Borrow your deposit

lisyloo

MatthewAinsworth wrote: »

You do have to be honest, but you could shift everyday spending and anything that'd normally harm the deposit onto credit cards and then onto loans. And it may be possible for some.

Main risk I see is interest rate rise, but that's affect rentals too (as would any personal circumstance change) so its odd that someone can be considered OK to rent a larger amount of equity than they can mortgage - and I think that's purely because rental yields a higher rate than mortgage

You'd have to shift a lot of daily spending to build up a deposit.

How do interest rate rises affect rentals? Landlords can only charge the max that demand will support so demand dictates rents.

Borrowing a large amount of money to buy an asset has associated risk, renting doesn't have the same associated risk. This is fairly basic. Gobsmacked frankly at that comment.
It's nothing yo do with yields. It's to do with the fact that paying the mortgage is much longer term than paying the rent and people can get sick, die, split up, lose their job etc.
A landlords losses would be limited as they can evict a paying tenant. Lenders stand to potentially lose a lot more.

Mallotum_X

I know several people who have done this over the years, including two couples who used credit cards to get a deposit together Clearly not what the banks advise but for the people I know who did this it worked out just fine for all of them.

lisyloo

I would not say that a couple of anecdotes make it a great idea.
Property has worked out well for most people, but your acquaintances took a risk. It wouldn't have worked out so well if they'd split and had loads of debt. They may even have been forced to live together or go back to their parents spare bedrooms in their 30's because they couldn't afford 2 properties.

I'd need a deposit of £67,500 plus costs, which we couldn't easily get with unsecured loans so I presume you are talking about really cheap properties at prices in the past that are not relevant today.

ging84

If you have a fairly clean slate you can spend a couple of years living off credit cards, balance transfers ensure you pay minimal interest, then stick it all into a loan a few months before you apply for a mortgage, you have 2 years worth of spending saved away cleanly and you are no different on paper to anyone with say a car loan

lisyloo

True but these days the loans will count against you whatever they are for which I think is correct lending policy.

BTW - What figures are you talking about, I don't think I could slow stood the figures I mentioned in 2 years.

Please detail so we know if you are talking about hovels in Blaenau Gwent or what?

Thrugelmir

ging84 wrote: »

If you have a fairly clean slate you can spend a couple of years living off credit cards, balance transfers ensure you pay minimal interest, then stick it all into a loan a few months before you apply for a mortgage, you have 2 years worth of spending saved away cleanly and you are no different on paper to anyone with say a car loan

All this activity will be clearly visible to a mortgage lender when reviewing the datasets provided by the CRA's. Very difficult to hide the intent.

wotsthat

Thrugelmir wrote: »

All this activity will be clearly visible to a mortgage lender when reviewing the datasets provided by the CRA's. Very difficult to hide the intent.

It's nice to think lenders are hiring Magnum PI to forensically analyse applicants exact spending over a few years but it's not the case.

System

Thrugelmir -

. All this activity will be clearly visible to a mortgage lender when reviewing the datasets provided by the CRA's. Very difficult to hide the intent.

True but its legit debt, it'll factor into affordability but if its the deposit thats the limiting factor, some degree of it could work. As with if a couple splits - its always a risk in everything, including buying itself, but even if something does fail it might still save enough rent to make buying worthwhile

. How do interest rate rises affect rentals? Landlords can only charge the max that demand will support so demand dictates rents.

Borrowing a large amount of money to buy an asset has associated risk, renting doesn't have the same associated risk. This is fairly basic. Gobsmacked frankly at that comment.
It's nothing yo do with yields. It's to do with the fact that paying the mortgage is much longer term than paying the rent and people can get sick, die, split up, lose their job etc.
A landlords losses would be limited as they can evict a paying tenant. Lenders stand to potentially lose a lot more.

True that demand limits scope though it wouldn't be surprising if landlords try to pass their costs on, seen as how the oil industry, food and many others fluctuate their price just from what happens their end. And certainly you could get a lot of landlords folding if rates rise, and Tennant's potentially displaced.

The yields point - I'm saying that the fact there is more profit/interest in buy to let than mortgages is why someone on say a low wage could rent a flat for £400 a month but only get a mortgage at £250 a month - landlords are prepared to relax their criteria to get anyone in paying the maximum possible, whereas mortgages are stuck at lower rates making banks more cautious
Yes the bank being stuck with the mortgage customer (lack of competition) gives them a longer term reason to care, but arguably a bank usually has more collateral than a landlord does, and I think generally cannot lose

Blacklight

I thought everyone asked the bank of m&d these days. I know more that have bought recently that did, than didn't.

Thrugelmir

wotsthat wrote: »

It's nice to think lenders are hiring Magnum PI to forensically analyse applicants exact spending over a few years but it's not the case.

Far more boring than that. Algorithms do all the hard work. Experian make their real money by selling data not consumer credit reports.