Is this a very easy way to boost a deposit, or would it be very silly?

[cheapertorent]

DP is selling his car (worth very little as it’s so old) and taking out a bank loan for a bigger car. Will get about 2k for it.

Loan would be approx 15k. We’ve no other outstanding finance. This was in the plan anyway.

We are wanting to get on the property ladder and saving is taking a while, so we had a lightbulb moment (if you can call it that). I own my car outright, but if I sold that privately (worth 5k) and got a loan of about 7-8k on a new one with our bank, where the interest rates are incredibly low for current customers………

DP and I jointly would have 7k which is a significant boost to our house savings. We currently rent cheaply but I know renting is not secure and it’s wasted money each month, really speaking.

Aware we would just be shifting the problem as cars would then be to pay back, but this seems easier and is affordable rather than just saving that money and it taking 4 or 5 years to be able to put it towards a house.

I hope I’m making sense! Basically just pondering the idea of freeing up the cash in cars to invest it in property.

Can anyone think of any other major issues other than mortgage affordability being affected?

We have sought advice and could borrow in the region of 230-250k currently without having any car loans. The loans combined would be about 22k, so would 22k likely just be subtracted from the affordability test?

Thanks in advance, from a perplexed first time buyer!

Absolutely bonkers.

Using personal loans to finance a deposit on a mortgage. The loans will show as liabilities on your credit score? Much like your credit cards etc. It would be just as good to go in an say you havent got any deposit which i'm sure you know the reply.

So you admit you cant save enough (Red flag), then you say your other half has a £2k car and wants to upgrade it to a £17k car (Red flag), then you talk about selling your only real asset for £5k and buying another car for £7k (red flag)

You will end up with £22k of extra debt, zero to show in the form of real savings and you actually want to take out a huge mortgage at a time when living costs are rising. Sounds like a plan to me.....

Stick with your other halfs £2k car. You stick with your £5k car and put some effort into saving more. Or sell one of the cars and try to manage with 1 car. Everything else is going to ruin you in the next few years.

If you sell your cars for cash, yes it can be used to top up your deposit for your house.

but if you immediately take out any sort of finance (bank loan or PCP) the mortgage lender will look at that and reduce how much you can borrow on the mortgage.

the only way your plan would work is if you went car free for a few months until the mortgage is completed.

Do you really need cars worth that much? A cheaper one still gets you A to B. I'd prioritise a house deposit over a 15k car.

I’d prioritise the deposit, and taking on new debt when you’re applying for a mortgage is risky. Keep your current cars, or even consider reducing to one car. We have one car and saves so much

Thing is I don't think people are getting your point. You need the cash for a deposit. You can borrow 300k but only want to borrow 180-200k. Therefore reduced borrowing power by 25k isn't a problem, wasting rent is and you can't really add to the deposit when throwing rent away. So go for it especially if you do have access to cheapish loans as you say.

I totally understand wanting to sell your cars for cash. What I don't understand is selling two cars for £7k and then immediately getting a loan for £23k.

Why isn't your boyfriend getting a car for £7-8k?

@Boomboom22 yes, exactly this. I don’t think I’ve done a good job of explaining to be honest!