Taking out a loan straight after a mortgage

AFF8879

Hi guys,

Looking for a bit of advice. I just completed the purchase of my first flat and I'm currently decorating. I would like to have the bathroom and kitchen refitted as they are currently both looking quite old and tired, however I only have about 6K in the bank currently, 2k of which is going to be spent on general redecorating (paint, wallpaper, carpet, new doors etc).

I would like a 10 K loan which should be enough to complete both rooms with a bit of change (the kitchen is small) - do you think this would be a problem? I don't have any debt other than my mortgage but it's scary applying for more money after just borrowing 280k on a mortgage!! :eek: though I did borrow about 40k less than my upper limit so maybe it's ok?

I'm also scared of seeing my bank balance drop below a few thousand - I was saving for my deposit for over 6 years so had gotten used to seeing higher numbers

Arleen

It is highly unlikely that you will get a loan now, you just took a massive debt and it will scare almost anyone away. I would also recommend against spending 2k on renovations now, as 6k is really not much in terms of savings, and with mortgage you want to have at least few months of all expenses in your bank account at all times.

[Deleted User]

If you don't want to see your savings drop, you'll like having a loan even less, as this will deplete savings you haven't even got yet. Plus interest.

AFF8879

Thanks for the replies guys. Experian creditmatcher has recommended a number of loans to me and I thought those were only meant to be ones I'm likely to be accepted on?

Secondly my monthly income after tax is about £3700, mortgage payment is £1000 and "necessities" ie travel costs, bills, food etc total about £500 a month. So still could comfortably afford repayments whilst saving- if this makes any difference?

Arleen

AFF8879 wrote: »

Thanks for the replies guys. Experian creditmatcher has recommended a number of loans to me and I thought those were only meant to be ones I'm likely to be accepted on?

Secondly my monthly income after tax is about £3700, mortgage payment is £1000 and "necessities" ie travel costs, bills, food etc total about £500 a month. So still could comfortably afford repayments whilst saving- if this makes any difference?

That means your current savings are for just about 4 months of living expenses. Now imagine a worst case scenario, for example getting hit by proverbial bus or getting fired - how quickly can you find a job that will pay at least as much? Whatever is the realistic number (counted to the day you receive your first paycheck), make sure you have at least that in your bank account at all times. Hell, add 1-2 months extra just to be safe.

It's simple pragmatism with a small touch of paranoia, unpainted walls can wait couple more months, but consequences of that bad-case scenario without proper preparations are just massive.

DCFC79

AFF8879 wrote: »

Thanks for the replies guys. Experian creditmatcher has recommended a number of loans to me and I thought those were only meant to be ones I'm likely to be accepted on?

Secondly my monthly income after tax is about £3700, mortgage payment is £1000 and "necessities" ie travel costs, bills, food etc total about £500 a month. So still could comfortably afford repayments whilst saving- if this makes any difference?

The credit matcher is based on your credit file so wont be entirely accurate for example they won't have any idea of your salary.

I am in no way suggesting it but make 1 application and see what rate is offered and if it's suitable, just don't be shocked if your offered a higher Apr than you were expecting.

AFF8879

Arleen wrote: »

That means your current savings are for just about 4 months of living expenses. Now imagine a worst case scenario, for example getting hit by proverbial bus or getting fired - how quickly can you find a job that will pay at least as much? Whatever is the realistic number (counted to the day you receive your first paycheck), make sure you have at least that in your bank account at all times. Hell, add 1-2 months extra just to be safe.

It's simple pragmatism with a small touch of paranoia, unpainted walls can wait couple more months, but consequences of that bad-case scenario without proper preparations are just massive.

Yeah this is what I guess I am paranoid about. I've been in my job 6 years and have progressed well so have no reason to think my job would be at risk, but as you say, it only takes one life changing accident....

I usually get a bonus in January so I think I might just wait and see how this goes...

Thrugelmir

AFF8879 wrote: »

Secondly my monthly income after tax is about £3700, mortgage payment is £1000 and "necessities" ie travel costs, bills, food etc total about £500 a month. So still could comfortably afford repayments whilst saving- if this makes any difference?

I'd be looking to reduce the mortgage debt. When interest rates do rise you'll notice the difference in outgoings on a debt of that size.

What mortgage term did you opt for?

upoiupou

Secondly my monthly income after tax is about £3700, mortgage payment is £1000 and "necessities" ie travel costs, bills, food etc total about £500 a month. So still could comfortably afford repayments whilst saving- if this makes any difference?

Originally posted by AFF8879

So you could save £10k in 5 months?

Within a year you could have a comfortable emergency fund plus the cash to do the kitchen and bathroom without taking out a loan.

To me that's a no brainer, but that's because when I bought my first flat I didn't have a decent emergency fund and I suffered for it when unplanned expenses came up. (Roof repair, wet rot, boiler fell off the wall - let alone new boiler, I had to get the wall rebuilt!) Now I've moved to my second property, one month after completion I lost my safe job at my long term company due to an acquisition. This time I have a large emergency fund so I don't have to lose sleep while I look for a new job.

If you're considering a £10k loan with a £280k mortgage, a property you're not familiar with yet and only £4k in the bank, you are going to have to be very comfortable with risk.

rtho782

We just took out a 95% mortgage of almost £220k on our first house. We had no debt when we bought, but since then we've bought lots of stuff (Sofa, carpets, new front door, new washing machine, etc etc) mostly on 0% finance and 0% credit cards.

We're currently £2000 into our £5000 overdraft, but we will be out of this by the end of the month (due to mortgage cashback and tenancy deposit return) then hopefully not back in it again.

It sounds awful but there is a plan behind it and we're not overstretched.

We've been accepted for 0% finance on a few things totalling £5k and I've gotten two new credit cards with £6k total limit since moving in.

So it's not impossible. In fact, lenders seem to be falling over themselves to lend to us now we're homeowners.

SensibleSarah

I couldn't even get a sofa on finance just after my mortgage went through 5 years ago. 6 months later and I was back on a good footing credit file wise but until a personal loan for a new car this year I've not really tested it on anything major.
With your income & saving potential, there is no way I'd be taking out a loan of that size when I could save a similar amount in a few months. I've been in my house for 5 years and still saving up to decorate Until I eventually get there with savings I just have to deal with living in a 70s decor hell in need of new everything - so probably about the time I pay the mortgage off in 20 years!