Loan towards a house

Jason35x

Just posted this on my journal, what do you think they will say???

"Hi, I recently put my house up for sale and intend to move once sold. I will probably have to add funds to my house sale price as my property is non standard construction and so lower value. I intend to take out a personal loan of around £25k to add to the funds. Unfortunately obtaining a loan isn't guaranteed so I will have to apply before I offer on a house otherwise I may not be able to afford. Even though I have incurred debt I don't want it to look like I have this money as saving if its sat in my account waiting for the purchase as that's not the case. What is your advice? regards"

teaselMay

Personal loans generally specifically exclude using the funds to  purchase property.

If this is your UC journal if you took a loan out it would immediately be considered capital whilst in your account

Muttleythefrog

Hmmm yeah... getting a loan may be difficult given your circumstances but it is possible it would exclude using funds to purchase property... you need a mortgage. Your conveyancer/solicitor may have issue if they cannot ascertain the funds sources are legitimately based. If UC are playing straight ball they should tell you sale proceeds can be disregarded for 6 months (or longer in some circumstances) if intending to use them to fund purchase of another home (not relevant if completing sale and purchase on same date as you'll never have the sale proceeds under your control)... but they probably also should tell you loans received are your money and count towards capital and so should be declared (at least until spent on home purchase). Unfortunately UC are not much good at giving you advice for future or taking decisions based on future circumstances... they tend to react to declared current circumstances to deliver decisions.. although sometimes you can get lucky... my wife as example was given permission for an extended stay out of country by a DM on compassionate grounds before she made it to the airport... and only hours after an agent said they would not make a decision until she had been out of country over a month.

Are you sure this is sensible and viable? Would you be able to repay such a loan which likely won't be on good terms even if you get it... add in other costs too of moving and legal fees.

Jason35x

It is viable, I did it many years ago before being on UC. Personal loans are available for property purchase but frowned upon if you are getting a mortgage. I wouldn't be getting a mortgage as I own my current property outright which is valued at £140k, I want to buy another at £160k so need £20k. I have been offered a £20k personal loan at 5.9% over 6 years @ £369 ish a month but I would need to take it out before to get the funds and don't want it classed as capitol. To be fair I usually wouldn't care but I don't want to lose my transitional protection.

peteuk

The monies from the sale of a house can be disregarded for 6 months initially, and then if you can prove your buying a house eg. awaiting an exchange of contracts or complition date then they can be disregarded until that point. 

However if you take a loan out, whilst youve every intention of using it to buy a house, UC doesnt know this, you could have £20K sat in your account for a year, if your waiting to sell your current property.  So therefore it will be classed as capital and as its above £16K it will stop your claim, until such time that your capital drops below £16K. 

Flugelhorn

Jason35x said:

It is viable, I did it many years ago before being on UC. Personal loans are available for property purchase but frowned upon if you are getting a mortgage. I wouldn't be getting a mortgage as I own my current property outright which is valued at £140k, I want to buy another at £160k so need £20k. I have been offered a £20k personal loan at 5.9% over 6 years @ £369 ish a month but I would need to take it out before to get the funds and don't want it classed as capitol. To be fair I usually wouldn't care but I don't want to lose my transitional protection.

why not put the £140K property on the market, see what you get then get a mortgage for the difference to get the next property 

Robbie64

Flugelhorn said:

Jason35x said:

It is viable, I did it many years ago before being on UC. Personal loans are available for property purchase but frowned upon if you are getting a mortgage. I wouldn't be getting a mortgage as I own my current property outright which is valued at £140k, I want to buy another at £160k so need £20k. I have been offered a £20k personal loan at 5.9% over 6 years @ £369 ish a month but I would need to take it out before to get the funds and don't want it classed as capitol. To be fair I usually wouldn't care but I don't want to lose my transitional protection.

why not put the £140K property on the market, see what you get then get a mortgage for the difference to get the next property 

This is a better idea as if the OP takes out the loan and leaves it sitting in his bank account, he'll not only lose his UC, he'll also lose his transitional protection.

NedS

In response to the journal message, UC should advise you to report any change in capital when it occurs and they will then make a decision on it at the time. They should not comment or advise you on hypotheticals that may or may not happen at some point in the future. UC do not offer advice.

Others have discussed the likely outcome above.

Muttleythefrog

Jason35x said:

It is viable, I did it many years ago before being on UC. Personal loans are available for property purchase but frowned upon if you are getting a mortgage. I wouldn't be getting a mortgage as I own my current property outright which is valued at £140k, I want to buy another at £160k so need £20k. I have been offered a £20k personal loan at 5.9% over 6 years @ £369 ish a month but I would need to take it out before to get the funds and don't want it classed as capitol. To be fair I usually wouldn't care but I don't want to lose my transitional protection.

I don't understand... a mortgage is still potentially relevant.. it's just that your source of funds will be largely from home sale... that's not uncommon (first time buyers aside). A mortgage would overcome the issue you have on the table regarding the personal loan... as the mortgage monies you'd never have under your possession... it'd also further evidence your intent with sale proceeds should there be a delay between sale and purchase (you don't indicate if that's a possibility but you may be under pressure to sell to a buyer especially if it is difficult to attract such given the non standard construction which could imply cash buyers only). Obviously the issue of whether you could get a mortgage (in principle offer) I presume you explored and concluded you'd not be able to get one (for what surely would be very low risk for lender given the very high equity)... but your language suggests you may not have as you may have felt it not relevant. Often a problem with these processes is you can't pinpoint precise monies... you do not know how much you'll sell property for or what price you'll purchase for... so the loan you're taking out is a sort of hit and hope that it works with these parameters and the often unknowns of conveyancing... you may not even need it or alternatively you could find yourself heavily constrained by it in market realities. Timelines are also difficult to predict. But I'm left wondering if you're creating complexity and a problem without any reason to do so.

born_again

Just get a mortgage. Solves the whole issue, & should be cheaper than a £25K loan.