First time buyer- loan to pay deposit query

Thrugelmir

Why not wait until your wife is back at work before obtaining a mortgage?

The criteria for lending on 95% mortgages may well be very tough.

maninthestreet

So what sort of price range are you looking at for this property in the SE of England?? You do not seem to have secured a new job yet in the SE, have you?

beecher2

You will need to have a job in the area you're moving to before applying for a mortgage, and have at least a 10% deposit. Seems as if the best idea would be to rent, save a deposit and wait until your wife has found a new job (if she is returning to work).

PGD

You can use a loan as a deposit but they will see that you've got a loan. Why try and hide it? I recently asked a bank the same question and they said that so long as the deposit is cleared funds (i.e all the money is in your bank and you're not trying to pay the deposit directly onto a credit card) then it's fine.

I wouldn't do this but if i wanted to i could log in to my credit card now and have £10,000 cash in my bank account by the end of today at 4.9% APR for life due to my excellent credit rating. I asked the bank up front about that and said yes it's fine so long as you understand that they will see you have £10,000 of debt when you apply and that will be taken off the amount you borrow.

I know of someone who did just what i said, £10,000 taken off a card, transfer it immediately to a 4.9% for life offer and that's how they got their mortgage.

Idiophreak

somethingcorporate wrote: »

It's a perfectly valid question to ask as the extra expense in home ownership is akin to saving for a deposit. You have failed in the latter so far so what makes you think you could afford the former?

Meh, people have reasons. Perhaps they've been paying debts, perhaps they went on holiday, who knows. I really think if the OP's happy that they can afford the thing, it's not worth beating the same drum over and over and the original question should be considered.

OP. As you're both well off, do you think you could still be granted a mortgage if they *did* see this loan on yours/your partners credit file? As PGD alludes to, different people have different views on what constitutes fraud in these things.

Saying the source of your deposit is a loan is a bit of a dead end...but saying it's from savings is fine. Few people had a problem with tarting to put money from a credit card into their savings - so what if these savings were the savings that you used for the deposit? Likewise, you can "save" a lot of cash quite easily - by buying stuff on credit instead for a while. As long as your mortgage application can take this extra debt being on your record, you're just a person with a bunch of savings *and* a bunch of debts. You're not compelled to settle all your debts before you apply for a mortgage...It just makes life easier.

Some people will consider any of the above fraud, however, as the root source of the deposit is the credit, but I think it's a bit grey.

Taking loans, however, is much more clear cut...as you need to state what you're taking it for. If you lie and say it's for a car, say, then lie to the bank and say your deposit's from savings, you're committing fraud on a couple of counts...

Thrugelmir

Idiophreak wrote: »

Some people will consider any of the above fraud, however, as the root source of the deposit is the credit, but I think it's a bit grey.

More black than grey. A deposit which is entirely funded by debt. Suggests that the borrower does not have either the ability or willingness to save. Regular saving is key plank in suggesting that a borrower is ready for the commitment of 25 years of mortgage payments.

MrNorfolk

Thank you to those who have answered my question.

northerner999

My experience as a FTB a few years ago was no matter how prepared I thought I was, I didn't have enough cash saved up. Stamp duty (this was before the rules were changed, had I bought a year or two later I wouldn't have had to pay this) took out £1,400 and with just conveyancing and a few other minor things I'd spent more than two grand. Eventually I had to go to my bank asking for a two grand loan in order to get some carpets so I could actually move in, with a variety of hand-me-downs for furniture.

I know it is tough and this is not the answer you want to hear, but I think you really need to be as ruthless a possible in saving. You have two incomes, so make sure your savings are earning you the most interest possible (I'm getting 6% on an easy-access "current account" with HSBC I took out in Jan). If you can afford the extra costs you should be able to put a decent amount away each month. Can you drop a brand in terms of food (for you or your pets) or other household items? Can you drive to work at 60mph rather than 70mph to save fuel? These sound like the sort of tips for people who have little income but in reality would you notice if your shower gel was 30p cheaper? Pennies make pounds and all that.

As has been said, debt may not be a problem in terms of funding a deposit so look at 0% transfer/purchase credit cards. If you have no real debts take out a 0% purchase, only pay the minimum, and before you know it you have an "extra" grand or two in savings. You'd still have to pay this back, of course, but you insist that you can afford the costs of being a homeowner but just don't have the cash to hand for a deposit so this can be managed. Key is that your c-card debt must only be a small(ish) percentage of your deposit.

You said earlier you felt this meant you could not move before the little one was born. What is stopping you renting down south, then saving to buy? That gives you more time to scope out potential properties/areas as well as sort out your finances.

MrNorfolk

Ok. Perhaps this was my fault for saying "all advice appreciated" but I meant this in the context of answering the actual question. I believe the question has been answered and I am grateful for that. However, there has also been quite a bit more opinion and judgement offered that wasn't asked for or warranted. Some well meaning like the most recent poster others less so well meaning. Just for the record my finances are fine, I do know how to save. Historically I accrued a fair amount of debt when studying and then more so whilst my wife was at university. I have managed to sort out our budget and pay off £8000 in debt in two years. I was merely asking this question of whether it was possible to use a loan in my wifes name to fund a deposit for a mortgage in my name. The reason for looking for this shortcut is because we currently live miles away from our families in the middle of nowhere and I do not wish for my wife to feel isolated with a newborn baby. Due to having pets we have to rent a house larger and more expensive than we need and that is in the north. When renting down south I am most likely going to have to offer to pay higher rent and put down larger deposits to get a landlord to accept us, more than likely in another house bigger than we need. So please all appreciate that even though is clearly my only option renting is not necessarily the cheapest option and please appreciate that I am neither unwilling or unable to save. People don't have the deposit at the time they need it for all sorts of reasons and a lot of the people who do have the deposit have it for no other reason than mummy and daddy gave it to them. I can and will continue to save and if I need any advice on how to do so I will ask for it but that was not what I asked.

Idiophreak

Thrugelmir wrote: »

More black than grey. A deposit which is entirely funded by debt. Suggests that the borrower does not have either the ability or willingness to save. Regular saving is key plank in suggesting that a borrower is ready for the commitment of 25 years of mortgage payments.

If someone can get a mortgage whilst having the debt outstanding, their income:value must be pretty decent, so you can assume they have the ability to save.

Willingness is a different matter. I don't believe the amount of saving you have has much to do with your ability to repay a mortgage. Whether they've always paid their rent on time is maybe a better marker. Saving for 10 years just to jump through some banker's hoops isn't something too many people are excited about.