Loan deposit

Rachellouise.s

I am currently saving up for a mortgage deposit
I used to be a mortgage advisor but would like a second opinion on a matter.
If I was to get a loan for say £5K and pay it off in 1 year before applying for the mortgage would the bank be bothered?
As technically I'd be debt free but would have raised my deposit by a loan?

Thanks

CKhalvashi

You wouldn't have raised your deposit at all, surely?

What you'd be better off doing, is saving the £5k over the course of the year, as you'll then have gained a little interest, and not paid it.

Pixie5740

If you can afford to repay a £5k loan before applying for a mortgage they you'd be able to save £5k before you apply for a mortgage. In fact you'll be able to save more because instead of repaying interest you'll also be earning it.

DCFC79

Rachellouise.s wrote: »

I am currently saving up for a mortgage deposit
I used to be a mortgage advisor but would like a second opinion on a matter.
If I was to get a loan for say £5K and pay it off in 1 year before applying for the mortgage would the bank be bothered?
As technically I'd be debt free but would have raised my deposit by a loan?

Thanks

I don't quite understand the point of that.

So your wanting to pay x amount in interest rather than save the amount you need.

Why waste money paying interest on a loan when you can have the interest in your pocket/hand/account.

27col

I'm glad that you are not advising me about a mortgage. Why would you possibly want borrow money and pay interest, instead of straight saving it and getting some interest on your savings.Your financial logic escapes me.

robatwork

The logical conclusion of your post is free money.

I would think again. Hope you went into another career away from financial advice....

CrowCrow

Right so you want to take out a loan to use a deposit, but, you want to pay the loan back a year before you use the deposit and apply for a mortgage?

That, just, what.

You just paid a lump of interest for nothing.

forgotmyname

Borrow £5000 a year before you need it and pay back £5000+ interest?

So you have given them the £5000 back + interest where is the £5000 deposit coming from?

Won't you just be giving them the £5000 + interest back?

Your savings will be minus the interest.

Ben8282

This is very confusing.
There is nothing wrong with having had a 5k loan over 1 year which was faultlessly repaid prior to your mortgage application. The monthly repayment will be £416.66 on the capital plus interest.so this may even look good as you can say that now you are no longer repaying the loan you have more money available each month.
If you want advice on whether it is worth it to pay interest on a loan for 1 year for the purposes of adding an extra settled loan account to your credit file and showing you can make that sort of monthly repayment without difficulty then say so.
But how can you have raised the deposit with the loan as the money will have been repaid?