Bank Loan for mortgage deposit?

JJBounce

Hi there guys.

My partner and I visitted the bank yesterday to apply for a mortgage. We are 24 & 28. We were given a mortgage promise and were told we could borrow up to 201,000k which surprised us both. The properties we have been looking at are between £100k-£130k.

Our mortgage advisor has said that we are in a very good position, but the only thing that is holding us back is our lack of deposit. We currently only have £4000 for our deposit and are looking for around £13k for a 90% mortgage. We did discuss, although she was very quick to tell us that discussing it was unethical, that we could go to another bank (my partner is with another bank, our joint account is there too) and apply for a loan for the rest of the money for our deposit. She said that if we borrowed the money to make up the rest of our deposit, it wouldn't affect our mortgage application as the amount that we actually need is around £70k less than what the bank is willing to lend.

I understand that this might seem impatient but house prices around our area are rocketing.. Has anybody else here taken a loan to cover their deposit? If none of you have, could someone tell us if what we're doing is possible or are we being really naive?

Thanks!

Thrugelmir

JJBounce wrote: »

She said that if we borrowed the money to make up the rest of our deposit, it wouldn't affect our mortgage application as the amount that we actually need is around £70k less than what the bank is willing to lend.

Bad advice, no idea what she is talking about.

Keep saving. Accept the fact that you may have to start at the bottom of the property ladder. Your dream home may have to wait a while longer.

ACG

Was it a real advisor or a bank advisor you met?
If it was a bank advisor which bank?
If it was a real advisor, did they tell you which lender they were thinking of for you?

Seems like very poor advice to me. Affordability may not be an issue but lenders do not usually accept a loan as a deposit.

JJBounce

ACG wrote: »

Was it a real advisor or a bank advisor you met?
If it was a bank advisor which bank?
If it was a real advisor, did they tell you which lender they were thinking of for you?

Seems like very poor advice to me. Affordability may not be an issue but lenders do not usually accept a loan as a deposit.

I don't really want to name banks but if the lender was to ask where the deposit has come from, we don't have to tell them it's a loan, do we? Or will they know? As far as the lender knows, that loan was for a new car..

ACG

Yes you have to tell them.
Theyre not stupid.... Deposit £13k and a couple of months before the application is made you take out a £9k loan... As an underwriter what would you think?

The reason I was asking for the name of the bank was so I could check their criteria. If they accept loans fine. If they do not then your "advisor" is going to potentially build up your hopes, spend your money on valuation and legal fees and then get an earful from you for being useless.

check the banks criteria.

matttye

JJBounce wrote: »

I don't really want to name banks but if the lender was to ask where the deposit has come from, we don't have to tell them it's a loan, do we? Or will they know? As far as the lender knows, that loan was for a new car..

Yes you have to tell them if you don't want to commit mortgage fraud.

JJBounce

Yes I understand what you're saying. Thanks for your help. Back to the drawing board!

Thrugelmir

JJBounce wrote: »

I don't really want to name banks but if the lender was to ask where the deposit has come from, we don't have to tell them it's a loan, do we? Or will they know? As far as the lender knows, that loan was for a new car..

Would a lender believe you? If it was that easy. Everybody would be doing it.

enthusiasticsaver

This is appalling advice and if you took a loan out with another bank this would show on credit checks etc. Personally I would be naming and shaming the mortgage advisor as this is how so many people get into debt problems. Not only would you have a mortgage to repay but also a bank loan.


Banks also tend to offer you the very maximum they think you can afford but this takes no account of interest rate rises, losses of overtime, higher than average bills, other debts etc as they consider that should be your problem. Do not assume that just because they will offer you £200k then that is affordable. Look at the monthly payment and ask for quotes if interest rates rise.


Save up for a bigger deposit and do not forget you will need money for solicitors costs, mortgage fees and searches and stamp duty.

ACG

enthusiasticsaver wrote: »

This is appalling advice and if you took a loan out with another bank this would show on credit checks etc. Personally I would be naming and shaming the mortgage advisor as this is how so many people get into debt problems. Not only would you have a mortgage to repay but also a bank loan. - There is clearly no issue of affordability here if the bank are prepared to lend £200k. But I agree it is bad advice in the sense it will probably not help get the mortgage.


Banks also tend to offer you the very maximum they think you can afford but this takes no account of interest rate rises, (yes it does, they are usually calcualted on a rate of around 5.5-7% depending on lender and LTV) losses of overtime (yes it does, most lenders only allow 50% of overtime anyway), higher than average bills (most use ONS figures which are averages).

I dont like to correct peoples posts but there are a few things not quite right above.

amnblog

Calm down everyone.

There is a mainstream lender that will allow you to loan part of your deposit provided everything fits with their affordability.

You can be upfront and honest about the loan.

If it were me however I would look at the Help to Buy Equity Loan scheme and work towards a 5% deposit with a 20% equity loan.