Mortgage Deposit Question

Dem85

I've read a few threads and understand that no mortgage lender would accept a deposit that is paid with a personal loan. I couldn't find, however, a situation similar to mine.

My annual income is around £85k pa and I have around £12-13k in savings. I am considering buying my first property for a about £175k.

Now, I understand I could take a mortgage of up to 3-4 times my salary (i.e. £240-320).

It seems to me that nowadays mortgagors require at least 5-10% deposit (i.e. £8.75k-17.5k). Clearly my savings would be insufficient to cover both the deposit and the fees associated to purchase a property (estimated £5-7k, but please let me know if that figure is too low/high). So, I was thinking of taking a personal loan to cover off either the fees or part of the deposit. I should have a good credit rating and have no debt.

Do you think it is a good idea? How would mortgagor take it if it sees a personal loan on my credit file, even though this is just to cover the fees?

Thanks for any advice. :j

beecher2

You need a 10% deposit, so would still need more money saved as you can't use a loan for part of your deposit.

ViolaLass

Dem85 wrote: »

I've read a few threads and understand that no mortgage lender would accept a deposit that is paid with a personal loan. I couldn't find, however, a situation similar to mine.
...

So, I was thinking of taking a personal loan to cover off either the fees or part of the deposit. I should have a good credit rating and have no debt.

How is this not the same situation as elsewhere?

JSR

Why can't a deposit be funded by a loan? I've not seen this prohibited on lending criteria when I was looking. In fact, my mortgage application form had a check box for this option. Surely it only matters that you can afford both repayments. The mortgage lender is not exposed to any more risk whether the personal loan was spent on a car or used for the deposit?

Still I'm curious why the need to consider a loan given the relatively small amount needed relative to such a large income. I would have thought the £5K could be accumulated in just a few months?

Thrugelmir

Why not save for 12 months and build up your deposit?

edinburgher

Why not save for 12 months and build up your deposit?

Absolutely - why the rush to buy? I can't think of anywhere where you'll get much property for £175k where the market is bouyant and you're likely to get 'left behind'. Waiting a year will probably get you better value for money, a smaller mortgage and no need to take out an additional loan.

Barny1979

£85K per year and you can't build up more of a deposit? What are your outgoings?

metaldud

I dont understand how people on such a high wage cannot just save some of it. I earn £16000 and my girlfriend £8000 yet we managed to save £15000 in a year so you should have no problem.

shy2011

You can use a loan for the deposit as long as your income covers the loan and mortgage and outgoings for affordability purposes. However is it worth paying more interest when you could save for a little while longer?

edinburgher

I earn £16000 and my girlfriend £8000 yet we managed to save £15000 in a year so you should have no problem.

After tax I take it? Still, 62.5% of your income - nicely done!

_Andy_

shy2011 wrote: »

You can use a loan for the deposit as long as your income covers the loan and mortgage and outgoings for affordability purposes. However is it worth paying more interest when you could save for a little while longer?

Please explain which mortgage lender accepts a loan as source of deposit, assuming it is properly declared.