Would a mortgage application fail if funded by a loan?

sugarbabe84

I'm currently paying off a loan which was £8185. I only have around 2k left to pay. I also have 1k credit card bill that I'm paying off monthly.

I'm really desperate to get my own place as I'm sick of renting. I'm now considering getting a 10k loan from HSBC to cover my loan and credit card dept. I would then plan on using the rest of it to cover a deposit for 25% shared ownership mortgage (approx £3500) and then use the other £3500 to cover the cost of buying.

Is it possible to execute this?

opinions4u

When I was a Halifax underwriter (over a decade ago now) I'd have declined it on the basis that your source of deposit was a loan.

Wait for the brokers to offer an opinion that's more up to date than my experience. For me no personal deposit and shared ownership makes it VERY high risk lending.

R_P_W

sugarbabe84 wrote: »

I'm currently paying off a loan which was £8185. I only have around 2k left to pay. I also have 1k credit card bill that I'm paying off monthly.

I'm really desperate to get my own place as I'm sick of renting. I'm now considering getting a 10k loan from HSBC to cover my loan and credit card dept. I would then plan on using the rest of it to cover a deposit for 25% shared ownership mortgage (approx £3500) and then use the other £3500 to cover the cost of buying.

Is it possible to execute this?

How much do you earn?

Sounds like an awful plan if I'm honest. Is it you would 'own' 25% and then pay rent on the other 75%? If so how different is that really to as you are now? Difference being you will have borrowed a further 7k in unsecured lending plus what ever your new mortgage will be.

ethank

Is Shared Ownership your only option?

StuC75

shared ownership and then effectively a 100% loan - as no equity because of the mortgage and loan liability just seems the worse possible combination...

You would just be taking on more debt, when consider the rent on the 75%, and the mortgage and then the 10k loan..

at least renting you can always move on - whereas with the shared ownership you would have limited options in terms of trying to sell on, and probably negative equity if property value went down and you still have the loan..

sugarbabe84

R_P_W wrote: »

How much do you earn?

Sounds like an awful plan if I'm honest. Is it you would 'own' 25% and then pay rent on the other 75%? If so how different is that really to as you are now? Difference being you will have borrowed a further 7k in unsecured lending plus what ever your new mortgage will be.

I earn 23k. The problem is that my rent is £700 a month and the housing assessment works out that the mortgage + rent + service charge would be £540.

sugarbabe84

ethank wrote: »

Is Shared Ownership your only option?

Yes it is, because of the small deposit amount

sugarbabe84

StuC75 wrote: »

shared ownership and then effectively a 100% loan - as no equity because of the mortgage and loan liability just seems the worse possible combination...

You would just be taking on more debt, when consider the rent on the 75%, and the mortgage and then the 10k loan..

at least renting you can always move on - whereas with the shared ownership you would have limited options in terms of trying to sell on, and probably negative equity if property value went down and you still have the loan..

I'm hoping to buy in a sought after area of London, so hoping the value would only go up

holly_hobby

I tend to agree with O4U, your new loan will effectively be restructuring existing finance, and sourcing your deposit.

From an UW point of view, the issues are that your purchase will effectively be 100% financed (ie mge & loan acting as deposit) - with no personal input of your own, which could equate to a more flippant attitude to maintaining the debt, given that you won't essentially be losing any of your own capital should it sell for less than the original valuation, to which coupled with a shared ownership property (ie more difficult market to sell in) we have a heck of a risk profile on the case.

Additionally, the financial commitment resulting from the loan will impact on the max loan available (which may or not be detrimental if its actually lower than the combined commitment of your 2 existing arrangements).

Personally, I would save my deposit rather than borrow it.

Hope this helps

Holly x

ethank

Do remember that Shared Ownership properties have to be given to people with the greatest housing need, so you have to bid, and they will give the property to the person with the highest number of points.

sugarbabe84

ethank wrote: »

Do remember that Shared Ownership properties have to be given to people with the greatest housing need, so you have to bid, and they will give the property to the person with the highest number of points.

I do understand that. I don't think that will be a problem. Two of my colleagues at work have managed to get shared ownership properties. They don't have any priority need, in fact one of them managed to get one in a different borough even though they weren't on that council register.

I'm also getting loads of invites for viewings.