Personal loan instead of mortgage

wh0sthedaddy

Hello MSE members, 

I am buying a house with the proceeds of my current house sale, i have £215,000 equity (after estate agents fees and conveyancing etc) .

The house i am buying is £230,000 so i will need £15,000 to add and i am asking if its possible to just get a personal loan for the £15k as its easy to apply and i will pay the whole loan back  in a few months when i receive a lump sum from an old pension ( i am 55 in a few months).

I could get a small mortgage but i will have to pay arrangement fees etc and probably get a higher early repayment fee.

Is it possible to use a personal loan for the £15k?

Thanks.

DullGreyGuy

The problem you will find is that most loans state you cannot use them for a property purchase and so it somewhat comes down to if you are willing to be dishonest about the purpose of the loan or if you are willing to pay a higher interest rate for a lender that doesnt have this stipulation. 

CliveOfIndia

It is theoretically possible to get a loan for this purpose - it's using a loan to pay the deposit that mortgage lenders don't like.  However, many (most?) lenders will not give a personal loan for property purchase, so you may have to do a bit of digging around to find a suitable lender.

A mortgage would be the obvious solution - but as you say, that would entail arrangement fees etc., also I think I'm right in saying that most mortgage lenders wouldn't usually lend such a small amount.

If you're unable to get the extra funds, could you negotiate a reduction in the price, or wait a few months?

prettyandfluffy

You need a Bridging Loan, commonly used in this kind of situation.  However they can attract a higher rate of interest than a mortgage.  You could speak to a mortgage adviser or simply apply for a bank loan online, as long as you don't actually lie about the purpose of the loan I can't see why it would be a problem.  I recently took out a loan, from memory there were 2 categories: car purchase or something else.  You could also consider a credit card transfer to your account if you have or can get a card with a good rate.

jackieblack

How much are the estate agents fees, conveyancing fees and other moving costs?

If they’re going to total around £15k, could you use a loan to pay all these expenses and use all the equity to put towards the property purchase instead?

wh0sthedaddy

DullGreyGuy said:

The problem you will find is that most loans state you cannot use them for a property purchase and so it somewhat comes down to if you are willing to be dishonest about the purpose of the loan or if you are willing to pay a higher interest rate for a lender that doesnt have this stipulation. 

I can apply for a loan on MoneySupermarket and there are options including home improvement, car purchase, debt consolidation and "other", i chose "other" and had offers with 100% acceptance, the interest rate isn't that important as i would be paying off in a few months.

I can't negotiate the price for the house as its already heavily negotiated for a quick sale, i can't wait a few months.

The fees and conveyancing are approx £6600 and i can get the removals for free.

I am not requiring a mortgage as my own house sale equity covers all but £15k.

So i suppose my other question is once the bank loan funds are in my bank then i can spend it on what i want can't I as long as the solicitors see where the money comes from ?

kaMelo

wh0sthedaddy said:

DullGreyGuy said:

The problem you will find is that most loans state you cannot use them for a property purchase and so it somewhat comes down to if you are willing to be dishonest about the purpose of the loan or if you are willing to pay a higher interest rate for a lender that doesnt have this stipulation. 

I can apply for a loan on MoneySupermarket and there are options including home improvement, car purchase, debt consolidation and "other", i chose "other" and had offers with 100% acceptance, the interest rate isn't that important as i would be paying off in a few months.

I can't negotiate the price for the house as its already heavily negotiated for a quick sale, i can't wait a few months.

The fees and conveyancing are approx £6600 and i can get the removals for free.

I am not requiring a mortgage as my own house sale equity covers all but £15k.

So i suppose my other question is once the bank loan funds are in my bank then i can spend it on what i want can't I as long as the solicitors see where the money comes from ?

Yes, unless the terms and conditions for the loan stipulate that the loan cannot be used for purchasing property, and most of them usually do in which case you'll be breaching those terms.

Whether the loan company will find out or not (or even care if they do find out) is anyone's guess. As long as you are fully aware of the consequences for you if they do care and found out then you'll be making an informed choice. The other option is a bridging loan which is a specific product for exactly what you are intending to do.

Grumpy_chap

wh0sthedaddy said:

I could get a small mortgage but i will have to pay arrangement fees etc and probably get a higher early repayment fee.

A small mortgage for $50k (usually the minimum) might be the way to go here.  There need not be arrangement fees and early repayment fee if you just go for standard variable rate though the mortgage lender will require a desk-top valuation survey report.