Personal Loan to Buy My Home

DaleA

Hi.

I inquired about buying my flat under the Right to Buy scheme. With my discount the price would be just under £20K. I am on a low income (private pension) and paying off a loan (plus service charge) would give me a saving of at least £30 a month on my current rent which is a big deal to me (especially with expected rises).

My problem is, where do I get the money from. First of all would anyone even give me an unsecured personal loan for this purpose? Second problem is that regardless of budget most want you to have a minimum annual income that I don't have. I also have trouble explaining to a computer that my rent money would be used to pay off the loan.

The advantage of a loan is the fixed payments which would make my budget rock solid. I would go for a mortgage but the comparatively high fees some charge (for surveyor and solicitor) do not make this an attractive prospect.

I would appreciate your thought on this please.

Dale A

CKhalvashi

I'd advise getting the property surveyed, and I have used solicitor for a cash purchase before; it's necessary.

Most personal loans state that they can't be used in connection with a property purchase,so look at this carefully, too.

DaleA

Thanks CKhalvashi. No point in getting a survey as I already live in the property and it doesn't look like its going to fall apart any time soon :-)

ViolaLass

£30 isn't much of a saving. What if the boiler breaks or the roof comes down?

dealer_wins

Dont forget the cost of insurance, ground rent, annual maintenance, other maintenance (Which can result in unexpected bills of £10K+ if the council decides to do big repairs).

I would suggest that RTB would not be wise in your circumstances at all.

Tixy

What are you basing the £30 a month saving on?

Are your calculations based on your borrowing the whole £20k to buy the property? What repayment term and interest rate are you using for your calculation?

The cost of owning a property is much more than comparing rent to mortgage/loan repayments. You will need to be in a financial positon to maintain and fix your own property and insure it which you are not whilst it is rented. In the long term this is likely to be far more than the equivalent to £30 a month.

But to answer the question, to be accepted for a £20k loan you'd be looking at needing a income in excess of £40k, maybe £50k. And buying property would be against the terms of a personal loan.

If you want to do this then I'd explore whether you can get accepted for a mortgage and get some advice on whether owning your property is the best option in your financial position, also taking in to account how it could affect any benefits / future care home fees etc.

DaleA

dealer_wins wrote: »

Dont forget the cost of insurance, ground rent, annual maintenance, other maintenance (Which can result in unexpected bills of £10K+ if the council decides to do big repairs).

I would suggest that RTB would not be wise in your circumstances at all.

Rebuild insurance is part of the monthly service charge.
Ground rent is £10/year
There can be no unexpected maintenance for the first 5 years. Planned maintenance is included in the service charge for the 1st 5 years.

I think I have to go down the RTB route as I fear the gap between my income and rent will only get narrower.

Dale A

DaleA

Tixy wrote: »

What are you basing the £30 a month saving on?

Are your calculations based on your borrowing the whole £20k to buy the property? What repayment term and interest rate are you using for your calculation?

If you want to do this then I'd explore whether you can get accepted for a mortgage and get some advice on whether owning your property is the best option in your financial position, also taking in to account how it could affect any benefits / future care home fees etc.

I was basing my figures on a loan of £17,500 over 7 years at a rate somewhere between 3.7% and 4.5% APR.

Going by the advice its looking like I may have to go for a mortgage with all its additional cost and delay

jonesMUFCforever

Banks will not lend money on a personal loan to purchase a property.

You can of course apply for a mortgage.

DaleA

I went to a mortgage broker and the situation is almost as bad with my criteria of:

Low-rise, purpose-built Council flat.
Borrowing less than £25K/Valuation less than £69K
Income less than £9K
Over 55 years old

In fact they could only come up with one company as a possibility which was the Principality Building Society.

Rollingstart

DaleA wrote: »

I went to a mortgage broker and the situation is almost as bad with my criteria of:

Low-rise, purpose-built Council flat.
Borrowing less than £25K/Valuation less than £69K
Income less than £9K
Over 55 years old

In fact they could only come up with one company as a possibility which was the Principality Building Society.

I would be very careful. Don't forget that you'll be responsible for paying for planned maintenance or improvement to the property and also the estate.

They should be able to give you an idea of this cost for the first five years, it may be nothing but it could be several thousand. Maximum I know of is about 15k.

I know how you feel, I'd like to buy my house under right to buy but it's awkward given costs.

Using a personal loan just isn't viable, as lenders are very specific as to what they can be used for.