using loan for deposit.

Demarco

Hi,
The mortgage rate went up to say 10% or higher say 15%, could you still afford the repayments on the mortgage and on the loan? Your current rent would then look quite attractive.

alexlyne

regardless of what the loan is used for, it is still a loan that has to be declared when getting a mortgage offer.
The bank will ask you : have you any oustanding loans?
To which you would reply: yes, £12500

This will massively affect the amount they will lend you if you're earning 20K
(as I understand it)

i.e. They may lend you 3x your salary... i.e. 60K, so paying a 10% deposit would be OK. But with a 12.5K loan, they would only lend you 60-12.5= 47.5K, meaning you have to stump up a huge deposit.
(example to prove point only, numbers may not be representative of real life)

Yorkie1

And even if you fail to declare it in answer to a direct question (which would be fraud), they'll find it on the credit search.

DVardysShadow

gerry_mc wrote: »

... The repairs thing is a bit ott as well. I have had one burst pipe in my whole time in my house (admittedly only 6 years). That only happened when I decided to get a new boiler (this was through choice as opposed to necessity). So I wouldnt be thinking you would have to spend £70 pm on repairs. If you did then I wouldnt bother buying the house.

By repairs, of course we are comparing like with like. So, this for a homeowner will be everything the LL would have to pay out on the maintenance of the property. The emergency repairs such as burst pipes are only a small proportion of this. There is exterior and interior decoration and maintenance, replacement of carpets and curtains, central heating upkeep, plumbing upkeep. Updating kitchens and bathrooms as they exceed their service lives.

booboomania

Not sure if it is an option for you, but have you considered borrowing the money for a deposit from a relative and then applying for a loan to pay them back once you have moved?

datlex

I read this thread when looking up whether I could use a loan as a deposit.

I was a bit concerned that people were saying it was fraud so I thought the best thing to do was to ring a high street mortgage provider to see what they had to say.

I just rang Barclays and asked them the question can I use a loan as a deposit. They said:

They look at your income first, then deduct from that your expenses incl loan payments, then see how much you have left. Then then see if the mortgage you want is affordable to you. If it is then fine. If it isn't then tough. Basically they give a mortgage on affordability not salary.

So in theory even if you had a large deposit saved, if they thought you could not meet their mortgage papyments you would not get a loan.

ytfcmad

USM wrote: »

As above, lenders won't accept loans as deposits - you need to save this yourself.

Secondly, no chance at all of getting a 12k loan on such a low salary.

No not a chance:rotfl:keep digging

Idiophreak

EatingGlitter wrote: »

the reason there are no 100% mortgages etc anymore is because people overstretched themselves

The reason there are no 100% mortgages is because banks actually want to be able to get their money back if you can't repay your mortgage...Affordability really doesn't have anything to do with it. I could *easily* have afforded a 100% mortgage on our place - and certainly could have afforded to service both the mortgage and an unsecured deposit loan, too. Sadly I arrived just a couple of years too late...

I think there are workarounds people use in this situation - spend everything on credit cards, for instance, and save your wages. Then use the loan to consolidate your debts - and use your new savings as deposit. Then you can honestly put "savings" as the source of deposit. Plenty of people have savings *and* credit card debt.

I think that's a legal grey area tbh...

Wh05apk

I can't believe some of the rubbish in this thread!

"What if rates go to 10 or 15%?" yes I know it has happened, but to be honest if base goes back to 5-6% in the next 5 years, I suspect the country will collapse, so 15% quite unlikely.

amongst other comments, the fact is the guy has the loan already, provided it is declared on the application, then the source of deposit is now "own funds" lenders will likely ask for bank statements to proove the deposit and will question any recent lump sums, to ensure that there is no additional borrowing to fund the purchase, if the loan is already in place and accounted for this will not be an issue.

With very high rates at high loan to values, it can often be cheaper overall to take a personal loan to move you into a lower rate band.