Using credit card balance to top up cash house purchase

Countrysider

I'm hoping to buy a house for cash this year, but i'm about £25,000 short of the amount i need.

The house i'm looking at is un-mortgageable so a small mortgage is not an option.

My first thought was to try an unsecured loan, but this doesn't seem possible as I need a permitted reason for the loan and using it to purchase a house or as a deposit is prohibited for all the loans i've looked at.

It then occurred to me that I have just over £20,000 of available credit across a number of credit cards, that were originally 0% purchase cards where i transferred the balance and no longer use. 

Could I not just cash advance from these cards to my current account and then, optionally, open new balance transfer cards to move the balance from these cards to new 0% / lower interest rate cards? 

As this is existing credit and mine to legitimately use for any legal purpose, the only impact i can see is that i'd be hit with a fee for the cash advance, higher interest on cash compared to purchases, and then a fee for the balance transfer. This might be high but if the 0% balance transfer is fast then it shouldn't be so bad and would be cheaper than renting for a few more months. 

[Deleted User]

Yes, you can do it, but get the BT in place first, or you could end up with a 20% mortgage.

ThisnotThat

I doubt this is going to work.  The likelihood of getting £20k in new credit on top of your existing limits is very low.

I suppose if you have no other options there's no harm in trying, but don't get your hopes up.

Countrysider

ThisnotThat said:

I doubt this is going to work.  The likelihood of getting £20k in new credit on top of your existing limits is very low.

I suppose if you have no other options there's no harm in trying, but don't get your hopes up.

This is my true, and something the other poster suggested that i should have a BT offer ready.

However, even if i can't get a BT offer and have the to repay the full £20,000, so long as the monthly interest is lower than my monthly rent (£600 pcm) then it still seems worthwhile as it allows me to move sooner than i would have done otherwise. 

My main concern is if my solicitor doesn't accept this as a valid funding source or, if they did, that i'd have to cash out the cards at the proof of funds stage instead of at the last minute when I send funds to solicitors. 

ThisnotThat

Countrysider said:

ThisnotThat said:

I doubt this is going to work.  The likelihood of getting £20k in new credit on top of your existing limits is very low.

I suppose if you have no other options there's no harm in trying, but don't get your hopes up.

This is my true, and something the other poster suggested that i should have a BT offer ready.

However, even if i can't get a BT offer and have the to repay the full £20,000, so long as the monthly interest is lower than my monthly rent (£600 pcm) then it still seems worthwhile as it allows me to move sooner than i would have done otherwise. 

My main concern is if my solicitor doesn't accept this as a valid funding source or, if they did, that i'd have to cash out the cards at the proof of funds stage instead of at the last minute when I send funds to solicitors. 

I don't see why a solicitor would have an issue with where the funds came from, they're perfectly legitimate.

I'd really caution against sticking 20k on your cards at full interest, even if it's cheaper than your current rent.  At 20% interest, your minimum repayment could easily exceed your £600 rent threshold and unlike with rent, you need to fund repairs yourself and you have no budget for this.

Nebulous2

Are you getting any offers on any current cards? A money transfer may be an option as well, MBNA and Barclays traditionally make offers to existing card holders.

This has certainly been possible inthe past, I remember a member on here saying they bought a flat completely on credit card debt. I took out over £30k in a few days once to stooze, and it was surprisingly easy. Credit has tightened though and I no longer have any idea what might be possible. 

If you don't need a mortgage, and are willing to take the chance, it might be worth applying for a couple of new BT cards to see what happens. 

Countrysider

Nebulous2 said:

Are you getting any offers on any current cards? A money transfer may be an option as well, MBNA and Barclays traditionally make offers to existing card holders.

Yes i usually have an offer from HSBC every 3 months or so. I'll probably take that up the next time its offered. An MBNA money transfer card might be a good idea as a first application as it skips that first step (and associated fees).

Nebulous2 said:

If you don't need a mortgage, and are willing to take the chance, it might be worth applying for a couple of new BT cards to see what happens. 

Yes, even low credit scoring short balance transfer cards (Aqua, etc) would be acceptable in this case. I really think i can clear the debt quickly (within 10 months) if i'm not paying rent or saving for a house.

It'll mean living very frugally for a short while but i think it's doable, so long as the interest charges are not at payday loan level. if it's 20% then, considering the alternative, that's not too bad. For £20,000 this would be £4,000 per year or £333 per month. This represents half my rent and is the very worst case scenario as in reality i'd aim to pay off around £2,500 per month.  

eddddy

Taking a step back - if you have an offer accepted on a property, the estate agent will want to check your 'proceedability'.

If you're a cash buyer, that includes asking to see bank statements to prove that you have the funds. If you've done the Money Transfers into your account at that point, that wouldn't be a problem - but then you'd be paying unnecessary interest.

If not, you'd need to explain your plan to the estate agent and convince them that your plan is credible.  If other buyers are interested, who have more conventional funding in place, they might think the others are a safer bet.


Incidentally, another form of borrowing you can look at is a 'bridging loan' or 'bridging finance'. It's expensive, but probably not as expensive as 'normal' credit card interest. But the loan would be secured on the property, and they'd want you to into details of how and when you'd pay back the loan etc.

Countrysider

eddddy said:

If you're a cash buyer, that includes asking to see bank statements to prove that you have the funds. If you've done the Money Transfers into your account at that point, that wouldn't be a problem - but then you'd be paying unnecessary interest.

If not, you'd need to explain your plan to the estate agent and convince them that your plan is credible.  If other buyers are interested, who have more conventional funding in place, they might think the others are a safer bet.

This is exactly my fear. Initially i thought i could just show them a credit card statement with the amount available to me and explain my intention, but the more i think about it the more I suspect it's likely they'll decline this as a valid funding source until it's actually in my account. 

I think i'm going to have to bite the bullet and do the transfer before offer, but probably just before i put my offer in. I can then show them bank statements up to the proceedings months and then an online banking screenshot / branch-stamped mini statement printout that shows credit card has been cashed out to account. If they so require they can have the official statement when it's generated within the next 4 weeks.   

I'll also likely apply for some money transfer cards about a month before I plan to look/offer so that I have those applications done and funds in my account ready. Then it may minimise the amount i need to cash out from my existing credit cards anyway.  

[Deleted User]

Lender might question large sums appearing in your account like that, especially as they are a debt / loan which will need to be included in your total loan borrowing calculations

Countrysider

Deleted_User said:

Lender might question large sums appearing in your account like that, especially as they are a debt / loan which will need to be included in your total loan borrowing calculations

There is no mortgage lender. The idea/hope is that i could finance the purchase primarily through savings but fall back to my existing credit card available balance if i'm up to £20,000 short of funds.

In theory there's no further credit applications with this approach, however in practice i'd want to transfer balance from the expensive cash rate to a new card with a balance transfer offer as soon as possible afterwards.