Taking out a loan to pay provide a deposit - good or bad idea?

Frank_Cannon

GoldenUx wrote: »

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?

Got it in one!

MobileSaver

GoldenUx wrote: »

Anyone else in a similar position where they've decided to take out a loan to supplement a deposit on a home?

The bank will ask you where the deposit came from and are unlikely to give you a mortgage once you tell them it is a loan.

mrstinchcombe

GoldenUx wrote: »

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.

Buy the house then.

But you can't afford marriage and children too.

iamana1ias

waynepyrah wrote: »

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.

And the increases on every other bill too. Nothing is getting cheaper!

iamana1ias

GoldenUx wrote: »

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?

Yep.

GoldenUx wrote: »

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.

If you're prioritising a big party and fancy baby items you don't really need over what's supposed to be your dream home, then you deserve to have problems.

GoldenUx

MobileSaver wrote: »

The bank will ask you where the deposit came from and are unlikely to give you a mortgage once you tell them it is a loan.

I wont have to tell them it's a loan. All I have to tell them is that my parents are fronting up the money. They wont be told I'm paying them back.

GoldenUx

iamana1ias wrote: »

Yep.



If you're prioritising a big party and fancy baby items you don't really need over what's supposed to be your dream home, then you deserve to have problems.

I already have the baby and married a few years ago. I was just outling the reasons why we haven't managed to store money away until this point. Sorry if it wasn't clear I need to proof read my posts in future

pinkshoes

GoldenUx wrote: »

I wont have to tell them it's a loan. All I have to tell them is that my parents are fronting up the money. They wont be told I'm paying them back.

This is dishonest.

Dishonesty often ends in disaster.

What's wrong with the house you've got? Why can't you stay put for another couple of years and save hard for the deposit yourself?

A loan for a deposit is the worst idea ever!!! It really is asking for trouble.

Are you sure you want your parents to take a loan out for you in their name??? It's something I'd never dream of asking my parents to do, and I'm very close to my parents!!

iamana1ias

GoldenUx wrote: »

I already have the baby and married a few years ago. I was just outling the reasons why we haven't managed to store money away until this point. Sorry if it wasn't clear I need to proof read my posts in future

How come you haven't saved anything for years if you were looking to upsize?

Seriously, you're doing this @rse backwards.

DVardysShadow

GoldenUx wrote: »

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?

Put bluntly, you are only fooling yourself if you believe that by taking out a loan in your parents name you are not touching their savings.

• If you default on the savings, of course your parents will have lost their savings
• If you default on the loan, of course your parents will have to make to money good from ... er ... their savings

If you must do this [I and I agree with the ohter posters, it is all a bad idea] - if your parents are getting less than 3.5% on their savings, then it is better to use the savings rather than the loan.

Another factor to take into account is that if the interest on your mortgage is 5% on a 90% LTV, you will need to find 4.5% of the value of the home each year for the interest only. If you borrow 5% of the value of the house from parents and pay it back over 5 years, you will need to find another 1% of the value of the house each year. So you will have to find about an extra nearly 25% over your mortgage.