Loan for Deposit? Good Idea/Bad Idea??

chicken_5

My Boyfriend and I are looking to buy a house in london in the next year or so - but first we need to raise about £12K for the deposit, which we should be able to do. But we also want to do other things like get married which also costs and although I am sure our parents will chip in the average wedding apparently costs £11k too according to some random website -so thats alot of saving!

We also plan to move abroad (in about a year/ year and half) where my boyfriend can earn alot more and we will be able to rent out the flat whilst we are gone.

My boyfriend can get a mortgage for 220k on his own, salary mine dosent actually add that much more and we could get a 1/2bed flat for that. What I am considering doing is taking out a personal loan for about 12K (however much the house buyer extras come too but mainly to cover deposit) We could then pay back the loan reasonably quickly, so hopefully wouldnt end up paying too much extra.

We could then use the money we are saving to pay for things like the wedding rather than having to either postpone moving abroad till we can afford to get hitched and buy a house or just forget about buying a house till we come back.

Does this sound like a ridiculous plan? Any ideas would be appreciated

AndrewSmith

We also plan to move abroad (in about a year/ year and half) where my boyfriend can earn alot more and we will be able to rent out the flat whilst we are gone.

You cannot be guaranteed that you will be able to let the flat for the amount needed to cover the mortgage.

My boyfriend can get a mortgage for 220k on his own, salary mine dosent actually add that much more and we could get a 1/2bed flat for that. What I am considering doing is taking out a personal loan for about 12K (however much the house buyer extras come too but mainly to cover deposit) We could then pay back the loan reasonably quickly, so hopefully wouldnt end up paying too much extra.

Your loan repayments would compromise the amount any mortgage lender would be prepared to offer you. EG: if your new loan repayments were £300 per month, this would be annualised and deducted from the salaries before applying the income multiple, thus on 3.5x joint income it would have the effect of reducing the available mortgage by £12,600. Even with an affordability based lender the effect would be similar.

Also the majority of lenders are not happy with you borrowing the deposit monies as it demonstrates a lack affordability in the purchase.

We could then use the money we are saving to pay for things like the wedding rather than having to either postpone moving abroad till we can afford to get hitched and buy a house or just forget about buying a house till we come back.

There are so many variables that specific guidance is not possible within the realms of an open forum. However my own opinion is that you should not buy the property here if you are intent on getting married and moving abroad for a while. definately do not borrow money for a deposit.

Hope this helps

Andy

chicken_5

Thanks for your advice and I take your point about loans decreasing your mortgage amount.

But maybe it wasnt clear what I was suggesting, My boyfriend can get a mortgage on his own and essentially by the flat by himself, I wont be financially involved although I will still have my name on the house deeds and contribute to the mortgage.

I could take out a personal loan on my own and then we could use this money for a deposit/towards the cost of buying a house, I looked on some loan websites that say it would cost about 600 a month for a 15000 loan over 2 years - we are currently saving over a grand a month so I figure we can afford that between us, and if we got a loan with no penalties for over paying we could get rid of it as soon as we could and it would not cost that much extra?

In terms of renting the flat, there is a chance we couldnt find tenants but I dont think that will be a major issue and obviously we would have to check the mortgage payments were in line with rental market and consider that before we did anything.

Is it still a bad idea - the other alternative is to consider a 100% mortgage but everyone tells me they are bad because of the risk of negative equity.

Or is it still advisable to leave house buying till we want to live in it and plan on staying put?

lynzpower

1. do you expect to be able to save the money for the wedding while you are paying off the loan
2. will you be contributing to mortgage & bills?
3. have you got savings for furniture/ organising any work that might need to be done to the flat or is this coming out of debt too?
4. have you saved sols fees/ stamp duty/ residual costs? Or will you expect to borrow these?
5. when you move abroad, wil you be doing this for work, both of you? If not do you intend to have the loan paid off before you leave
6.whatr if you cannot find someone to rent the flat, can you afford the voids
7. buying a flat now will mean that your mortgage payment is higher than someone who bought a similar flat last year, thus when it comes to rent out they will be cheaper than you. How can you be convinced someone will pay it? Only there are A LOT of voids around london at the moment, this may well continue. you might not think finding tenants is a major issue but Ive been looking for rental properties myself and theres some sat in the internet since may, june etc. Im sure the owners of those properties didnt think there would be problems finding someone to move in either, but they are.
8. if you cant find anyone to rent it will you stay put?
9. If you are not going to be working overseas, and you will be travelling volunteering, do you anticipate that you will be able to save enough in those 2 years to be able to fund these travels on top of the wedding
10. you will also need to consider a whole raft of legal issues in renting the flat out, as you become a landlord and if you are out of the UK you have to instruct a letting agent to let the property fort you who is based in the uk by law. this costs money too , although other users will be able to tell you more about this
11. you will need to have money sat aside for voids, otherwise the mortgage will bounce while you are away, do you expect that you will be able to do this? ( unless you have good incomes from working overseas that is, )

Sorry I am rattling through this, but in all honesty you sound a bit like me when I bought my flat. As you can see, im still paying it offwhat with all the unforeseen costs and going into the whole affiar too early adn without enough money. If I knew then what I know now I would not have bought this flat, and I would have waited.

Tassotti

11K for a wedding sounds extremely cheap. Budget for about 25K.

Let your OH buy the place and get a 0% deal on a credit card for the deposit and wedding. Then just keep transferring to 0% cards.

From the initial figures, I take it your BF is earning 50-60K per year.

That's enough money, plus yours not to worry.

AndrewSmith

If you are being named on the deeds then you will need to go on the mortgage application.

Even if you do not go on the mortgage your OH will have to declare that you are going to live at the property with him which may cause the lender to still investigate your situation further.

In this case then any loan that you take out will be taken into consideration against the amount of money able to be loaned.

Also lenders, as I said originally, do not like you useing the proceeds of a personal loan as deposit for a purchase. You will be asked on the application form for the source of deposit funds and whether you are borrowing money from elsewhere towards the purchase.

They will see that a loan has recently been taken out when they carry out credit seaches / score and, again via the application process, you will have to declare what the loan is for. Even if you take the loan after the mortgage application is in it is not unheard of for a lender to do another assessment prior to completion or releasing funds to ensure that all current commitments are being adhered to.

Even if you do borrow the money on a 0% card, the lender will apply the minimum payment percentage of approx 5% to work out the monthly commitment to deduct from the income.

Lenders are not daft and will spot what is going on.

My advice is forget it until you are ready to live in it yourself.

jamminjamaica

i think a budget of 11k for a wedding is not realistic. but i would also not get a loan for a deposit.

clutton_2

why not have a smaller wedding ? thousands of ££££ for a one day affair, is just a huge amount of money and for what ? a few freinds in a registry office, and a small do in a local pub/village hall, should not cost thousands .... set your priorities -which is more important to you ?

i would not borrow money for a deposit either.

listen to lynz and andrew - very wise words both

lynzpower

Tassotti wrote:

11K for a wedding sounds extremely cheap. Budget for about 25K.

Let your OH buy the place and get a 0% deal on a credit card for the deposit and wedding. Then just keep transferring to 0% cards.

From the initial figures, I take it your BF is earning 50-60K per year.

That's enough money, plus yours not to worry.

Or do what one of my relatives did, big plush wedding, just stick it on the mortgage :cool: No problema

mi-key

£11K for a wedding is perfectly realistic if you arent planning on inviting 100's of guests and having a honeymoon that costs thousands.

When me and my wife got married, we had to pay for everything ourselves, and had a perfectly good wedding ( church job with reception in a nice country hotel and meal for around 50 people, plus some money behind the bar ) and probably spent around £4000 all in, which included my wifes hand made wedding dress !

I think a lot of people make the mistake of thinking they have to invite, feed and water every person they've ever met or are distantly related to, and end up spending too much.

We decided we'd rather keep the actual service and meal afterwards to our close friends and relations, then give out an open invitation to the party in the night so anyone else could come along if they wanted.

chicken_5

Thanks for all your advice, it all sounds very sensible! having given it some thought unless we could get some serious parental contributions towards stuff (not likely!) its probably much simpler to wait and buy the house after we have been abroad (where we will be working and hopefully earning more anyway).

thanks again