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Can you borrow for a house deposit?

(22 Posts)
HolidayArmadillo Fri 23-Aug-13 19:39:33

I know I know it's not ideal, long story short is we own (mortgaged) a 2 bed house that is too small for us, we rent this out and are in negative equity. We rent a 3 bed house that we love and the LL has contacted us to say he wants to sell and offering us first refusal, we're saving for a deposit and managing to put away around 250 quid a month comfortably and we could more than make mortgage payments on a 90% mortgage but we don't have the 10% deposit (need approx 13k on top of what we have incl fees etc). Can we borrow this sun from a bank or are we destined to have to move out of a house we love and into other rented accommodation that we probably will have to pay more for? So bloody depressed right now.

NatashaBee Fri 23-Aug-13 19:51:52

No, probably not. When the lender credit checks you, they will see the loan and ask you what you spent it on.

Mintyy Fri 23-Aug-13 19:53:40

Would you be able to afford the 90% mortgage payments and the loan for the deposit?

This is what the mortgage company will be interested in.

HolidayArmadillo Fri 23-Aug-13 20:01:44

Yep, loan repayments would be covered by the amount that we are currently able to regularly save and the mortgage itself would be slightly cheaper or around the same as we currently pay in rent. It's so frustrating as this house is well within budget technically but realistically it doesn't look like we can step up.

PrincessFlirtyPants Fri 23-Aug-13 20:03:52

You are not allowed to use an unsecured loan to fund the deposit on the house. It will also reduce your borrowing capacity so you may struggle to meet the lending criteria.

HolidayArmadillo Fri 23-Aug-13 21:01:58

I thought that was the case. I've got a friend who says she has just done this but I think she's maybe covering the fact that her parents have lent them the money for one reason or another.

Bowlersarm Fri 23-Aug-13 21:03:37

Don't they look into it these days and you have to prove it's not a loan?

mysteryfairy Fri 23-Aug-13 21:06:00

Can you temporarily borrow off your parents or parents in law to fund the deposit? You would hopefully still get an unsecured Loan to pay them back afterwards.

LegArmpits Fri 23-Aug-13 21:07:36

I did, some years ago. I told the bank it was to buy a car, no one questioned it.

Theironfistofarkus Fri 23-Aug-13 21:12:08

I did. It was to refurbish the property we were buying though.

PrincessFlirtyPants Fri 23-Aug-13 21:25:34

theiron this is fine.

bowlersarm you are asked upon application where your deposit s coming from

To fund a property is not allowed though. If you lie about the purpose of the loan, it would most likely be considered fraud.

Mum2Fergus Sat 24-Aug-13 09:59:43

Afraid not...deposit needs to be from a non repayable source, eg savings. Using a loan or credit card is a repayable source. Even if for example you were loaned deposit from relatives, they can be asked to sign to confirm its a gift and they don't want it repaid.

HolidayArmadillo Sat 24-Aug-13 12:46:58

Has anyone heard of landlord deposits? Where the landlord lends 5% and you put up the other 5%? Really it's just dropping the amount the landlord receives by 5% although the purchase price stays the same. I think...

noisytoys Sat 24-Aug-13 19:32:17

When I applied for a mortgage (in 2008) the bank suggested I get a loan for a deposit. We didn't.

PrincessFlirtyPants Sat 24-Aug-13 19:39:00

noisytoys you were give very poor advice. The person who told you the was probably remunerated for the mortgage and/or loan going through. It's why moste people would be better off with an independant mortgage adviser.

PrincessFlirtyPants Sat 24-Aug-13 19:39:12

*most

LoganMummy Sat 24-Aug-13 19:43:46

When we bought two years ago we got a lender gifted deposit meaning we have a 95% mortgage but only needed 5% deposit. Don't know if they still do them.

newlifeforme Sun 25-Aug-13 17:13:32

If you took out a loan (saying it was for a car) then it may impact the affordability - the amount of disposable income you have and this could impact the chances of getting a mortgage.

I know its horrible to move again, we went through this before buying but if you already have one house, in negative equity and you take out further loans you could be in danger of overstretching yourselves esp if you have a period of time where you don't have tenants,

The deposits are there to lower the risk to the bank and yourselves as it gives a buffer in the event of house price decreases.

It may not be the right time for you to buy this place, unless you have a relative who could gift the deposit (but potentially you repay at some stage when finances allow).The loan however would have to be gifted at the time without expectation of repayment.

Charlottehere Sun 25-Aug-13 22:29:41

We bought 16 months ago and were told we couldn't brow deposit officially but did borrow off PIL. It's tough financially.

Charlottehere Sun 25-Aug-13 22:30:44

Ours s he same as Logan's mummuy

Elara2 Fri 20-Sep-13 07:02:51

sorry long - sharing own experience - hope it helps and open to ideas of help!

Hey this is the exact same thing we are going through. renting London area, me redundant from Police but happily we can easily afford to buy a house in area we are moving to, on one income. Here, even if both on impossible salaries, couldn't afford to buy as first time buyers.

The funny thing is, ive rented here over 20 years (wow paid for this house and don't own an inch of it, how criminal is that?!) and told my husband every time I do something major in the house I move! my hubby bought and fitted carpets... so of course he got a job he went for hundreds of miles away!!! As this job move was unexpected we have no savings - but absolutely no debts either. nice credit history showing all paid off etc so very high credit rating. spent weeks waiting for experian reports and correcting errors – getting married did reset my credit history as all my wonderful up to date payments are omitted on my record – for companies with both my names - only months viewable are those with my new name! Another reason to choose hsbc – because as my bank they can see my history with them of decades!!

GIFTS
borrowers are happy for you to use a gift from a family member as a deposit (with letter saying is a gift they don't want back- but in the same sentence they said it is up to you and your parents if you pay it back) or they want to see savings build up over time. surely a loan is same as gift - you aren't showing you are able to save up over time with a gift are you - but they accept that!! - the financial world is not consistent.
GUARANTOR
there are also a lot which will lend if your parents act as guarantor (they call it: parent assisted or family guarantee etc). I think this is unfair - mortgage providers are the winners in every way here – because they do this they boast they are helping first time buyers but most wont want to put on or worry elderly parents with possible risk (known lots get made redundant and protection insurance may not pay out) to a home they own outright and spent 30 – 40 years paying off, for a house worth a fraction of theirs. No one knows the future and I bet the protection insurance wouldn’t pay out giving the excuse our parents would have to pay up missed payments because they acted as guarantors- or lose their home. so I do not trust this at all. I would feel very awkward. I believe it also links you financially with parents which can affect credit ratings.
LOANS
HSBC said they are fine with us taking a loan out with someone else - they look at the affordability. Me & Hubby worked out the mortgage & loan = the rents we pay now in both places (husband is other side of country working in new job, decided on one move from here to own home easiest because of disabilities, hubby concentrate on new job and have good credit history from many years here (moving around negatively impacts credit rating). I had variety of chats doing research on hsbc mortgages and what they take into consideration, but when it came to phoning up for the actual decision in principle they became a pain in the neck, we wont be using them, and would not recommend them to anyone. I have seen many negative things written about them on mumsnet -sadly tonight AFTER todays problem!

HSBC PROBLEMS!
Phoned up few times info – basically, I was told can do all over phone with me and husband going into local branches where we actually are to show any paperwork and don’t need the loan until we actually have an offer accepted for a house we like. Sounds good?: Great so needed to get decision in principle –I phoned-was told I have to do in branch so I can see an expert advisor… so I go into branch:
She included our rent as something we need to pay when we are paying our mortgage!! So it makes our outgoings hundreds more than they will actually be! and she made the term of the mortgage take us over age 75 when hsbc policy is to never agrees such mortgage terms. I obviously said are you sure we only want 25 years etc and couldn’t understand why she counted rent and house insurance etc (which are variable) into the affordability bit. It was declined because of her stupid mistakes!! I was stunned at the time and thought all my fault, but it wasn’t of course. On the way home I realised she included rent – we wont be paying the rent when we own our own home!! So I phoned hsbc at home and they admitted she’d made a few mistakes and went through the whole thing again with me – claiming this will not add a mark that anyone other than me or hsbc, will see on my credit report (but will show as 2 checks because of her in branch mistakes – what a cheek I complained but can't do anything about that)
Within half an hour hsbc on phone happily said they had a decision in principle for me, great I thought, then I was speechless - HSBC offered us less than half we need to buy a house! - where can you buy a home for £60,000!! so we could afford a park home - but you cant get a mortgage for a park home so then in is the problem!! husband thinks they are useless, disgusted at their errors and since, I feel weve been saved from future problems they could have caused (read lots negative re hsbc).
So we will go to a broker – the estate agent with a vested interest in helping us, and the loan – it will be our only outgoing and the only way we can do this – so heres hoping!!

BikeRunSki Fri 20-Sep-13 07:10:55

Why don't you see an IFA to see how best afford the house? Could you get an interest only mortgage and save in an ISA for the repayment? 100% mortgage?

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