Using loan to pay stamp duty

FTBuyer_2

Hi All,

I am a First time buyer and looking to purchase below 250K mark to avoid Stamp duty. I have the 25K required for 10% deposit and 3-4K to cover other costs. I have also just taken out a 10K loan to purchase a car and this was approved by my bank immediately.

However, there is very little stock available around my location for 250K and pushing my upper limit to c285K opens up a whole new market but means having to fork out another 7-8K in stamp duty.

SO, i have a few options now:

Option 1: Since I haven't purchased the car yet, I could use the 10K to fund the stamp duty and forget about getting a new car now (live pretty central and don't need the car for commute etc. so more of a luxury than necessity and Zipcar works perfectly well)

Option 2: Buy the car and use credit card to pay for stamp duty (if that is possible).

Option 3: Bite the bullet and move away where we can afford a 250k property.

Option 4: Try for a 95% LTV and use the remainder of the 5% deposit to pay for stamp duty.

Facts:
OH and I joint income: 85K
Monthly savings: 1.5k (Can be increased by another £200 per month)
No credit card debt
No dependents and fairly conservative lifestyle
No loans (Except the car loan at c200/month)
good credit history


Thanks in advance for any advice.

Cheers.

Yorkie1

Are you sure you'll get the mortgage for the amount you want? Mortgage lenders will take into account any other credit commitments, particularly recent loan transactions or credit card borrowings, in deciding what they are prepared to lend you.

Your solicitor will require the funds for stamp duty before you complete the transaction. They won't accept credit cards so you'd have to do a cash withdrawal on the CC, with associated costs for that.

In my view you should cut your cloth according to what you can afford. The extra interest rate at a 95% mortgage - even assuming you find a lender who will give you that product with the other debt you have - will be a lot.

FTBuyer_2

Yorkie1 wrote: »

Are you sure you'll get the mortgage for the amount you want? Mortgage lenders will take into account any other credit commitments, particularly recent loan transactions or credit card borrowings, in deciding what they are prepared to lend you.

Your solicitor will require the funds for stamp duty before you complete the transaction. They won't accept credit cards so you'd have to do a cash withdrawal on the CC, with associated costs for that.

In my view you should cut your cloth according to what you can afford. The extra interest rate at a 95% mortgage - even assuming you find a lender who will give you that product with the other debt you have - will be a lot.

Thanks Yorkie1. You have a valid point about the solicitor requiring funds upfront so can't go down that route, and withdrawing cash on the CC is not even worth thinking about.

Getting the mortgage amount however should not be a problem as even if a lender decided to lend us 3.5 times our income, it's more than the required mortgage amount. (3.5 x 85k = 297.5K) I am looking to borrow (285K (property value) - 28.5K (deposit) = 256.5K).

billymadbiker

My partner and I are in much the same position. Don't need to worry about stamp duty though as we can get some nice houses for just under 250 around our way.

What we did find though - and we both have good credit, firm jobs etc etc..
1. You really want (or the banks really want) a 25% deposit. Especially if you are a ftb.
This gets you the best rate and the wider choice of lenders. With only 10% you will struggle to get a good rate and to borrow the amount you want.

2. They will not lend 3.5 times joint income. At best you will get 3.5 the larger income and 1.5 the second. (so if you earn 55k & 30k for example you could get 3.5x55(=185) + 1.5x30(=45) so 230k. Thats if your wages are split unevenly. Ours were 'worse' as we are both on about 45k so only got offered about 225k and that varied about depending on the down payment. We had 1 offer of 225 with 15% deposit at a decent rate. The higest we could go was 255k but they wanted 25% deposit so we would actually be borrowing LESS by having the 255 than the 225!

property.advert

The blazing question has to be just what on earth you were thinking by taking out an unnecessary £10,000 loan for a car you do not need just before you want a lender to advance you maximum amounts with a mere 10% deposit.

You have no rainy day money put aside !

I'd knock you back in a second, irrespective of the true risk profile, simply because you are showing you cannot live within your means before I add a quarter of a million pounds of debt to your burden !

I'd get out of the loan. It will cost you a few hundred I guess and in a month or two it will be on your credit file as repaid. Until you do that, it looks as though you have borrowed the £10,000 to make up your £25,000 deposit. You could tell me you spent it on a car or put it on black, I wouldn't care.

DannyboyMidlands

Easy, don't buy the car.

We recently got 1.9 x joint income with 25% deposit, good credit records and a rainy day fund of about a years joint income. Sounds harsh but the larger deposit secures a cracking interest rate (sub 3%) and monthly payments so low that we hardly notice them.

Cushty.