Taking Out a Loan to Pay for a House Deposit

Thrugelmir

[QUOTE=totallynaive;49949785The_plan_being_to_use_them_as_much_as_possible,_then_pay_them_off_before_the_end_of_the_interest_free_period._[/QUOTE]

And lenders know that people will fall into this trap. 0% interest otherwise wouldn't make business sense. Taps into the buy now pay later culture. Trouble is tomorrow gets pushed back and back.

totallynaive

Thrugelmir wrote: »

And lenders know that people will fall into this trap.

Completely agree. The funny thing is I thought I would not be one of them!

Sonic_The_Hedgehog

It's amazing how quickly things can become possible! You could look for 5% or 10% deposit paid by vendor, though declaring this will restrict competitive Mort rates, it will also restrict house choice obviously.
In wisdom I agree with what these guys say a little. Best bet would be a loan or 'gift' from family or something, even then it's a lot of pressure, a loan with emotions! Options are there, we even considered a loan too :-S it's just arguable which is the right way.
we owe more than you so my personal advice is get out alive! Squish that c card between you now, don't be tempted to spend any more. All very angelic advice I know but I worry too much about my situation so I'd do that. Easy to say cos after renting skanky flats and shared houses on and off paying to greedy monopolising self rightious landlords I'd had enough, though being completely priced out of the market in 2008 I'm now happy about, we got a better flat close to work for 2 years while prices got real and our search to us to creatively out of the box new areas, the commutes not bad either... why not test new cheaper (or less obvious) areas by renting there for a bit?

Good luck its not easy or cheap whatever ya do.

Derivative

My advice is to pay off the CC's and then save £7k. Your net worth is the most important thing. Forget monthly payments or what you have in your current account. Total value of marketable assets is the only figure that should matter unless you're living paycheck to paycheck.

When you look at the big annual numbers, it becomes easier to realise what's what.

Between you, you make £24k pa roughly after tax. Take off 6.5k for rent and council tax, that's £17500.

You need to save £10500 to clear the CC's and save a deposit. To do it in five years, you'd have to save £2000 a year.

Saving £2000 a year sounds like a lot, but then, spending £15500 (or £7750 each) sounds like a lot too.

Benefits of saving are that paying off the mortgage should be a doddle, and that you'll have had another few years together to figure out if you actually want to live together. :P

kingstreet

Sonic_The_Hedgehog wrote: »

You could look for 5% or 10% deposit paid by vendor

The only gifted deposit accepted now is on a newbuild and that's limited to 5%. The last vendor gifted deposit facility on second hand property ended on 25 July when Halifax pulled out.

Sonic_The_Hedgehog

Thanks kingstreet, I didn't realise it had ended, there were only one or 2 doing it and at a high rate. Good advice.

Ugebear

A lender would not refuse you a mortgage simply because you took out a loan to increase your deposit. But you may be refused a mortgage on the lender's view of affordability. As a general rule of thumb, the most a lender will lend when assessing affordability is calculated as total monthly income minus outstanding monthly credit multiplied by 40%. So simply having the loan could affect how much you can borrow.

The other reason for not taking out a loan is that mortgage rates, even on a 90% mortgage, are likely to be lower than the rate you would pay on a personal loan. So borrowing to fund a deposit doesn't make much sense.

Dave_Ham

Thank you - but this thread is over 18 months old...

Paul.gas

I have 3 houses, the one I live in I didn't get a loan for the deposit, but the two I rent out I did! I took a risk n so far it's paid off and a good way to get properties!

totallynaive

It looks like this thread has been raised a few times since I posted it, so thank you all for your input.


For those who are interested in an update, I'm happy to say that we're in a much better position now financially, although we still have a way to go. I'm now on £18k which is not a fantastic wage by any stretch of the imagination, but has certainly made things easier. My other half is now on £17k, which is great compared to the £12k she was on previously. So in total, an extra £6k after tax per year between us which definitely makes a difference.


We've moved into a nicer place with lower rent (£350/month), we'll have our debts cleared in a few months and we've even had a couple of holidays! Getting married next year now though - so the deposit will have to wait even longer - but at least it's in sight