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  • Mortgages & Finance

    Buying with a personal loan

    Is there anything stopping someone buying a £50k property with £30k in their current account and £20k from an unsecured loan?

    There would be no mortgage and it would be a home to live in not to rent out.

    Many thanks

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    The only problem you may have, is what the loan lender has been told that the personal loan will be used for.

    Some lenders don't like personal loans to be used as a deposit for a property. However, that is strictly speaking and would normally only become an issue if repayments on the personal loan were not met.


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    You would be better off stating the loan is for a new car.

    Of course once you have received the loan monies you can always change your mind and buy a house!

    However if you convert to a letting you make your loan interest subject to S24 if you admit to HMRC that you used a loan to buy the property

    Best thing you can do is buy and keep quiet about the purpose of the loan.

    Most consumer credit operations specify that their credit is NOT to be used for business purposes.

    Nobody ever takes any notice of this stricture.

    Businesses have been started on credit cards which is breach of their conditions.

    So you could buy for home purposes and then let it out having changed your mind

    As far as HMRC are concerned you bought the property for cash and so no S24 liability.

    I would put the purpose of the loan is to buy a car.

    It is effectively a mortgage anyway because believe me there is no such thing as unsecured credit if you have assets, especially a property.

    If you default on the personal loan payments believe me the loan company will slap a charge on your property and probably force its sale to recover their loan monies if you refuse to pay up.

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    Thanks for the replies guys, was just an idea. Thought the solicitors might have something to say about the source of funds?


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    You can advise the solicitor the source of the funds if asked.

    You have nothing to hide.

    It would be a legitimate personal loan.

    I have bought property using credit card by means of balance transfers etc.

    Once you have the property you could possibly after a few years remortgage to a cheaper mortgage rate.

    But with the existing property value it would need to increase to a suitable amount before a remortgage was possible.

    But first things first get your resi property as this will put you in a good position to become a LL should you wish to.

    You should try and repay the personal loan debt as quickly as you can as it invariably will be fairly expensive.

    The only problem you might have is that most personal loans don't allow lump sum payments to reduce the loan quicker than the original agreement.

    But if you are prepared to do so why not buy the resi and take in a lodger/s

    Or if you are not that concerned about being at the property much then you could rent the two rooms to lodgers.

    You would obviously be visiting and staying with friends lots of periods

    You might only return home every 31 days just so as to comply with resi insurance requirements.

    Who knows what your domestic circumstances maybe!?.

    But you can certainly make a tidy sum in tax free income from lodgers and not be subject to S24!

    I doubt that with the value of your property you would be able to achieve any lodgers that would pay more than the tax free amount allowed of £7500

    This will go towards paying down debt on your expensive personal loan.

    I believe you could settle a loan early though you would probably be subject to the Rule of 75.

    This means usually paying a penalty of two months of interest to redeem the loan early.

    With lodgers it is good practice aswell as being a material fact to ensure you advise your RESI insurer that you have lodgers

    You will need to reference these lodgers

    You will need to see details of their driving licence if they have one, even a Provisional and inform the insurer of ANY motoring offences.

    You will also be required carry out RTR checks.

     Based on the price point of this property I suspect it is somewhere in the Valleys!?

    As far as I am aware there are no issues with RentSmart Wales if it is just lodgers you would be taking in.

    You should check with them to make sure though.

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