Refinancing Personal Loan + New Mortgage with LIFT Scheme Scotland

DracoAuric

Hello,

Was wondering if anyone has any suggestions with the following situation:

My wife and I are looking to buy our first home and have started to save for a deposit. We've only started saving recently and have just over £2k so far.

We just got a surprise application for the LIFT scheme in Scotland about a week ago and just found out that we've been approved and have three months to get an offer accepted.

For those who don't know the LIFT scheme is the Scottish government basically paying a deposit for you to buy a home in exchange for a percentage of the equity. However all the banks at the moment are asking for a 5% deposit on top of what the Scottish government is putting up. Which would be about £5k in our case. With only three months to find a place we won't be able to save enough for the deposit plus the legal fees and a bed for the new place.

My wife also has a personal loan with about £5k outstanding which should not present a problem in our application for a mortgage(we actually already gotten an AIP from HBOS) Now the payments on this loan are about £215/month and the interest rate is 9.1%. So when we saw on the main page here that the current loans on the market were around 7.6% we started to wonder about the possibility of getting a new loan to payoff the outstanding balance(there are no early repayment charges on the current loan) plus enough to cover the rest of the deposit.

Looking at the calculators online a loan of £8k over five years would bring the monthly payments down to around £160 a month.

Now the question is: would this hurt our chances of getting a mortgage? and are there other downsides to consider?

Any help, suggestions, or opinions would be greatly appreciated.

opinions4u

Leave the loan as it is until after the mortgage has completed.

My main reason for saying that is because it's highly likely that the rate you end up with would be higher than the rate you currently have (and in the example you give, most of the payment reduction is delivered by increasing the term, not reducing the rate). Very few people end up with the advertised market leading rate.

The other reason is that it would be an unnecessary credit search.

EDIT: I missed the bit about funding the deposit with credit. One of the questions on the mortgage application form will ask where the deposit came from. Answer honestly and you will be declined. Lie, and your credit file will reveal to the lender that you are trying to obtain funds fraudulently.

A single credit check will make little difference to a mortgage application. As part of a handful, it could cause problems.

beecher2

You can't fund a deposit with a loan, so your idea's a non starter. I don't know anything about the LIFT scheme, but can you get your offer extended after the 3 months are up?

DracoAuric

Thanks for the replies.

beecher2:
Why can't you fund a deposit with a loan? Is that a recent change? I ask because we have a friend who has done just that.

Not sure if would would be able to get the LIFT scheme offer extended. The information they sent us implied that they needed to use up their funding before the end of the financial year, and that it was uncertain if the scheme would be continued next year.

opinions4u:
You say that refinancing would lead to an unnecessary credit check, do you know how much that influences a mortgage application? My Wife's current bank ran a credit check on her without her permission when she called to ask about a PPI claim that she made recently. Could that hurt our chances of getting a mortgage?