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Original poster

Getting a small loan instead of a mortgage.

20 replies

Mybloodycat · 21/02/2023 13:03

I have enough to nearly buy the house I want outright.
Family are lending me 15k on a long loan to cover stamp duty, but I will be between 7-12k short.

I can afford to overpay by several hundred a month as I will no longer be renting, so my options are a mortgage or loan.

However, I have realised most Banks have a minimum mortgage fee and most won’t allow you to use the money for a house purchase!

Has anyone done this? If so, any ideas on where I go to sort this out? I think my Bank may agree a mortgage that low, but I think I could pay a loan much quicker?

OP posts:
Holidayheaven2 · 21/02/2023 13:43

Think the interest rate on a loan will be far higher than on a mortgage? Something to investigate perhaps?

ComtesseDeSpair · 21/02/2023 13:43

Provided you have decent credit, just use a comparator website to look for an unsecured loan at the best rate you can find and the shortest term you think you can afford based on affordabillty calculations. That’s pretty much all there is too it. Much easier (and quicker, if you qualify you could have the money in days) than getting lenders and solicitors involved with a mortgage or secured loan.

ComtesseDeSpair · 21/02/2023 13:45

And yes, the interest will be higher than with a mortgage, but you’ll avoid conveyancing and lender’s valuation costs and if you’re paying it down quickly over a short term it will be lower interest paid back overall.

Original poster
Mybloodycat · 21/02/2023 13:55

My only issue with a loan is I am not a high earner, however I have a huge amount of money towards it (divorce) but they all ask for what I pay on rent, which causes an issue, because once I have a house I won’t pay rent, over 1k is freed up just like that, meaning I would have £££ a month spare to pay this.
Only it’s proving difficult to get that across as right now it’s classed as an expense

OP posts:
Fakecrazy · 21/02/2023 14:03

0% credit card?

Original poster
Mybloodycat · 21/02/2023 14:59

Out of interest, if I put “other” on the application, how would the bank know what I used the money for?

OP posts:
Ilikewinter · 21/02/2023 15:18

Can you just get a loan and put it down as a car purchase.......no-one is going to check! Would that then mean you dont require a mortgage?

isurvived3under2 · 21/02/2023 16:13

ComtesseDeSpair · 21/02/2023 13:45

And yes, the interest will be higher than with a mortgage, but you’ll avoid conveyancing and lender’s valuation costs and if you’re paying it down quickly over a short term it will be lower interest paid back overall.

You still need conveyancing, even as a cash buyer...

Original poster
Mybloodycat · 21/02/2023 16:50

I’m fine with paying a Conveyancer, my only concern is that it will show as a loan, and o don’t know if the Solicitor will get funny over that.

It seems silly to take a mortgage for 10k if I could get a loan out really, but I do t want the conveyancer asking to see paperwork and seeing it says “you can’t use this to buy a house”

OP posts:
Ilikewinter · 21/02/2023 17:36

Im probably totally wrong, but if you dont need a mortgage, would it matter to the solicitor where the money comes from? In terms of affordability checks etc wouldnt that only be relevant to a mortgage lender?.

ComtesseDeSpair · 21/02/2023 17:49

Mybloodycat · 21/02/2023 16:50

I’m fine with paying a Conveyancer, my only concern is that it will show as a loan, and o don’t know if the Solicitor will get funny over that.

It seems silly to take a mortgage for 10k if I could get a loan out really, but I do t want the conveyancer asking to see paperwork and seeing it says “you can’t use this to buy a house”

If this is a cash purchase then the solicitor will just need to see the origins of all your funds for AML purposes. They aren’t interested in whether some of it is coming from an unsecured loan. The situation in which funds from loans are queried is where they are being used to make up a deposit on a mortgages property, because this will (usually) be in breach of the lender’s criteria for deposit funds and affordability.

By all means it’s a good idea to speak with a qualified financial advisor to get their opinion on the best route. Very few mortgage lenders will lend under the £25k mark, so bless you approach a specialist lender that option may not be available to you in the first place.

tirednewmumm · 21/02/2023 21:16

Mybloodycat · 21/02/2023 14:59

Out of interest, if I put “other” on the application, how would the bank know what I used the money for?

They won't most likely? I've never had that checked (two large ish loans for home improvement)

tirednewmumm · 21/02/2023 21:19

The conveyancer has to check for purposes like money laundering that's why they ask about source of funds

NotDavidTennant · 21/02/2023 21:28

Money is money. There isn't mortgage money that you can use to buy a house and loan money that you can't. As long as you can account for the source of your funds and demonstrate that you're not money laundering then it's all good.

Zen8 · 21/02/2023 21:42

Could you get a 0% money transfer from a credit card?

MumOf2workOptions · 21/02/2023 21:50

@Mybloodycat
I would go and speak to someone in your own bank you already have a relationship with as with being an existing customer they will more than likely want to help you.

titchy · 21/02/2023 21:53

Can you get a £25k mortgage, then use the family £15k to pay that amount off?

Alexymomy28 · 09/06/2023 13:09

This reply has been deleted

This has been deleted by MNHQ for breaking our Talk Guidelines.

DrySherry · 09/06/2023 16:09

Why don't you just offer what you have ? Lots of sellers are accepting lower offers these days ?

WithManyTot · 09/06/2023 19:22

An offset mortgage would work well. Take out what ever their minimum amount is, pay in all your funds to lower the balance, then over pay the rest in your own time, until you are in credit and beyond. You would always have the buffer to call back on for a rainy day. All at mortgage type rates, not loan type rates

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