Mortgage deposit idea

Chrisubank

Stu_N_ wrote: »

It's only £79/m profit if you otherwise couldn't afford to put any money into the HTB ISA.

Compared to an interest rate of 3% in an ISA. 80 quid a month seems sensible for money that just sitting there. Making my money work harder.

Stu_N_ wrote: »

Pushing your earnings up in the other direction, though, is: you can get interest in a bank account on the balance of your loan that isn't in the ISA yet. 3% from Santander 123, for example.

I agree, the remainder would be best sitting in a highest interest account I can find!

[QUOTE=Stu_N_;70135755
But I don't know what would happen when you come to get the mortgage. Ideally you'd have none of the loan debt left. And I have no idea how a lender would react if they asked you about the loan you've now paid off, and you said you'd used it to do a form of stoozing. It's legal, and you'd no longer carry the debt when applying for the mortgage...[/QUOTE]

If I aim for the 36months then. So the loan would be paid off in 36 months. Leaving nothing but a positive note on my record for a satisfied loan.

Ill do the math quickly and post it.

15k @ 36 months is 450per month. Which makes the idea unprofitable!

ReadingTim

• You can't borrow your deposit
• Even if you could, it would negatively impact the amount you'd be lent on a mortgage, so your overall borrowing would remain the same
• Borrowing money always costs more than you get paid for saving it, therefore for your scheme to work, you're dependent on government policy.
• Government policy can and does change, and savings products can and are withdrawn. Frequently.
• If the H2B ISA is withdrawn mid-way through your plan, your expected level of return will reduce, or disappear.
• Given the length of time you'd be borrowing for, and the limited monthly amount you can contribute to the H2B ISA, the most cost effective way to save the amount you're likely to need to save is by saving the monthly maximum of £200 per person per month, which you can easily afford if you think you can afford to borrow the amount you'd like to borrow for a personal loan
• Buying a house is a significant financial undertaking, which requires patience and effort. There aren't any shortcuts in respect of patience and effort.
• If your idea was possible, everyone would be doing it. Why isn't that happening?

Strummer22

ReadingTim wrote: »

Borrowing money always costs more than you get paid for saving it

Uh... no? Maybe on average! But I have:

1) Put an interest free overdraft into an ISA and regular saver (2005 - so the ISA actually got interest!)
2) Spent on a credit card at 0% (i,e, borrowed) and saved the money in an interest paying current acc. I then did a BT to another 0% deal, costing me about 100 quid, leaving the money to gain interest, and it will gain well over £100 before the 0% deal runs out and I pay it off.

You can borrow at low rates and save high. Especially easy in the current financial climate.

Chrisubank

foxy-stoat wrote: »

Got mine a few years ago - depends on where the house/flat you want to buy and if you can get a HTB 95% mortgage. £10,000 deposit may all you need to save.

We are aiming for a 29k deposit

If I could convince the missus to move outside the M25 and commute in we would probably be in our own house by now! Just imagine the traffic though

Chrisubank

ReadingTim wrote: »

• If your idea was possible, everyone would be doing it. Why isn't that happening?

I have literally no idea! I still don't see a flaw in this.

This is my point, I don't see why borrowing cheaply and making a "profit" with this money is an issue.

People on this forum seem to churn out the same statements regardless of the question.

Stu_N_ wrote: »

You can borrow at low rates and save high. Especially easy in the current financial climate.

Isn't what I'm suggesting exactly this?


The main issue with my suggestion, which ReadingTim pointed out, is if the Govt change the policy. I'm guessing that isn't going to happen. We aren't due a government change within the timescale I'm talking about!

Strummer22

Chrisubank wrote: »

The main issue with my suggestion, which ReadingTim pointed out, is if the Govt change the policy. I'm guessing that isn't going to happen. We aren't due a government change within the timescale I'm talking about!

I still think the main issue is: either you'll have to lie on your loan application to get it approved, or a lender/broker will think what you did was 'weird' and refuse to help you get a mortgage.

Much safer and more profitable using credit cards to stooze.
1) You can borrow on cards at 0% - you were looking at a loan at 4.9%!
2) You can do a money transfer from a credit card (so it's like a loan) for a one-off fee of under 2%.
3) You don't have to tell the credit card company what it's for.

Cornucopia

Chrisubank wrote: »

I have literally no idea! I still don't see a flaw in this.

The flaw in the simplified version you gave above is that you are borrowing, say, £15k at day one, and paying interest on it from then, but you won't be accessing ISA interest on a similar amount until 36 months have elapsed.

Before that point you will struggle to maintain a positive savings rate compared to the loan rate.

I would suggest modelling this properly using a month-by-month spreadsheet before making a decision on it.

The 0% on purchases Credit Card option looks much better - not only 0% interest (so anything you get on savings will be profit), but also it will be trickling on a similar basis to the ISA - basically you will be diverting day-to-day spending to the ISA.

Chrisubank

Stu_N_ wrote: »

I still think the main issue is: either you'll have to lie on your loan application to get it approved, or a lender/broker will think what you did was 'weird' and refuse to help you get a mortgage.

The reason for my loan is "Home improvement" might be stretching the through, but its not dishonest!

Stu_N_ wrote: »

Much safer and more profitable using credit cards to stooze.
1) You can borrow on cards at 0% - you were looking at a loan at 4.9%!
2) You can do a money transfer from a credit card (so it's like a loan) for a one-off fee of under 2%.

Barclay card are offering me 5k balance transfer until November at 0%.

5k would pay for the first 6 months of this scheme. So you are 100% correct.

600 profit in month of the scheme.
Then 500 for the remaining 5 months until the Barclay card money runs out.

The fee for a 5000 transfer is 2%? So thats 100.

Leaving 1k profit, after I've repaid the 5k barclaycard "loan"

You are a genius!

Chrisubank

Cornucopia wrote: »

The flaw in the simplified version you gave above is that you are borrowing, say, £15k at day one, and paying interest on it from then, but you won't be accessing ISA interest on a similar amount until 36 months have elapsed.

Before that point you will struggle to maintain a positive savings rate compared to the loan rate.

I would suggest modelling this properly using a month-by-month spreadsheet before making a decision on it.

The 0% on purchases Credit Card option looks much better - not only 0% interest (so anything you get on savings will be profit), but also it will be trickling on a similar basis to the ISA - basically you will be diverting day-to-day spending to the ISA.

Where did you get the information from that I wont be able to maintain a positive savings rate?
I haven't given you any of my financial details.

I'm simply trying to make my money work a lot harder than sitting in an ISA collecting "Meh" interest rates.

Edit:

Apologies, I misunderstood your post!
I think the whole scheme is still more profitable that money sitting in an ISA accumulating at a low %.

Cornucopia

I think the HTB ISA is the right vehicle for your savings. I just think you can do better than a loan for the borrowing part.

Some of the posts higher up the thread are not very clear. There is no issue using the ISA as a source of deposit funds. However, if you still owe money at that point on a loan or CC, you will need to declare that in your mortgage application, and it is likely to affect the affordability calculation.