Using an overdraft to pay mortgage deposit?

abankerbutnotafatcat

moneypuddle wrote: »

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

I'm glad it worked for you and the vast majority of your deposit was savings/gift but the fact is that if you lie about the source of your deposit (and in your case it's a grey area given the % that was savings) you are committing mortgage fraud.

I'm sure lots of people do this and most are never found out but there is a risk involved that OP needs to be aware of.

pinkshoes

Bee83 wrote: »

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?

You will be asked the question "Where is the source of your deposit?", in which you will have to WRITE down where it's coming from. If you say it's coming from your savings, you are LYING!

This is called FRAUD.

Are you sure you're willing to take this risk?

I guess it comes down to your own conscience and morals?

Also, you should ideally have enough savings to be able to pay your mortgage for 6 months should you find yourselves out of work for whatever reasons.

princeofpounds

Seriously, if you are relying on an overdraft to buy a property you cannot afford to buy. You will be hit by all sorts of indcidental costs when you get into the property, people always are.

Werdnal

Financially stretching yourself this far is a recipe for disaster.

Whilst I understand your keenest to get on the property ladder and have a place of you own, how are you going to feel if you lose it, then have to uproot your kids from school because you are forced to move to another area and rent a house you don't like in an area you don't want to live in, because your mortgage is refused, or you cannot keep up with the payments and cover your other living expenses. You are keen to keep your sons settled in their school and keep a roof over your family's head, but you may not have any choice in the matter if some major unforeseen cost suddenly raises its head, or your already tight finances take a hit for some reason.

Is continuing to rent really worse than perhaps not having a roof over your head at all ...

Don't get me wrong, I am not a harbinger of doom and it may all work out for you OK, but if the security of your family it at risk, is it worth it?

sinbad182

I used my overdraft as part of my deposit a couple of years ago, Britannia were very thorough about checking where this money was coming from but when it came down to it they didnt care so long as it was accounted for.

As long as the overdraft is authorised and you're paying it off each month and not always going to the brink, I dont see what the issue is.

tom9980

sinbad182 wrote: »

I dont see what the issue is.

The issue is the risk hasn't be correctly identified and accounted for the result when it happens is the lender can find they have a big black hole unaccounted for. The net result is the past 5 years of world wide recession brought about by lenders not assessing the risks properly.

ruggedtoast

Bee83 wrote: »

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

Ignoring all the hyperbole and faux moral outrage about deceiving the poor bankers, elsewhere in the thread; providing you've done your sums the real risk really lies with you.

Banks can do any kind of checks ranging from virtually nothing to scanning every detail of your life. It depends largely on how much they want to lend to you as far as I can see.

Usually the checks at the beginning of the mortgage are the only ones you will have, but there are horror stories floating around the internet of people being randomly audited later on and having their mortgage withdrawn.

Remember that once they issue the formal offer, the bank will have no idea whether you have exchanged or not, the next thing they will hear is your solicitor asking to draw down the funds for completion, so if you believe there is a risk between exchange and completion you can, somewhat, mitigate this by exchanging and completing on the same day.

If you are caught out I'm afraid your liabilities do not stop at losing the deposit, you will have contractually agreed to buy the house and the vendor is entitled to pursue you for the full amount, plus daily costs, until you have either paid up or gone bankrupt.

If you have a mortgage withdrawn from one place (technically for fraud) your chances of getting another one elsewhere at short notice are close to zero.

Personally I would be upfront about where your deposit is coming from, upfront to the point that if they said using your overdraft was ok I would want that in writing before exchanging.

Then you may find that an underwriter that really didnt want to know about this, is forced to decline your application because you yourself flagged it.

Thats the great gamble of life though, personally I would wait but plenty of others would tick the box and not give it a second thought.

somethingcorporate

ruggedtoast wrote: »

If you are caught out I'm afraid your liabilities do not stop at losing the deposit, you will have contractually agreed to buy the house and the vendor is entitled to pursue you for the full amount, plus daily costs, until you have either paid up or gone bankrupt.

And if a chain collapses as a result you could also be responsible for the losses of all the other parties in the chain (I think).

If you have already waited ten years, just wait a little bit longer to avoid committing mortgage fraud.