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  • Mortgages & Finance

    Using personal loan as deposit to acquire BTL

    Good Afternoon ALL

    I just completed my second BTL and I'm looking for opportunity for the next one. I plan to take personal loan in order to get the deposit for BTL mortgage 75% LTV. DO you have any experience whether the lender will accept it as a deposit?

    I also earn min 25k a year.

    Thanks for your advice

    Paul

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    They don't look favourably on a loan for the deposit. However if you were to get the loan for "other reasons", home improvements, a car etc. And use savings for the deposit it's fine so long as the loan repayments don't effect your affordability to repay the mortgage of course.
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    Most lenders would say "no" and Lenders will ask you how and where you got a deposit

    My advice is don't do it ...

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    Most lenders (I’m pretty sure it’s actually all lenders) won’t provide a mortgage if they can see you’ve also borrowed the deposit, as this equates to 100% finance.

    They will see from your bank statements you’ve taken a loan, and they’ll reject your application. This means you’ll  take a loan and start paying interest on it, plus you’ll pay to apply for a mortgage, all for nothing. So I would say don’t it, as you’ll just lose money.

    Also, I’d be worried that no property will pass a stress test once you factor in your personal loan repayment, so it’s not a smart move however you look at it I’m afraid!
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    I only ever used either savings or draw down on personal residential property that i’d been overpaying on for fifteen years to fund a deposit. I only ever took a mortgage of between 60 and 70% LTV.

    This was in the days of no extra stamp duty, property prices having slumped to an all time low and no s.24. Even then sums wouldn’t have added up to get a loan to fund a deposit.
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    Hi

    I’d speak to your broker as there are lenders that would consider this, and lenders that wouldn’t.

    I have done it but I needed a fair bit of documentary proof that I could take the equity out of other properties, which I was 3 months off remortgaging on another property to realise the funds, so it was only short term. (Well, I say that but now looking to buy another property). 

    My mortgage advisor said that if I was going to do it again it would be better if I had taken the personal loan out 3/4 months prior to applying for the mortgage then It wouldn’t of looked suspicious on any documents I had to send in and it wouldn’t of looked like you had taken the loan for that purpose.

    Speak to you broker is my advice...
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    Paul- Yes 

    Would only do this and have done, if the yield would pay the loan repayments AND the property is a really good buy . It can pay off for sure if you know you can advance soon for another purchase. 

    Hate to miss an opportunity.
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    ... and did you inform the lender that you borrowed the deposit via a Personal Loan , for the purchase of another BTL ???

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    The loan was applied for prior purchase and completed after/ savings were a buffer
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    As others have stated, most lenders will decline to lend if you have borrowed the deposit as it amounts to 100% financing.

    It's risky for them and risky for you as it is 100% leverage.

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