loan to top up deposit?

ollski

Looking at getting a mortgage from post office for 240k but struggling with the 10% deposit we need. I could probably lay my hands on 18k but struggling for the rest so I'm wondering if I could use a 5 year 6k bank loan to make it up. I have checked the repayments on the post office cal and putting the loan repayment in it still gives me the multiplier I need for the mortgage. Am I missing an obvious problem in this?

Soot2006

The obvious problem is that this is not allowed by lenders so they will reject your mortgage application.
You can't finance debt with debt; or at least not as easily as in the olden days and certainly not with a Post Office mortgage as you won't pass their checks at the first hurdle.

Yorkie1

Lenders don't approve of loans as sources for deposit so you may well come a cropper.

Don't forget the money you'll need for solicitors fees, searches, mortgage application, survey, stamp duty (if applicable), moving in, furniture, initial set-up costs ... ... ...

ollski

How do they know if I have an agreement in principle now (I do) and take out a personal loan in the next few weeks?, I could use credit cards but that seems to be an incredibly expensive way to do it.

GMS

AIP is the first hurdle. Further checks will be done at underwriting stage which could reveal the loan. Solicitors would also need to be satisfied as to the source of deposit on completion so potential problems there.

Speak to Post Office and see what they say

ollski

Thanks appreciate the replies. Just let you know how I am looking at it so you may be able to let me know where the idea will fail. The mortgage calculator asks me about loan and credit card repayments which I have filled in accurately and it offers me a lot more than I need. If I add the repayment from the loan I would need then it reduces the offer considerably but still offers me enough to buy the house. I could sell the car to make the difference but then I would need another car and hence a car loan.

blueberrypie

Lenders want to see some evidence that you have been able to save a deposit - it's an indication of your ability to handle your finances well in the future. If you can't save for a deposit, you probably can't afford a mortgage (remember that owning a home brings more costs than just your mortgage payment). Lenders will not accept a loan as the source of a deposit, and if you don't tell them of it, you will be committing fraud, even if the loan was not noticed on the last-minute credit-check that many lenders perform before releasing funds.