Can I use a personal loan and cash to buy a house outright

Unknown247

I currently have enough money saved up to buy a house outright. But there is a house about £15,000 above my budget. Is there any reason I can’t get a personal loan for that amount and use that with my cash to buy a house outright. 

MorningcoffeeIV

Personal loan - no.

Cash - yes.

WillPS

MorningcoffeeIV said:

Personal loan - no.

Cash - yes.

Why not, out of interest? If a lender's willing to lend someone money unsecured, why does it matter how they use that money?

CliveOfIndia

Strictly speaking there's no reason you can't use a personal loan to part-purchase a house in this scenario - whether a lender would be willing to lend for such a purpose is a different matter.  It will depend on their internal policies.

What you can't do is use a personal loan for the deposit, if you're getting a mortgage.  The company giving you the personal loan may not mind, but the mortgage lender would.

MorningcoffeeIV

It's outside of the risk appetite of most lenders. Usual exclusions are property, gambling, investment etc 

For property, they want some security.

secla

You could get a small mortgage. I think 15k is below most places minimum mortgage but nothing stopping you taking more then overpaying it,  As said most places wont do unsecured loans for property although i am not sure how they would ever find out if your paying the rest in cash

Jonboy_1984

Have you taken into account all the other costs, legals, searches, removals, stamp duty etc and a contingency in case something needs an urgent repair in the first few weeks (e.g. our water heating stopped working four weeks in, etc).

Depending on the property value and circumstances you can very easily hit £10,000 in “cash” costs for buying and moving.

If not already in your budget, it may be worthwhile looking at a £30k or so mortgage to keep some cash funds in hand and then clearing it quickly.

Kimmie30

CliveOfIndia said:

Strictly speaking there's no reason you can't use a personal loan to part-purchase a house in this scenario - whether a lender would be willing to lend for such a purpose is a different matter.  It will depend on their internal policies.

What you can't do is use a personal loan for the deposit, if you're getting a mortgage.  The company giving you the personal loan may not mind, but the mortgage lender would.

I mean if you've acquired the cash via personal loan and you approach the seller directly after the fact instead of going for a mortgage I don't see why the seller would reject that? Especially if it means faster capital gains?

MorningcoffeeIV

It's not the seller who would reject money.

It's the lender who would reject the loan application.

pushpull

MorningcoffeeIV said:

It's outside of the risk appetite of most lenders. Usual exclusions are property, gambling, investment etc 

For property, they want some security.

I'm not convinced it's outside their risk appetite as they'll happily lend via a mortgage.

Ultimately they can get the security via a mortgage, so why not do that? I don't think a 10k loan for property is inherently riskier than
a 10k loan for home improvements.

MorningcoffeeIV

pushpull said:

MorningcoffeeIV said:

It's outside of the risk appetite of most lenders. Usual exclusions are property, gambling, investment etc 

For property, they want some security.

I'm not convinced it's outside their risk appetite as they'll happily lend via a mortgage.

Have a look at the exclusions on a few lenders and you'll be able to confirm for yourself..

They'll do it as a mortgage, though not generally for 10k..And, of course, mortgages have inbuilt checks as to the suitability of the collateral.