We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
PLEASE READ BEFORE POSTING: Hello Forumites! In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non-MoneySaving matters are not permitted per the Forum rules. While we understand that mentioning house prices may sometimes be relevant to a user's specific MoneySaving situation, we ask that you please avoid veering into broad, general debates about the market, the economy and politics, as these can unfortunately lead to abusive or hateful behaviour. Threads that are found to have derailed into wider discussions may be removed. Users who repeatedly disregard this may have their Forum account banned. Please also avoid posting personally identifiable information, including links to your own online property listing which may reveal your address. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Taking out a loan to pay provide a deposit - good or bad idea?
GoldenUx
Posts: 8 Forumite
Hey guys first time poster here, I just wanted to get some advice and canvass your opinions regarding my current circumstances.
My partner and I are looking to buy a new build (shock horror!) and have been researching means to obtaining a mortgage in these difficult and frustrating times. We've looked into the shared equity route which we decided was not for us (the uncertainty of it all was terrifying if I'm honest).
As you're probably be aware, most banks/building societies are asking for 15% - 25% deposit on new builds however we've finally found a bank that will do 10% providing we set up an account with them which has £750 a month or more going into it. Great, no skin off our nose as we have no loyalties towards who we're with currently. We're hoping an offer of £205,000 to £210,000 will be accepted by the builder so a 20 - 21 grand deposit will be needed.
Our problem is that half of the deposit will be via equity in our current home and the other half needs to come from elsewhere as we have zero savings. My parents have offered to loan the money to us which I have declined as I don't want to touch their savings.
My parents have since offered to take out a loan in their name which we would pay off over 5 - 10 years (still undecided on how long to go for). The reason their offer is tempting is that because it's in their name the loan APR is quite low at 3.5% - something to do with remortgage their home. Would it be fair to do this? We plan on paying the loan off ourselves with no help from my parents. I'm clompletely inept when it comes to the financial industry and have never needed to take an interest until now. The only negative I can see thus far is that should they remortgage their home (to get the 3.5%) this would hinder any plans to move home over the loan repayment years and they've assured me that this wouldn't be an issue.
I hate the idea of having a loan to pay off each month along side a mortgage but the home we intend to buy is a dream home and we can afford the payments providing we tighten our belts over the next couple of years. We've worked out that following all our monthly bills which would include our mortgage, loan (for the deposit), food, petrol, utilities etc that we'd be left with £350 a month. My partner thinks that's enough but bear in mind we have a 1 year old son I'm not sure the risks are worth it.
Anyone else in a similar position where they've decided to take out a loan to supplement a deposit on a home?
My partner and I are looking to buy a new build (shock horror!) and have been researching means to obtaining a mortgage in these difficult and frustrating times. We've looked into the shared equity route which we decided was not for us (the uncertainty of it all was terrifying if I'm honest).
As you're probably be aware, most banks/building societies are asking for 15% - 25% deposit on new builds however we've finally found a bank that will do 10% providing we set up an account with them which has £750 a month or more going into it. Great, no skin off our nose as we have no loyalties towards who we're with currently. We're hoping an offer of £205,000 to £210,000 will be accepted by the builder so a 20 - 21 grand deposit will be needed.
Our problem is that half of the deposit will be via equity in our current home and the other half needs to come from elsewhere as we have zero savings. My parents have offered to loan the money to us which I have declined as I don't want to touch their savings.
My parents have since offered to take out a loan in their name which we would pay off over 5 - 10 years (still undecided on how long to go for). The reason their offer is tempting is that because it's in their name the loan APR is quite low at 3.5% - something to do with remortgage their home. Would it be fair to do this? We plan on paying the loan off ourselves with no help from my parents. I'm clompletely inept when it comes to the financial industry and have never needed to take an interest until now. The only negative I can see thus far is that should they remortgage their home (to get the 3.5%) this would hinder any plans to move home over the loan repayment years and they've assured me that this wouldn't be an issue.
I hate the idea of having a loan to pay off each month along side a mortgage but the home we intend to buy is a dream home and we can afford the payments providing we tighten our belts over the next couple of years. We've worked out that following all our monthly bills which would include our mortgage, loan (for the deposit), food, petrol, utilities etc that we'd be left with £350 a month. My partner thinks that's enough but bear in mind we have a 1 year old son I'm not sure the risks are worth it.
Anyone else in a similar position where they've decided to take out a loan to supplement a deposit on a home?
0
Comments
-
Sounds like a no no to me. The figures say you cant afford it and your merely fudging these figures as you wont be truthfully telling the lender your outgoings either.
I understand your desperate to move, but surely theres a better way to do this.
P.S its not a loan , its a second mortgage. Unless you work it out exactly each month theres a chance your parents will still be paying some of the interest on your cash.0 -
Hey guys first time poster here, I just wanted to get some advice and canvass your opinions regarding my current circumstances.
My partner and I are looking to buy a new build (shock horror!) and have been researching means to obtaining a mortgage in these difficult and frustrating times. We've looked into the shared equity route which we decided was not for us (the uncertainty of it all was terrifying if I'm honest).
As you're probably be aware, most banks/building societies are asking for 15% - 25% deposit on new builds however we've finally found a bank that will do 10% providing we set up an account with them which has £750 a month or more going into it. Great, no skin off our nose as we have no loyalties towards who we're with currently. We're hoping an offer of £205,000 to £210,000 will be accepted by the builder so a 20 - 21 grand deposit will be needed.
Our problem is that half of the deposit will be via equity in our current home and the other half needs to come from elsewhere as we have zero savings. My parents have offered to loan the money to us which I have declined as I don't want to touch their savings.
My parents have since offered to take out a loan in their name which we would pay off over 5 - 10 years (still undecided on how long to go for). The reason their offer is tempting is that because it's in their name the loan APR is quite low at 3.5% - something to do with remortgage their home. Would it be fair to do this? We plan on paying the loan off ourselves with no help from my parents. I'm clompletely inept when it comes to the financial industry and have never needed to take an interest until now. The only negative I can see thus far is that should they remortgage their home (to get the 3.5%) this would hinder any plans to move home over the loan repayment years and they've assured me that this wouldn't be an issue.
I hate the idea of having a loan to pay off each month along side a mortgage but the home we intend to buy is a dream home and we can afford the payments providing we tighten our belts over the next couple of years. We've worked out that following all our monthly bills which would include our mortgage, loan (for the deposit), food, petrol, utilities etc that we'd be left with £350 a month. My partner thinks that's enough but bear in mind we have a 1 year old son I'm not sure the risks are worth it.
Anyone else in a similar position where they've decided to take out a loan to supplement a deposit on a home?
If you can't afford the deposit, you can't afford the house.I was born too late, into a world that doesn't care
Oh I wish I was a punk rocker with flowers in my hair0 -
Sounds like a no no to me. The figures say you cant afford it and your merely fudging these figures as you wont be truthfully telling the lender your outgoings either.
I understand your desperate to move, but surely theres a better way to do this.
P.S its not a loan , its a second mortgage. Unless you work it out exactly each month theres a chance your parents will still be paying some of the interest on your cash.
Thanks for the advice, I dislike making any decision when I'm not fully aware of the pros and cons so I'll bear this in mind. My mother went to the bank about it and the way it was explained is that there would be a fixed APR over the payback period but I can't understand why they'd need to remortgage their home. I think we could manage our bills as our jobs are secure and income can only go up over the coming years.0 -
I think we could manage our bills as our jobs are secure and income can only go up over the coming years.
Are you both undertakers?
No such thing as a secure job/guaranteed income anymore.I was born too late, into a world that doesn't care
Oh I wish I was a punk rocker with flowers in my hair0 -
iamana1ias wrote: »Are you both undertakers?
No such thing as a secure job/guaranteed income anymore.
I came here looking for helpful advice, I see enough doom and gloom on the news thank you very much!0 -
Make sure you take potential mortgage rate increases into account... an extra % can make quite a difference in a few months time to your budgets.0
-
Um, You're a first time buyer looking to buy a £215,000 flat in South Wales?
South Wales!
Surely there would be something available for about half that?0 -
If it was me I would work out for definate if £350 a month spare would actually be enough... if so and it all works out then go for it... especially if your family are happy with the loan.0
-
iamana1ias wrote: »If you can't afford the deposit, you can't afford the house.
Can you ellaborate on this? Because you're pretty much saying that all those people who needed to take out a 100% mortgage several years ago couldn't afford their home? The reasons why don't have a deposit right now are due to paying for a wedding, baby, kitting out our current home etc Not because we're living on the breadline. I'm not too concerned about my wife and I losing out on any decision we make I just don't want my parents to be affected because we want to buy our dream home.0 -
Lol....I never said anything about being a first time buyer. I'm a homeowner and we're looking to part exchange - we're pretty happy with the offer the builder have given on our home by the way.Frank_Cannon wrote: »Um, You're a first time buyer looking to buy a £215,000 flat in South Wales?
South Wales!
Surely there would be something available for about half that?0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352.1K Banking & Borrowing
- 253.6K Reduce Debt & Boost Income
- 454.2K Spending & Discounts
- 245.1K Work, Benefits & Business
- 600.8K Mortgages, Homes & Bills
- 177.5K Life & Family
- 258.9K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.6K Read-Only Boards