A loan for a mortgage

8lakeley · 26 April 2013 at 7:54PM

Is it wrong / stupid to get a £5000 loan to secure a £125,000 mortgage?

Katzen · 26 April 2013 at 8:02PM

My understanding is that you will have to declare where the money has come from or it will show up on your credit file anyway. In which case, the mortgage provider will take that in to account when deciding if you can afford to the pay the mortgage and therefore whether you will be accepted.
Also, you need to consider how you would afford to pay the loan on top of a mortgage. Very dodgy ground, would avoid if at all possible.

swanny78 · 26 April 2013 at 8:34PM

I would also avoid if possible.

Out of interest to anybody who can answer , are the lending criteria more strict on an unsecured loan than that of a mortgage in regards to credit scores etc? ie loan of £10,000 must have an excellent score , Mortgage of £250,000 with 25% LTV score could be lower to be accepted.

kloana · 27 April 2013 at 3:20PM

swanny78 wrote: »

I would also avoid if possible.

Out of interest to anybody who can answer , are the lending criteria more strict on an unsecured loan than that of a mortgage in regards to credit scores etc? ie loan of £10,000 must have an excellent score , Mortgage of £250,000 with 25% LTV score could be lower to be accepted.

'Scoring' is a bit of a red herring. Credit scores in themselves mean very little, i.e. when Experian says that your score is 999, and so on. Though obviously lenders have their own criteria benchmark.

But it can be seen in some cases that it can be 'easier' to get an unsecured loan than a mortgage. For the obvious reason that if you fail to pay your mortgage, your house is sold. Forcibly or otherwise. And in your scenario (£250k representing 25% LTV = million pound property!), your lender would make their money back PDQ.

Fail to repay an unsecured £10k, and your lender can find themselves in trouble. If you have little-to-nothing, generally they'll get little to nothing when trying to recoup the money.