Borrowing to Fund a Mortgage Deposit

richieboy_2

Appreciate any help or advice with regards to the following.....

Does anyone know of any mainstream lenders who will provide a personal loan for the purchase of a second house/flat deposit, and also any mainstream lenders who will provide a mortgage on the back of the deposit coming from a personal loan ?

This is just a theoretical situation but lets make the following assumptions....
1. Prospective borrowers have excellent credit history and currently have a joint mortgage and approx. £100K equity.
2. Prospective borrowers have approximately £2700 per month available after all other monthly bills and living expenses are paid
3. Personal loan would be for 20k over 6 years (estimated cost of £400 per month *likely less than this but lets go with this number)
4. New mortgage would be £80k to allow the purchase of a flat costing £100k and would cost approx. £450 per month
5. Mortgage term would be 20 years
6. Joint income £80K

Appreciate that this in effect is a 100% mortgage and that some will argue that this is the root cause of the financial crash, but I think that in certain circumstances this could be "sensible".

Logic behind this plan is that the personal loan in reality would be paid of early probably by end of year 3 and therefore gets the £400 per month personal loan payment back, and waiting to save the deposit could take a 2 or 3 years and house values and sold prices in the area have consistently went up and not went down over the past 10 years so waiting could prove costly, literally.

Mortgage will be Capital and Repayment so Mortgage debt will be getting reduced, personal loan getting cleared and possibly house/flat value increase increasing, and all within affordability.

Anyway.....maybe a non starter as no mainstream lenders have the appetite for this but thought I would ask...all comments and thoughts welcome.
Thanks

[Deleted User]

Try the mortgage boards.

Dingo12

Generally speaking no bank will give a personal loan for the purpose of a down payment. It is possible (not likely) however that you'll not be asked for the loan purpose by some lenders. You could of course tell them you're using the money to buy a car or make home improvements but that's up to you. Many readers of this forum would consider that unethical or worse.

Arleen

Even if that "prospective borrower" gets a loan, during mortgage application the will ask for source of the deposit. And then he will either commit perjury and say "this would be my savings good sir" risking a lot of very bad consequences when found out, or he will admit that it's a loan and get refused.

richieboy_2

Thanks Dingo12....I was pretty much of the same opinion, but thought it worthwhile canvassing some other views....I wouldn't be comfortable about misleading the lender on the loan purpose, prefer to follow the rules and sleep easy ! However if there was a genuinely acceptable method out there then be useful to know. Thanks.

richieboy_2

Thanks Arleen, Appreciate the comment, either outcome unacceptable....

Dingo12

A secured loan may be looked upon more favourably as a source of house deposit. You have a lot of equity in your home already, so this may be a viable option.

ThePants999

richieboy wrote: »

Appreciate that this in effect is a 100% mortgage

And that is EXACTLY how mortgage lenders will see it.

Nasqueron

You have £2700 a month left over

In 8 months you have your 20k deposit, stretch to a year for some luxuries. Why would you borrow the money?

Moreover, 80k mortgage with £2700 a month free, why on earth would you do it for 20 years? You could pay it off in under 3 years!

System

Nasqueron wrote: »

In 8 months you have your 20k deposit, stretch to a year for some luxuries. Why would you borrow the money?

The same reason that lots of people are up to their eyeballs in debt in this country, because it means they can get what they want now without having to make any sacrifices,

richieboy_2

Nasqueron...Thanks for the post... Although in reality it would take nearer 2 years to save, and it could be argued that in that time the property could have went up in value and will require more deposit and more mortgage...anyway its still a valid point. 80K mortgage paying off in 3 years is maybe a bit extreme but again I get your point thanks again.

Tamborini...Agree, lots of people are in debt up to their eyeballs because they either cant wait or choose not to wait and save up.

Not everyone though. Lots of people take on some form of debt that they can handle responsibly, and without borrowers, savers interest rates would be even worse, so maybe not be too harsh on those that borrow

Very few people are fortunate enough to never have to take on any debt for anything ever. Not sure how you are able to ascertain what sacrifices people have made either. It's important to sometimes see the bigger picture. Thanks anyway.