Loan for deposit?

mottyt

Hi,


What are the risks, pros/cons around borrowing to increase the deposit for a mortgage?


Circumstances in this instance are:


We're currently saving for a deposit for a house at say 170k; currently got about 6k saved and trying to scramble together 10%, but not looking likely anytime soon so more realistic is to use the Help to Buy and get as close to 10% as we can before we need to leave our current rental (around April next year).


I was wondering whether it would be worth borrowing to get a better down payment as im thinking it's better to borrow money for a larger deposit and pay it off over 6 or 7 years , than to get a larger mortgage and pay that additional amount that we'd needed to cover the deposit shortfall over the life of a mortgage.


It makes sense in my head, but I'm no expert.


Any advice?


Thanks in advance.

~Beanie~

Most lenders won't let you use a loan as the deposit and they will ask where the funds for the deposit have come from.

The fact that you have a loan outstanding will also affect the amount of mortgage you will be able to get.

mottyt

Thanks for that.


Did seem a bit too easy.

MEM62

You cannot use a loan as a deposit. Also, there is the school of thought that, if you do not have the spare cash to save then you do not have the spare cash to service a loan. This is probably particularly true if you are taking on house ownership.

JPD86

Whilst I don't have experience I did receive advice from a mortage advisor that Santander do accept loans for deposit provided you meet their affordability criteria including the loan repayment.