Can You Use A Personal Loan For House Deposit
Personal loans are not typically used to pay for a house.
Can you use a personal loan for house deposit. The answer is yes you can. In some cases it is possible to use your credit card or an overdraft for a mortgage deposit but this is considered another risky business. However there may be some exceptions in certain situations where it s not only possible but it may be a better option than a mortgage loan.
Most of the time you cannot use a personal loan for a down payment on a house. Firstly you will need to spend a little time finding out which mortgage lenders will allow personal loans as a deposit source. While this approach can be useful in a number of circumstances taking out a personal loan to avoid lmi can work out to be more expensive down the track.
That s the simple answer though in reality it s a little more complex than this. You could be able to avoid lmi by taking out a personal loan to finance the gap between the your deposit and 20 of the property s price. Instead you should try to save whatever your monthly repayments would have been and use this to fund the deposit instead.
Although it is always better to save a deposit of your own it is possible to use a personal loan as part of your deposit to buy a home. Although the prospect of buying a house without saving for a deposit may appear tempting as a means to get onto the ladder quickly it s not that simple. If the cash has come from a loan or credit card it may impact on the decision especially as it will be an added outgoing that will have to be taken into account to assess your ability to repay the mortgage.
Conventional and fha mortgages prohibit the use of personal loans as a source for down payments. You need to meet the criteria for both a home loan and for a personal loan. A high income to afford both repayments.
Even if you can find a lender that will allow you to use a personal loan it is unlikely to be your best option for a down payment. Stricter rules on mortgage lending mean you most likely won t be able to use the cash from a loan as a deposit on a property and being patient and saving up is likely to be the best option.
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