General Business Forum Brought to you by Total Gas & Power

Can you purchase property with a personal loan?

Discussion in 'General Business Forum' started by bells-couriers, Mar 7, 2018.

  1. bells-couriers

    bells-couriers UKBF Newcomer Free Member

    23 2
    Evening all I'm just wondering if I was to get a personal loan could I use it to purchase a house with?

    I've seen a bargain 2 bed house in my area for oiro 40k (yes house prices are cheap in the north east) Im short by 15k and I thought would it be cheaper to buy it outright with the difference added off a personal loan rather than get a mortgage?

    My intentions are to either renovated it for a quick sale or to rent it out,

    My bank is offering me a 25k loan at 3.1% Apr repayments £449.84 per month over 5 years

    10k more than I need for fees and renovation

    Would this be a better solution rather than a buy to let mortgage? And is it allowed?

    Thanks.
     
    Posted: Mar 7, 2018 By: bells-couriers Member since: Aug 13, 2014
    #1
  2. pbdesigns

    pbdesigns UKBF Regular Free Member

    108 8
    That's not a bad APR - so yes, go for it.

    It would only be an issue if you were using the personal loan to fund the deposit element of the purchase, as you'd be highly unlikely to get a mortgage with that level of borrowing.

    I'm assuming at that level (25k) that the loan is secured against your existing property? In which case, the bank is protected, so all is good.

    Keep some of the money back to cover the repayments during the months whilst you renovate and don't have any incoming coming in from rental - or during the period whilst you attempt to sell it, as that could take longer than you'd expected.
     
    Posted: Mar 8, 2018 By: pbdesigns Member since: Nov 23, 2011
    #2
  3. Mark T Jones

    Mark T Jones UKBF Enthusiast Free Member

    2,029 539
    I’m guessing that your bank have invited you to apply for a loan, rather than offered it?

    If so, it is unlikely they will accept property purchase / speculation as a purpose

    It’s also likely that the date and amount will change in the process
     
    Posted: Mar 8, 2018 By: Mark T Jones Member since: Nov 4, 2015
    #3
  4. Alan

    Alan UKBF Legend Full Member - Verified Business

    5,940 1,633
    Whilst they may not lend it for a property ( normally an appreciating asset ) they probably would lend it for a car ( normally a depreciating asset) ( crazy) - I guess you can get a loan to buy a £25k car and then use the cash you would have spent on the car to buy the
    property.
     
    Posted: Mar 8, 2018 By: Alan Member since: Aug 16, 2011
    #4
  5. Mark T Jones

    Mark T Jones UKBF Enthusiast Free Member

    2,029 539
    True. I’ve known a number of start up loans granted under the banner of home improvements

    The key point is that s loan will be granted (or otherwise) based on ability to repay from normal income, they won’t take into account either value or profit potential from ghe property.
     
    Posted: Mar 8, 2018 By: Mark T Jones Member since: Nov 4, 2015
    #5
  6. bells-couriers

    bells-couriers UKBF Newcomer Free Member

    23 2
    Good morning all,

    Thank you for the comments I applied online via my online banking and got accepted instantly @3.1% APR, the reason I stated for the money i simply selected the option "other"

    This did not effect the decision as stated before I selected this option, it's not tied to my current property just simply an unsecured personal loan at a great APR rate,

    I've now put an offer in @38k and I've got a family member keen to rent the home @£450 per month, everything seems to be falling into place fingers crossed my offer is accepted.
     
    Posted: Mar 12, 2018 By: bells-couriers Member since: Aug 13, 2014
    #6
  7. atmosbob

    atmosbob UKBF Ace Free Member

    3,331 742
    Mine did. My bank manager was always willing to run if I wanted more funding for anything. How else could he justify his job if he didn't make money for his bank?
     
    Posted: Mar 12, 2018 By: atmosbob Member since: Oct 26, 2009
    #7
  8. Mark T Jones

    Mark T Jones UKBF Enthusiast Free Member

    2,029 539
    I suspect, if you had a bank manager running, it was pre 2008?
     
    Posted: Mar 12, 2018 By: Mark T Jones Member since: Nov 4, 2015
    #8
  9. HomesWarehouse

    HomesWarehouse UKBF Contributor Free Member

    87 8
    once its in your account from a legit source IE bank, nobody on the other end will question, its a straight cash purchase
     
    Posted: Mar 12, 2018 By: HomesWarehouse Member since: Dec 22, 2016
    #9
  10. Mitch3473

    Mitch3473 UKBF Regular Free Member

    955 213
    Be very careful about renting it to a family member.
     
    Posted: Mar 12, 2018 By: Mitch3473 Member since: Aug 25, 2011
    #10
  11. Gordon - Commercial Finance

    Gordon - Commercial Finance UKBF Enthusiast Free Member

    626 138
    I would second that! Could be tricky.
    I never rent to people I know, let alone family.
     
    Posted: Mar 13, 2018 By: Gordon - Commercial Finance Member since: Jun 26, 2017
    #11
  12. Mitch3473

    Mitch3473 UKBF Regular Free Member

    955 213

    Years ago in the good old days my bank manager called me, I was driving, and asked if I wanted £25k, " what for " I asked.
    "Anything really, I need the bonus points for a golf trip to Portugal...." Came the reply.
     
    Posted: Mar 13, 2018 By: Mitch3473 Member since: Aug 25, 2011
    #12
  13. STDFR33

    STDFR33 UKBF Big Shot Free Member

    3,530 857
    Beware of the arising tax liability. The loan will not reduce the profits. Only the interest element will.
     
    Posted: Mar 13, 2018 By: STDFR33 Member since: Aug 7, 2016
    #13
  14. Noah

    Noah UKBF Enthusiast Free Member

    661 142
    Would you be so kind as to share the source of this largesse please?
     
    Posted: Mar 13, 2018 By: Noah Member since: Sep 1, 2009
    #14
  15. bells-couriers

    bells-couriers UKBF Newcomer Free Member

    23 2
    Afternoon all again thank you for your comments I take every bit of advise on board it's gratefully appreciated,

    Can I ask what concerns certain people about renting to a family member? I figured it would be a good thing knowing who is in the property?

    The loan came from tesco bank, I'm told I've got a good enough credit rating to be offered there lowest APR loan rate

    Offer has been accepted by the way, the property isn't in bad shape needs a new kitchen but other than that just a general tidy up boiler was replaced 2 years ago still has a warranty so I'm good there, the tenant ever gets a driveway for off road parking hard to believe for 38k but yes I believe I've done well

    Glenholme terrace, Blackhall colliery, Hartlepool, TS27 4HU

    If anyone's is curious it's on rightmove brown bay window at the front,

    Again thank you all for your advice and comments.
     
    Posted: Mar 13, 2018 By: bells-couriers Member since: Aug 13, 2014
    #15
  16. Gordon - Commercial Finance

    Gordon - Commercial Finance UKBF Enthusiast Free Member

    626 138
    That is a positive however I have tended to find that people who know you would be more inclined to push boundaries, maybe even take advantage. Not through malice or a conscious effort - just human nature it seems. Perhaps a presumption that they should get a reduced rate because they are family?
    Also, if things were to go wrong for any reason, then its more than just a tenant you're losing. Family relationships are too important in my opinion to put at risk in that way.
     
    Posted: Mar 13, 2018 By: Gordon - Commercial Finance Member since: Jun 26, 2017
    #16
  17. bells-couriers

    bells-couriers UKBF Newcomer Free Member

    23 2
    Thanks for that Gordon I can understand where your coming from, it's a cousin of mine she's a single parent and claims housing benefit at the moment, I figured at least I'd be guaranteed the rent if it is through the benefit system

    As much as I'm against people living off the tax payer I wouldn't normally put benefit individuals in there but been a family member I thought it would go in my favour knowing the rent will be payed directly off the DSS.
     
    Posted: Mar 13, 2018 By: bells-couriers Member since: Aug 13, 2014
    #17
  18. Mark T Jones

    Mark T Jones UKBF Enthusiast Free Member

    2,029 539
    I don't want to be alarmist, but last time I rented through DSS to a single parent, it went very badly indeed

    One of the problems if the DSS decide there is anything amiss, they will simply stop paying; partially or fully.

    It is important to understand that the contract will be between you & your cousin, the DSS will pay on her behalf if they feel she qualifies for benefits (that can change at a moments notice) but aren't in any way liable.

    If it goes wrong their advice to her will be to stay until formally evicted.
     
    Posted: Mar 13, 2018 By: Mark T Jones Member since: Nov 4, 2015
    #18
  19. bells-couriers

    bells-couriers UKBF Newcomer Free Member

    23 2
    That is a concern hmm not quite as straightforward as I assumed then, maybe I best rethink on that one

    Could you advise me on a specific tenant to target? Maybe a simple working family would be best?
     
    Posted: Mar 13, 2018 By: bells-couriers Member since: Aug 13, 2014
    #19
  20. Mitch3473

    Mitch3473 UKBF Regular Free Member

    955 213
    There are no specific tenants to target. We've had everything from workmen on 6 mth contract saving a small fortune in B&B charges to qualified doctors, all in the same type of appt. Nurses and doctors are considered high risk. A working family would seem a good bet but dont call them simple to their face...;)
     
    Posted: Mar 13, 2018 By: Mitch3473 Member since: Aug 25, 2011
    #20