loan as deposit?

It can depend on the wording of the mortgage application form.

Some require confirmation that the deposit is coming from your own resources. An untruthful answer may be fraud - e.g. Peter Mandelson.

But there are lenders who do 125% loans.

"Doug Ramage" wrote

If you've already taken out the loan beforehand and stashed the cash in the bank, then it *would* be "coming from your own resources", wouldn't it?

I don't think that defence would fly in court.:)

A lender will normally want to know if you have any outstanding loans. The amount of these and the monthly cost of the repayment of them will be taken into account in what they offer you.

Rob Graham

And they'll simply check you credit file to see any current credit card debts and/or loans so you can't really hide it.

"Doug Ramage" wrote

OK then, where do you draw the line? Every person's financial position is (usually) a mixture of assets (eg houses, cars, bank balances) and liabilities (eg loans).

Suppose you have 20,000 in the bank and want to buy *both* a car costing

20,000 and a house which needs a deposit of 20,000. You take out a (personal) loan for 20,000 and place this in the bank, giving a balance of 40,000. You now buy the car, and sign the application for a mortgage which requires "confirmation that the deposit is coming from your own resources" - is this acceptable? You have the extra 20,000 in the bank at the time of purchase of the house, *only* because you recently took out the personal loan ...

The point is that, really, you cannot say that "the house deposit was paid from the initial bank balance and the car was paid for from the loan" any more than "the house deposit was paid from the loan and the car was paid for from the initial bank balance".

"Tim" wrote

"D.A.L." wrote

Well, actually - yes you can. You just need to know which banks/credit card companies *don't* pass data to the CRAs! I know of a number ...

What you say is correct. But the car loan will probably require disclosure elsewhere. And is likely to show up on the credit search done by the mortgage lender.

"Doug Ramage" wrote

Agreed - but you wouldn't need to disclose the *purpose* of the loan, would you??!

"Doug Ramage" wrote

As stated elsewhere, this is not *always* true.

But they don't ask about the purpose. They simply ask you to list any loans you have outstanding, and in particular how much they are costing you, so that they can take that amount off your income for salary multiples calculation purposes.

The "own resources" declaration is pretty daft, though. Once you've borrowed money, and have it, it is essentially your own resource. Suppose you're in your first job, and have enough salary to afford loan repayments, but not enough saved up for a deposit. Suppose Daddy gives you the money for the deposit. I'd say it would be perfectly OK to say the money came from your own resources. Now change that to read "Suppose Daddy *lends* you the money ...". Still perfectly OK? Yes, I think so.

And if the loan comes from a government minister? :)

------------------------------

"Ronald Raygun" wrote

Exactly what I was suggesting (see above) - to which Doug suggested it wouldn't "fly in court" ...

"Ronald Raygun" wrote

My point entirely - they don't know whether the loan was taken out to pay for the *car*, or for the house *deposit*.

Since when are courts daftness-free zones?

But it doesn't matter, since as you point out you can say you bought the car with the loan and are using your savings for the house, and no-one can prove that you bought the car with your savings and borrowed the money for the house deposit.

What matters is that you do in fact have a loan commitment, which you are expected to declare.

"Ronald Raygun" wrote

Agreed (but only if they ask!). The "confirmation that the deposit is coming from your own resources" is a nonsensical requirement.

you are quite quite correct, they don't know.

however, they also don't care.

the only thing they care about is how much you owe so they can take it into account when looking at a mortgage offer - which they will then reduce to take into account your existing debts.

hypothetically, even if you did find a iffy lender and managed to hide the debt there are a good many wise people on this 'group who can point out the stupidity of living beyond your means.

"John :-)" wrote

So why the requirement for "... confirmation that the deposit is coming from your own resources ..." mentioned by Doug??

AFAIK, this type of question relates back to the days of more prudent lending. 100% mortgages were almost unheard of before the 1980s, and were normally only available to "professional" types who could show significant income increases when qualified.

Also, 99% of the lending was done by Building Societies who had a virtual cartel. When I was working for a major Clearing Bank, and suggested that residential lending looked like a good option - I was told, in uncertain terms, by my superiors, that it would never happen because banks never "lend long". :)

"In uncertain terms"? I like it.

Well, the word "no" was in the original. :)

I suspect the CIA - again.