Credit to fund House Deposit & Mortgage

Jonathon365

Hello Money Saving Expert Forums,

I am a 24 year old looking to get my feet on the housing ladder. I've been saving from January this year and have put away about £7k (mostly in a Lifetime ISA and some invested in a Vanguard Index fund).

My Company is moving my office to Manchester in the next 6 weeks and rather than rent I'd quite like to get on the property ladder.

There are nice apartments that can be had from anywhere between £150k-£200k.

I'm not 100% clear on how much deposit I'd need (I'd assume 10%, but I've read you can get away with 5%?), so i'd assume i'm not THAT far off. Additionally from running a reselling business a few years ago where I'd buy £1000s worth of stock using a credit card and sell on for a small profit, I've built up a very good credit score and have about £25k of credit available to me and currently using none of it.

My question is this -

Is it possible for me to money transfer a portion of that credit (maybe £5k?) into cash in my bank that I can use for a deposit? I know the money transfer half is possible and at low rates, but can I use this cash to fund a deposit? Will the bank look into my credit report and see that I've borrowed some of the deposit and refuse the mortgage?

I've done some research myself but people seem to have different opinions, so looking for some clarity.

Many thanks,

davidmcn

Lenders will generally take a dim view of you borrowing money for your deposit. The source of the funds will be checked whether it shows up on your credit records or not.

marliepanda

Whats your salary? if you can very comfortabley afford the mortgage then they may not be too worried about the 5k.

ACG

There is only one lender I am aware of who will accept a loan as a deposit, I think there may be one or 2 others but in the main you will limit your options.

You will need a 5% deposit minimum, so at £150k purchase price you are more or less there.

You also need to check your affordability.

One other thing is that some lenders do not like people have a large amount of credit available to them. So having a £25k credit card may actually go against you with some lenders, with others it may actually go in your favour.

All things being equal however, assuming you pass affordability, you should be fine.

AnotherJoe

I'd advise you rent for 6 months to start so you can get the lie of the land work out what areas to buy in, from a POV both of living there and a commute, save some more money and then buy. 7k won't go as far as you think once all the bills associated with buying come in.
You might worst case find you don't like where you bought, or Manchester at all, and if you bought that will be much harder to unwind than if renting.

Jonathon365

Thanks for the advice everyone.

My salary has recently increased from £32,000 to £40,000 and my spending is low (I can hit a 40% savings rate on net pay on a £40k salary).

From what you're saying, it's probably not worth trying to fund the deposit from a credit card as it will limit my options in terms of lenders and makes more sense to continue to save for another 6 months.

AnotherJoe

You'll also find that with a bigger deposit, your mortgage rate will tend to be lower.

Comms69

Jonathon365 wrote: »

Hello Money Saving Expert Forums,

I am a 24 year old looking to get my feet on the housing ladder. I've been saving from January this year and have put away about £7k (mostly in a Lifetime ISA and some invested in a Vanguard Index fund).

My Company is moving my office to Manchester in the next 6 weeks and rather than rent I'd quite like to get on the property ladder.

There are nice apartments that can be had from anywhere between £150k-£200k.

I'm not 100% clear on how much deposit I'd need (I'd assume 10%, but I've read you can get away with 5%?), so i'd assume i'm not THAT far off. Additionally from running a reselling business a few years ago where I'd buy £1000s worth of stock using a credit card and sell on for a small profit, I've built up a very good credit score and have about £25k of credit available to me and currently using none of it.

My question is this -

Is it possible for me to money transfer a portion of that credit (maybe £5k?) into cash in my bank that I can use for a deposit? I know the money transfer half is possible and at low rates, but can I use this cash to fund a deposit? Will the bank look into my credit report and see that I've borrowed some of the deposit and refuse the mortgage?

I've done some research myself but people seem to have different opinions, so looking for some clarity.

Many thanks,

You can do this. But it will just affect how much you can borrow. typically its a bad idea


Since you don't have even an agreement in principle, and you're moving in 6 weeks, there is NO chance of you moving into an owned property.


It just wont happen

saajan_12

Jonathon365 wrote: »

Hello Money Saving Expert Forums,

I am a 24 year old looking to get my feet on the housing ladder. I've been saving from January this year and have put away about £7k (mostly in a Lifetime ISA and some invested in a Vanguard Index fund). - well done! Do check the figure you'd get in your bank after liquidating the fund and paying any fees

My Company is moving my office to Manchester in the next 6 weeks and rather than rent I'd quite like to get on the property ladder. - property purchases take 3-12 months.. you're not going to view > get an offer accepted > get surveys & searches > get mortgage offer > exchange contracts > complete in 6 weeks. So you'll end up renting initially anyway.. Most rentals have a minimum 6 month term, so may aswell use that time to get to know the area and save more.

There are nice apartments that can be had from anywhere between £150k-£200k.

I'm not 100% clear on how much deposit I'd need (I'd assume 10%, but I've read you can get away with 5%?), so i'd assume i'm not THAT far off. - yes, generally very minimum is 5% but
* you also need to pass affordability on the remaining 95% loan based on your salary, expenses
* you also need cash upfront for costs eg solicitors, mortgage application, survey, removals


Additionally from running a reselling business a few years ago where I'd buy £1000s worth of stock using a credit card and sell on for a small profit, I've built up a very good credit score and have about £25k of credit available to me and currently using none of it. - may help in general credit history if you have a history of paying it back, but if you use the credit then this will reduce how much you can borrow under mortgage.

My question is this -

Is it possible for me to money transfer a portion of that credit (maybe £5k?) into cash in my bank that I can use for a deposit? I know the money transfer half is possible and at low rates, but can I use this cash to fund a deposit? Will the bank look into my credit report and see that I've borrowed some of the deposit and refuse the mortgage? - MOST lenders will want the deposit to be yours (or at worst gifted to you). If you borrow if from elsewhere that will reduce your affordability for the mortgage and you'd have equity ie psycologically less skin in the game.

I've done some research myself but people seem to have different opinions, so looking for some clarity.

Many thanks,

You won't complete on a property in 6 weeks, so you'll need to rent initially.. usually on a min 6 month tenancy. Use that time to save up, get a feel for the area, make offers etc. Don't use any credit, to maximise your affordability and save as much as possible to get the lowest LTV (usually means lower mortgage interest rates).

macman

If you are saving 40% of your salary after tax, then that is about £1K per month? So in 7 months you can double your deposit. I'd rent for 6m and see if you still want to buy.