Using an overdraft to pay mortgage deposit?

Bee83

Hi all,
My partner and I are currently in the process of buying our first house. It is a part-ownership scheme new build, being built by the local housing authority.
We have been told that we need a deposit of £18,900 which we have saved over a number of years. However, some of this amount must come from our overdraft facilities, which are £2,850 and £1,250.
We would like to know if there would be any repercussions to us doing this in terms of being accepted for the mortgage? We are planning to move all our monies into our joint account for the purposes of writing the actual cheque, so it would not be obvious that the money had come from overdrafts.
We are due to have our arrangement meeting in mid-January and completion is due at the end of March. Any help on this would be greatly appreciated.

Bee83

pinkshoes

When applying for the mortgage, you have to state where the deposit is coming from. If it's coming from an overdraft, then it's not YOUR money, so I'm pretty sure won't count as deposit.

Are you sure you can afford to buy?

Sounds like you need to save up some more.

Tiglath

I'd agree with pinkshoes - you're 21% short on your deposit in terms of hard cash. Better to knuckle down and carry on saving - I know it's hard and you're impatient to do it quickly, but you don't want to start your homeowning life with an additional huge overdraft to pay back as well.

_Andy_

You will need to disclose this to both the lender and solicitor.

CLAPTON

just consider if, after you have exchanged contracts and paid your deposit, the lender does another credit check and finds you have a large OD?

Angie_B

I've just bought as a first time buyer and I was asked to submit 6 months of bank statements (which would show if you had a large overdraft) as well as savings account statements showing my deposit building up over time and that it was me who was saving. You have to declare the origins of your deposit so I don't think you can get away with £4000 from an overdraft.

Do you have enough money for fees, surveys, furnishings etc? This can add another £5000 onto what money you need to be able to buy.

Bee83

Hi, thanks for all your replies.

We don't think we would have to use the full amounts in our overdrafts, we have been doing some very careful calculations of income and outgoings for months now.
Unfortunately, in the area we live we know we would not be able to obtain a mortgage for the full cost of a house, and since our sons are established in school here, we need to stay local. This shared ownership scheme seems like the only way we could ever afford to buy here which is why we can't really wait and save more, because there simply isn't the time to do so.
We have taken into account the cost of the fees etc also, which brings the total we need up from the deposit amount, but it is the deposit which is obviously the biggest outlay, and so this is most likely where we would need to use the overdraft money.
We have considered the risk of the lender running a check that would reveal the negative bank balance, and we understand this would more than likely cause them to withdraw their offer and we would lose the deposit money we had already paid. How much of a risk would you say this is?

thelem

What would happen if major work was needed just after you moved in? Or one of your lost your job? You need a bit of spare cash sitting around as a homeowner to cover for unexpected circumstances. Typically 3-6 months of mortgage payments is advised.

You're much better missing out on this scheme than potentially ending up with a property that you can't afford to keep and can't afford to sell.

Bee83

thelem wrote: »

What would happen if major work was needed just after you moved in? Or one of your lost your job? You need a bit of spare cash sitting around as a homeowner to cover for unexpected circumstances. Typically 3-6 months of mortgage payments is advised.

You're much better missing out on this scheme than potentially ending up with a property that you can't afford to keep and can't afford to sell.

If any major work was needed, we would be stuffed, same for one of us losing our job. We knew it was a long shot but after 10 years of renting and the position we're in now it was for us the perfect opportunity but carried a fair amount of risk.

Bee83

CLAPTON wrote: »

just consider if, after you have exchanged contracts and paid your deposit, the lender does another credit check and finds you have a large OD?

I guess they would withdraw their offer at a later date and if this came after exchanging contracts then we would lose our deposit,i think this is correct.

moneypuddle

I bought a house 18 months ago, did exactly what you're saying and it wasn't a problem. I didn't have to provide proof of my deposit at all. On one application was just one question that said Source Of Deposit. I put Savings. Job done. No questions asked. Mine was actually around £18k savings, £2k overdraft and £2k gifted. That was with santander