The best way to borrow £20K?

CookieMonster

Hi,
I'm looking for a little advice here.

Scenario is that I want to buy a flat, it's on the market for about £40K.

I can get £20K together; I don't want to go down the buy to let mortgage route so I think that I'm looking for a loan (unsecured?!) of £20K. If that's not a good idea please let me know?

As soon as I mention that it's for a flat I'm directed to buy-to-lets.

I already have a mortgage, 12 years left, and have about £60K positive equity in my current house but I've inquired and been told that I can't borrow against my current house to pay for another dwelling.

Is it possible (ethical/allowed) to get two £10K loans if the overall interest is better than a single £20K?

I'm planning on paying it back over 5 years, this is feasible (and if anything went wrong I can downsize the home and free up some funds but I'm trying to avoid doing this to buy the flat).

Do I have to disclose that I want the money to buy a property?

My bank is trying to direct me towards a buy-to-let.
Their 6.2% APR on £20K loan isn't that attractive anyhow (just browsing on-line).

I last had a loan from the bank in the late 80's, £1000 to buy a motorbike, and my credit rating is good, other than the mortgage I don't have any debts.

Any and all advice and comments are welcome.

Thanks,
Paul

Gaz83

CookieMonster wrote: »

Is it possible (ethical/allowed) to get two £10K loans if the overall interest is better than a single £20K?

Allowed, yes. Possible, probably not.

What's your income?

6.2% doesn't seem too bad to me on a loan of £20,000 BTL, by the way. What other rates can you get? Bearing in mind that advertised rates won't be given to all applicants?

CookieMonster

Income: £50K per annum. (Pre-Tax and deductions)
Current Mortgage ~£900/month.

Circa £11K 'resting in my account' as overpayment on my mortgage, a 1 year buffer in case of unemployment. I'd use half of that on the new flat, still keep 6 month buffer (at least that's the plan).

It's just from looking around there seems to be better rates on smaller loans (7½-15K) than on 20-25K loans.
I can even get ~£6K from the credit union, need to confirm their rates, which is why I'm thinking of splitting the loan up...

Thanks for the feedback thus far.

I believe I've an excellent credit rating, but want to check my options before applying for loans (as I think that even applying might reduce my rating?).

Tixy

Are you buying to let out? or buying for your own use? Personal loans often have it in the T&Cs that the money should not be used for business purposes. I suppose a buy to let would be classed as a business so this could potentially be a problem.

Loans under £15k do generally have a better representative APR than those over. But they are only representative APRs. You may find it harder to get accepted for the 2nd loan, or you may find a comparatively high APR as a result of the 1st loan.

Do you expect to be in a position to pay off the loans in the 5years?

Again if you are intending to let out then if you can get a decent buy to let mortgage rate then buy-to-letters tend to borrow on interest only and pay down any surplus funds against any personal mortgage/borrowing first (as you get tax relief on interest on the buy to let but not on the interest on your own property).

Thrugelmir

You'll struggle to obtain funding using unsecured credit as a base.

CookieMonster

Thanks for all the replies.

Yes, I am in a position to pay back in 5 years.
Much sooner if there happens to be a tenant, I, but I'm planning worst case here.
The flat is potentially part of my pension plan, move into it and rent out the current house for an income...
I don't intend doing interest only and I was actually told by N/West that I was looking to borrow too little - less than £40K wouldn't be entertained! - for a buy to let.
The higher interest on the 2nd loan is obvious once you mention it - I really am clueless about borrowing as, apart from a mortgage, I was raised to 'buy if I had the money' and 'do without it I didn't have it'!
I'd happily secure the loan on my current abode but they won't let me (!).

What would Elvis do?

SparklesJD

Bear in mind that some (possibly all, I'm not sure) credit unions won't lend if it's to purchase property.

bouncydog1

As you have £60k equity plus the cash, is it possible to remortgage your existing property by moving providers? HSBc for instance used to do equity release mortgages for all sorts of things - boats, cars, school fees etc.

Might be worth having a chat with some of the banks or a specialist broker? The rates were really good as well less than 6% for sure.

ViolaLass

CookieMonster wrote: »

I already have a mortgage, 12 years left, and have about £60K equity in my current house but I've inquired and been told that I can't borrow against my current house to pay for another dwelling.

We borrowed last year precisely to buy another property and had no problems getting our reason for the borrowing accepted.

CookieMonster

Thanks for all the feedback.
Currently on year 8 of a 10yr fixed rate with N'wide, might look at the equity release properly (elsewhere) as they weren't willing (phone line) to lend against the current property. Maybe try them again.
I'll pursue a couple of avenues and let you know how I get on.
Paul

themull1

I recently got a loan from Tesco but it was for home improvements, £10.000 over 10 years 4.3%, you try them?