Should i get a loan as rates are so cheap?

danlightbulb

Thank you for being explicit in your answer. It does however lead to more scenarios.

What would the truthful answer be if you had a loan 5 years ago that has since been repayed but that was where the deposit lump came from, and it's been sitting in a savings account for that time, whilst you were repaying the loan? The same logic could apply to a credit card balance transfer.

You are also clearly saying that the lender will look at net savings after debt. Ok, but on the affordability checks it's the ability to service the debt that matters isn't it? What if the debt was a car purchase? Does that change the assessment of it?

Candyapple

danlightbulb wrote: »

The advice has been very black and white though. I don't think a good justification has been put forward as to why this won't work, taking into account the grey areas involved when people have a combination of cash and debt. Not trying to be pedantic.

Perhaps my viewpoint is skewed and everyone who gets a mortgage has no other debt and a 5 year audit trail of regular savings by standing order on an otherwise perfect bank statement?

The majority of people who know they will be applying for a mortgage in the near future will have already been saving for a number of years prior to application and ideally have no debts, or look to minimise any debts as much as possible closer to the application.

Yes you do get those who have been gifted a deposit due to a death/inheritance and their finances are not in the best of shape - however after speaking to a broker they would most likely advise them of the best way forward with any money they have inherited and how to use it for a deposit (if possible) and/or clear debts first.

Anyone who is stoozing would clear their balances well in advance of any mortgage application.

Have you actually ran your figures through a mortgage calculator? Don't forget where you have children, this will also reduce your final lending amount quite a bit.

Personally I think you should use your £7k "savings" and clear the debt regardless of it being on 0% and then start your proper savings from scratch. You're earning £2.7k a month, it shouldn't take you that long to save £7k again, possibly even by the end of this year if you saved £1k a month.

[Deleted User]

danlightbulb wrote: »

What would the truthful answer be if you had a loan 5 years ago that has since been repayed but that was where the deposit lump came from, and it's been sitting in a savings account for that time, whilst you were repaying the loan? The same logic could apply to a credit card balance transfer.

The answer there is that it wouldn't be a problem, as the debt has been repaid.

It would only be a concern if people realised you had borrowed the money just to put into a savings account.

Assuming that the rate on your savings was lower than the rate on the loan, lenders may think you were a idiot, prone to making bad financial decisions.

StopIt

danlightbulb wrote: »

Thank you for being explicit in your answer. It does however lead to more scenarios.

What would the truthful answer be if you had a loan 5 years ago that has since been repayed but that was where the deposit lump came from, and it's been sitting in a savings account for that time, whilst you were repaying the loan? The same logic could apply to a credit card balance transfer.

You are also clearly saying that the lender will look at net savings after debt. Ok, but on the affordability checks it's the ability to service the debt that matters isn't it? What if the debt was a car purchase? Does that change the assessment of it?

That's different though isn't it?


If you get a 17k loan and pay it off while keeping the 17k untouched, you have saved a 17k deposit, well done.


However, why didn't you just put the monthly repayments into a LISA, or normal ISA and gain interest instead of paying it.


That scenario is nonsensical because nobody should paying interest to save, which you could've done anyway.

Sncjw

You say there's no point in voluntarily putting information that's not relavent. I have to say the banks nd solicitor will determine what is relavent and what isn't relavent

danlightbulb

StopIt wrote: »

That's different though isn't it?


If you get a 17k loan and pay it off while keeping the 17k untouched, you have saved a 17k deposit, well done.


However, why didn't you just put the monthly repayments into a LISA, or normal ISA and gain interest instead of paying it.


That scenario is nonsensical because nobody should paying interest to save, which you could've done anyway.

I agree this specific scenario could be nonsensical, depending on the relative rates between saving and borrowing. On current rates I could potentially borrow 2.8% and earn 3%, by taking advantage of the right accounts. Then cost becomes nothing ie free debt. Assuming the loan is affordable, what difference does it make to the lender?

What about the car scenario?

Let's say you have £25k in the bank but you have a loan of £25k to buy a car. What would the lenders assessment be then?

StopIt

I will add that Stoozing is different and of course a viable saving strategy.


However, the amount gained by Stoozing is only the interest accrued after paying off the capital. So a 3% ISA on a £10k 0% card (Being generous and saying it's a fee free money transfer) would only net you £300 in the first year, only a small step towards a deposit.


Again though, a broker wont see your £10k as a viable deposit, as it'll need to go back to the CC company when you've stopped the Stoozing process.

StopIt

danlightbulb wrote: »

I agree this specific scenario could be nonsensical, depending on the relative rates between saving and borrowing. On current rates I could potentially borrow 2.8% and earn 3%, by taking advantage of the right accounts. Then cost becomes nothing ie free debt. Assuming the loan is affordable, what difference does it make to the lender?

What about the car scenario?

Let's say you have £25k in the bank but you have a loan of £25k to buy a car. What would the lenders assessment be then?

That's Stoozing.


The amount of money that you'll actually gain in terms of funds towards a deposit is the interest gained, not the capital itself.


You'll be better off getting a 3% savings account and saving the £25k over time, than taking £25k and paying it back, as you'll still need to find another £25k to fund the deposit as well as repay the loan.


Again, if you have £25k of cash and a liability of £25k for ANY REASON, it'll mean that cash is essentially struck off in terms of a mortgage deposit.


Your broker will be asking you why you took out a £25k loan to pay for a car instead of paying for it with cash.

danlightbulb

StopIt wrote: »

Your broker will be asking you why you took out a £25k loan to pay for a car instead of paying for it with cash.

The simple answer would be that the £25k you'd saved was earmarked for a house deposit, and you could also afford the car on top. Since you can't get a mortgage without a deposit, the only choice available was to have a loan for the car.*


*discounting the choice of not having the car at all, for the purpose of simplicity.

adindas

danlightbulb wrote: »

The simple answer would be that the £25k you'd saved was earmarked for a house deposit, and you could also afford the car on top. Since you can't get a mortgage without a deposit, the only choice available was to have a loan for the car.*


*discounting the choice of not having the car at all, for the purpose of simplicity.

Great you find a holy grail a breakthrough in financing a house deposit without the need to have your own money.

There will be millions of people out there will be very interesting to hear from you and your experience.

Please feed the forum back with your experience.