Loan To Fund A Deposit On A House?

[porca misèria]

Has anyone had any recent experience of having done this?

Friend of mine has money tied up in investments that will be available late next year, but believes that it's a buyers market right now and we could be missing the boat if we hang about.

Is it still possible to get a loan for the purpose of a deposit on a property? I'm in a similar predicament (but just limited in my buying options until Spring), and wondering if I should be doing the same. Wife also keeps nagging because we've just had a baby and she wants to settle down properly.

Try a proper mortgage broker.

A mortgage secures a loan against a house. If there are other assets, a mortgage provider might consider them as additional security, and lend more than they would against the house alone. Depending of course on their assessment of the investments in question.

Can't hurt to ask.

[winkie]

What about the new furniture, kitchen and bathroom....need a loan for that as well?

[SarahBell]

Has anyone had any recent experience of having done this?

Friend of mine has money tied up in investments that will be available late next year, but believes that it's a buyers market right now and we could be missing the boat if we hang about.

Is it still possible to get a loan for the purpose of a deposit on a property? I'm in a similar predicament (but just limited in my buying options until Spring), and wondering if I should be doing the same. Wife also keeps nagging because we've just had a baby and she wants to settle down properly.

If you miss the boat it's the titanic

[Bloo Loo]

No you can't get a loan for the deposit. Not unless you lie about where it came from and hide the repayments somehow and this would be fraud.

Wait another year and save up your deposit the normal way. It will still be a buyers Market and house prices will be significantly lower.

wrong, government homebuy schemes would supply effectively 100% loans in two tranches to homebuyers...and that was earlier this year.

[Pent Up]

LOL at people who spout such rubbish.

You can borrow money for anything you want. The banks don't even ask you what it's for. Once it's in your bank account then money is money and it can be used for a deposit if you so choose.

Of course you can borrow the money for whatever reason you wish. When you apply for the mortgage you will be asked where has your deposit come from. (at least I was on the last two) if you say 'an unsecured loan' they will not look favourably upon you probably charging a higher rate of interest or refusing you outright.

You could lie of course. Which would be fraud.

[Tiger Woods?]

^ This. They will want to know the source of funds and a loan is not acceptible even if it does not compromise your affordability ratios.

Surely the proof of a maturing investment would be considered as a reasonable balance to the loan when looking at all one's assets?

[Bloo Loo]

I would strongly recommend borrowing the deposit. When i bought my first house I got a 97% loan and borrowed the other 3% and the mortgage insurance. Best thing I ever done.

Since then I borrow a 104% when I buy a house. This figure includes legals,. stamp duty and any other closing costs.

Deposits are there to protect the lender not the borrower. There are better things to do with your hard earned.

thank you, you are Mr Ponzi and I claim double my £5 in two weeks.

[Kyoto]

Of course you can borrow the money for whatever reason you wish. When you apply for the mortgage you will be asked where has your deposit come from. (at least I was on the last two) if you say 'an unsecured loan' they will not look favourably upon you probably charging a higher rate of interest or refusing you outright.

You could lie of course. Which would be fraud.

Exactly. We actually took out a £5k loan ourselves in 2006 to get us over the hump for a 20% deposit. This saved on a 'high LTV' fee and made a better deal available to us so was well worth doing.

Our lender, granted a small building society, would not accept this when we put it on as our proof of funds. Flat out denied it. We had to borrow the money from a parent and write a letter showing that we had an alternate source of funds for the £5k.

[Kyoto]

I would strongly recommend borrowing the deposit. When i bought my first house I got a 97% loan and borrowed the other 3% and the mortgage insurance. Best thing I ever done.

Since then I borrow a 104% when I buy a house. This figure includes legals,. stamp duty and any other closing costs.

Deposits are there to protect the lender not the borrower. There are better things to do with your hard earned.

How prey tell do your figures add up, borrowing, say 20k for 7% a year and investing it for a 3% return? Both compounded over 25 years.

It will always cost more to borrow money than you can get by investing or saving it.

[anteros]

Has anyone had any recent experience of having done this?

Friend of mine has money tied up in investments that will be available late next year, but believes that it's a buyers market right now and we could be missing the boat if we hang about.

Is it still possible to get a loan for the purpose of a deposit on a property? I'm in a similar predicament (but just limited in my buying options until Spring), and wondering if I should be doing the same. Wife also keeps nagging because we've just had a baby and she wants to settle down properly.

The bank will/should ask where the deposit came from. I think it will affect their decision to lend a mortage if you borrowed the deposit rather than having it as either equity or cash.

[Kyoto]

Exactly. We actually took out a £5k loan ourselves in 2006 to get us over the hump for a 20% deposit. This saved on a 'high LTV' fee and made a better deal available to us so was well worth doing.

Our lender, granted a small building society, would not accept this when we put it on as our proof of funds. Flat out denied it. We had to borrow the money from a parent and write a letter showing that we had an alternate source of funds for the £5k.

BTW ours was actually in early 2007 for Cheltenham and Gloucester building society. If we didn't get away with it in 2007 then I'm sure it wouldn't go down well today.

[gilf]

The bank will/should ask where the deposit came from. I think it will affect their decision to lend a mortage if you borrowed the deposit rather than having it as either equity or cash.

Why do people keep saying this? That's not my experience just got a mortgage and have not been asked where we got the deposit from. The same was true when I last got a mortgage 10 or so years ago.

I'd totally accept that they might not lend if you have an outstanding loan which they will of course ask you about, especially one taken out for the purpose of a deposit. But where the deposit comes from is no concern of theirs, all they care about is do you have the money and are you likely to pay it back, a £20k loan will effect the later of course.

When my sister got and extra £5k from my parents half way through a purchase last year, there were all sorts of problems but that was to do with money laundering rules and nothing to do with the mortgage company.

However, whether this is a good idea in principle is certainly open for debate.

[sun n sea]

BTW ours was actually in early 2007 for Cheltenham and Gloucester building society. If we didn't get away with it in 2007 then I'm sure it wouldn't go down well today.

Having been through the mortgage process recently I can confirm you're absolutely correct.

When trawling around for the best deal it became apparent that neither Barclays, RBS and Santander would accept borrowed money as all or even part of your deposit.

If you don't believe it's any of the bank's business where your deposit comes from take out a loan and apply to use the funds for a deposit on your mortgage... you'll be rejected 100% guaranteed.

[Pent Up]

Group Think ?

Personal experience.

[Pent Up]

Having been through the mortgage process recently I can confirm you're absolutely correct.

When trawling around for the best deal it became apparent that neither Barclays, RBS and Santander would accept borrowed money as all or even part of your deposit.

If you don't believe it's any of the bank's business where your deposit comes from take out a loan and apply to use the funds for a deposit on your mortgage... you'll be rejected 100% guaranteed.

Yep they (or at least the vast majority) will want to know exactly where your deposit came from. If it's a gift from a parent or an interest free loan from parents they will want written confirmation of this and the terms of repayment.

[Bloo Loo]

Why do people keep saying this? That's not my experience just got a mortgage and have not been asked where we got the deposit from. The same was true when I last got a mortgage 10 or so years ago.

I'd totally accept that they might not lend if you have an outstanding loan which they will of course ask you about, especially one taken out for the purpose of a deposit. But where the deposit comes from is no concern of theirs, all they care about is do you have the money and are you likely to pay it back, a £20k loan will effect the later of course.

When my sister got and extra £5k from my parents half way through a purchase last year, there were all sorts of problems but that was to do with money laundering rules and nothing to do with the mortgage company.

However, whether this is a good idea in principle is certainly open for debate.

If you have the money with a bank, then its no problem...money laundering regs makes them wary.

they can see loans you have on credit checks....cash?

[Speak&Spell]

Do people really think prices will be significantly lower next year ?.

It depends! What I find hilarious about this website is that everyone seems to think that there will be a massive HPC throughout the whole of the UK. I completely do not agree with this. Everyone should be following prices in their own areas and researching in their own areas. Some areas will see massive drops, others will see little drops.

[Pent Up]

It depends! What I find hilarious about this website is that everyone seems to think that there will be a massive HPC throughout the whole of the UK. I completely do not agree with this. Everyone should be following prices in their own areas and researching in their own areas. Some areas will see massive drops, others will see little drops.

But all will see drops to some extent.

[Speak&Spell]

But all will see drops to some extent.

You are right. For me prices will not drop enough for me to want to wait. The house I'm buying is going to be a home for me and my partner for 7 to 10 years.

Every week I keep an eye on the development and what's happening on Rightmove/Property Bee. Another house has just gone Sold STC for 5k more than what my offer was accepted at.

I can't stress enough that if you're trying to buy in a desireable development and you want to only move there, to one of the preferred layouts, you'll end up paying the price for it. Two property's are not selling in this development, and that is due to the layout (there are 4 different layouts as they are townhouses). I will agree that these two sellers need to reduce their prices by about 15k to sell them.

[Tired of Waiting]

No you can't get a loan for the deposit. Not unless you lie about where it came from and hide the repayments somehow and this would be fraud.

Wait another year and save up your deposit the normal way. It will still be a buyers Market and house prices will be significantly lower.

+ 1

and

+ 1

[Tired of Waiting]

Yes, although you have to declare the loan repayments when you apply for a mortgage and they will reduce the amount a mortgage company will advance.

Exactly.

[Tired of Waiting]

not to mention mothers and mothers-in-law doing same to their offspring

Very good point there.

To be fair many fathers and fathers-in-law as well.

[Tired of Waiting]

Your loan value and repayments reduce in monetary value over time, your house value increases in monetary value over time thanks to the trusty tireless inflation worker bee. The difference between them grows due to miracle of compounding growth due . This system depends on time the longer the better so saving for a deposit is dead time and you are far better off starting the process sooner rather than later.

From an investment perspective the above applies with the addition of increasing rents as well. Also if you have no money in teh dela any income or capital gain gives you an ROI of infinity...............

Only if all movements were linear.

( Tiny detail there. )

[Tired of Waiting]

(...)

Is it still possible to get a loan for the purpose of a deposit on a property?

(...)

(...)

I'd totally accept that they might not lend if you have an outstanding loan which they will of course ask you about, especially one taken out for the purpose of a deposit.

(...)

Group Think ?

[Tired of Waiting]

It depends! What I find hilarious about this website is that everyone seems to think that there will be a massive HPC throughout the whole of the UK. I completely do not agree with this. Everyone should be following prices in their own areas and researching in their own areas. Some areas will see massive drops, others will see little drops.

I think areas that fell already in 2008 will fall less now, like in parts of the North. Whilst more expensive and "posh" areas of the south-east are now in Wile Coyote territory, just before gravity kicks in.

.

Edited October 27, 2010 by Tired of Waiting