a loan for debt consolidation...Now, are you committing fraud if you say the £15k is savings?)

jonesMUFCforever

Idiophreak wrote: »

People do it. They'll take out a loan (you want to make your old home nice for sale, afterall) then one way or another use this cash for a deposit.

Of course, this is then declared as "savings" rather than a loan...As BF says, people won't let you finance a deposit through a loan, so you basically have to lie (fraud) on your mortgage application - so it's fairly inadvisable.

As I say, though, people do it all the time and there are some fairly grey areas...(for instance, you spend everything you normally spend on CC's for a few months...you rack up £15k of debt on the cards, whilst saving your actual wages. You then take out a loan for debt consolidation...Now, are you committing fraud if you say the £15k is savings?)

First line should read people DID it - but no more - that's part of the reason for the credit crunch happening.